There’s a feeling of schadenfreude in Silicon Valley when a unicorn stumbles. So when the WSJ broke the news Thursday afternoon that Capital One will acquire Brex for $5.15 billion in cash and stock (Capital One issued an official release confirming the details 30 minutes later), you could practically hear the collective snickering from Sand Hill Road to San Francisco’s South Park. That figure represents less than half of Brex’s last private-market valuation of $12.3 billion from its 2022 Series D-2 round.
Before everyone sharpens their knives, consider that for the VCs who backed Brex at its outset, the sale is a triumph. Micky Malka’s Ribbit Capital, which led Brex’s $7 million Series A soon after its 2017 founding, is likely staring down a very handsome return. We’ve reached out to Malka for more information on that front.
In the meantime, that early bet — Ribbit was joined by Y Combinator, Kleiner Perkins, DST Global, and individual investors including Peter Thiel and Max Levchin — has multiplied somewhere in the neighborhood of 700-fold. Even accounting for dilution across subsequent rounds, early stakeholders are walking away with the kind of gains that have long made venture capital seem like such an attractive asset class to outsiders.
Still, the sting of that valuation haircut is sharper when you consider what happened to Brex’s chief rival Ramp during the same period. Just as Brex lost momentum several years ago, Ramp went on a tear. The competing expense management fintech has at this point raised $2.3 billion in total equity financing and saw its valuation zoom from $13 billion in March of last year to $32 billion by November across successive funding rounds.
You could argue whether those kinds of paper gains across a dizzying number of financing events means that much (that’s definitely not always the case). Still, assuming Ramp is presenting a truthful picture to the world, its traction in undeniable. The company announced last October that it had surpassed $1 billion in annualized recurring revenue and secured more than 50,000 customers. The contrast is probably more painful for Brex’s later-stage investors, who watched a competitor lap them multiple times while they awaited an exit.
The Capital One deal comes at a bit of an inflection point for Brex. Just five months ago, the company announced it had secured a license to operate in the European Union. As CEO Pedro Franceschi wrote in a blog post at the time, the move enabled Brex to “directly issue credit and debit cards and offer its spend management products to any business in all 30 EU countries with no workarounds required.” Previously, the company could only work with EU firms that maintained a U.S. presence, a significant limitation for a would-be global player.
For Capital One, the timing is as good as it gets. The bank, which already swallowed Discover Financial in a $35 billion deal last May, gains Brex’s tech platform and client roster — including, reportedly, TikTok, Robinhood, Intel — as well as immediate access to European corporate banking customers through its freshly minted EU license. (TechCrunch has reached out to Brex for more information.)
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The $13 billion in deposits that Brex reportedly oversees at partner banks and money-market funds also presumably sweetened the pot.
The founders, Brazilian entrepreneurs Pedro Franceschi and Henrique Dubugras, dropped out of Stanford as freshmen to launched Brex in 2017 after being accepted into YC’s winter 2017 “batch,” initially pitching a virtual reality concept. But they were bound to circle back to payments having sold — at the tender age 16 — a payments processor startup in Brazil that had raised $30 million and was later acquired for more than $1 billion by one of their strategic investors.
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