Banking and technology just had the biggest corporate acquisition ever. The banking behemoth Capital One said it is acquiring the start-up Brex for $5.15 billion. Brex is best known as the creator of a so-called “smart” corporate credit card, which it says has features that allow businesses to track their spending automatically. This deal is being described as the largest of its kind, as big banks move to replace their old systems with the quick, intuitive software that startups have developed over the past decade.
Capital One’s founder and leader, Richard Fairbank, said that the bank has long aimed to be at the vanguard of “technology revolution.” With Brex in the fold, the bank now has far better tools to offer its business customers for managing money. They won’t simply get some new credit card, but rather have one place where they do their banking, spending and accounting.
Shifting on Startup Valuations
While $5.15 billion itself is a lot of money, it also says something about what the market has become. When tech companies were on a growth tear in 2021, Brex was worth more than $12 billion. That would value the sale to Capital One at less than half of what the company was once worth. This “price drop” reflects a larger movement in which investors are starting to concentrate on stable profits rather than just rapid expansion, no matter the cost.
Brex, after all, may be a cheaper company, but it’s not a bad one. It counts more than 1,100 employees and reaps some of the best-known brands in the world as clients, like DoorDash, Zoom and Intel. The company is growing at a pace of 40% each year and it’s already turning a profit. Yet for the early backers who invested in Brex when it was little more than a nebulous idea back in 2017, such a sale still represents a massive win and will see millions of dollars returned to them.
From Teenage Business People to Worldwide Leaders
The tale of Brex is also the tale of its two founders, Pedro Franceschi and Henrique Dubugras. The two began working together in Brazil at the age of 16. And before they even checked in at college, they’d already started and sold their first payment company for tens of millions of dollars. They came to the United States to start Brex after observing firsthand how challenging it was for new startups in Brazil to secure a corporate credit card from traditional banks.
Before the new deal, Brex will continue to operate largely independently and Pedro Franceschi will stay on as the boss. The idea is to marry Capital One’s massive scale and deep pockets with the innovative software of Brex. By banding together, they aim to cater to the millions of businesses that old-fashioned banks have left untended for far too long. The deal, which has yet to receive the last “okay” from the government, is expected to be officially complete by midyear.
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