Brex, a FinTech firm that deals with B2B products, recently netted $150 million in funding. The raise comes at a crucial time as the current business climate could spell danger ahead.
Brex’s Latest Funding Round Explained
A May 19 press release has revealed that Brex has received $150 million in funding. This investment comes from Lone Pine Capital as well as existing investors in the company. Brex is a tech firm that provides financial services for emerging businesses.
According to Henrique Dubugras, Co-founder and Co-CEO of Brex, the fresh injection of capital will enable the business to continue providing services to customers. This, he says, is particularly important in the current economic climate. This new investment will help boost Brex’s post-money valuation.
It should be noted that Brex is known for its credit card, which is tailored for new businesses. While fintech as a whole is on the rise, the banking cards sector appears to be attracting big names. Google, for example, is currently developing its own debit card that will be incorporated into its Google Pay platform.
The new funds will be used by Brex for engineering and product and design functions, according to the press release. This will, in turn, help them with expense management, procurement, and software tooling for customers. So far, Brex has raised $465 million in venture capital funding.
Recent times have seen Brex making some concessions in order to navigate global lockdowns. This includes helping customers to acquire CARES Act Payment Protection Program loans as well as increasing availability of Brex Cash, which is a bank account replacement that is strictly online. Baris Akis, Co-Founder and President of Human Capital, stated that product and service development at Brex has only doubled with the current outbreak.
COVID-19 Brings New Business Challenges
Despite the influx of capital, lockdown measures around the world could threaten Brex’s business model. Businesses laying off staff and rolling back operations means that fewer purchases will be made with credit cards, which is their major source of income. This, besides the global decline in consumer lending, shows that less money is going to businesses overall.
Dubugras has stated that the business will be fine regardless of COVID-19. According to him, they deal mainly with startups, so some level of risk was always involved, and this new influx only helps them take more risks. “The capital is so we can play offensive while everyone else plays defensive,” he said.
While Brex’s CEO claims that the company is in a good place, some recent actions suggest otherwise. The company has lowered credit limits for customers, who claim they were not given adequate warning. While the company reportedly has around $300 million in cash reserves, their rolling back of business activities such as their restaurant and clashing of limits indicates that they are preparing for a harsh few months ahead.
As countries around the world are slowly looking to lift lockdown measures, there will likely be yet another shift in consumer spending. Only time will tell what this will mean for businesses like Brex.
Do you think Brex’s business model can withstand the current situation? Is now a good time to ‘play offensive’? Let us know in the comments below.