Brex drops tens of thousands of small business customers as Silicon Valley adjusts to new reality
Brex, the Silicon Valley lender to start-ups, is dropping tens of thousands of small business customers to focus on bigger venture-backed clients, according to co-founder Henrique Dubugras.
The company began informing customers this week that they have until Aug. 15 to withdraw funds from online accounts and find new providers, Dubugras told CNBC Friday in a Zoom interview. Axios reported the change on Thursday.
The move is the latest sign of a sea change occurring among start-ups as an abrupt shift in market conditions is forcing a new discipline on companies that previously focused purely on growth. The shift began late last year, when the shares of high-flying publicly traded fintech players like PayPal began to collapse.
Dubugras said that he and his co-founder Pedro Franceschi made the decision in December as their start-up customers became increasingly demanding. Plunging valuations for public companies soon bled over into the private realm, hammering valuations for pre-IPO companies and forcing firms to focus on profitability.
That meant that some of Brex's biggest customers began to request solutions to help them control expenses and hire cheaper international workers, Dubugras said.
At the same time, the traditional brick-and-mortar small businesses (including retailers and restaurants) that Brex began adding in a 2019 expansion flooded support lines, resulting in worse service for the start-ups they valued more, he said.
«We got to a situation where we realized that if we didn't choose one, we would do a poor job for both» groups of clients, he said. «So we decided to focus on our core customer that are the start-ups that are growing.»
The initial news of the announcement caused mass confusion among Brex
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