Expense management startup Brex, which was valued at $12.3 billion two years ago, laid off 282 people, or about 20% of its staff today.
The once high-flying fintech startup sent a note to employees (that was also published on the company’s website) today, announcing the news.
In addition, Brex announced that its COO, Michael Tannenbaum, is transitioning from his role to become a board member. Camilla Morais, who was SVP of global operations, is being promoted to COO. And Cosmin Nicolaescu is transitioning from his role as CTO to an adviser position this summer.
In the note to employees, co-founder and co-CEO Pedro Franceschi wrote that the company was now “emphasizing long-term thinking and ownership over short-term gains” in its comp structure.
“The opportunity ahead of Brex is massive, and we want everyone staying to have high conviction and financial upside in our equity,” he added.
Franceschi also said the company is changing its operating model, expecting leaders to “operate at all levels moving forward, promoting from within, increasing in-person collaboration in our hubs, and concentrating the time zones in which we operate.”
Not its first rodeo
In October of 2022, Brex laid off 136 people, or 11% of its staff, across all departments as part of a restructuring. After those layoffs, Brex had just over 1,150 employees.
It is not clear how many employees Brex has today, though its layoff indicates the figure at around 1,400 before its latest cuts.
The latest layoff news comes amid a report from The Information that the company reportedly told employees that it burned $17 million a month in the fourth quarter of 2023 and that it only had “enough cash to last through March 2026.” A spokesperson for Brex told that publication on Monday that the company’s cash runway is now four years.
When asked about financials, a company spokesperson told TechCrunch that the data was “inaccurate,” directed me to the note announcing the layoffs and wrote: “The changes today are driven by a desire to make Brex more agile and accelerate our path to profitability, building on the growth we had in 2023. We grew our revenue 35%+ in 2023 while gross profit increased by 75%. This reduction in force puts us on a clear path towards profitability.”
She added: “Brex’s financial plan is to be well above cash flow positive with the current cash we have, which calls for around 4 years of runway. Plus, cherry picking certain months for financial burn is not the correct way to look at burn.”
Brex had a short-term boost to its business after the collapse of Silicon Valley Bank last year. But that growth has since slowed, largely due to the hike in interest rates and resulting slowdown in VC funding. With more startups failing and not growing, many of Brex’s customers began spending less overall.
The company’s annualized net revenue was $279 million in the fourth quarter. While that was up 32%, most of that growth took place in the first quarter of the year.
Employees affected by the restructuring will receive eight weeks of severance, with two additional weeks of pay for each additional year of service. The company is also offering a waiver of the one-year equity cliff for those who haven’t reached theirs yet.
Things at Brex have been up and down since June of 2022, when the company declared that it was “less suited to meet the needs of smaller customers” in an announcement that caused shock waves in the startup community.
While Brex soon clarified that by smaller customers it meant small- to medium-sized businesses and non-funded startups, the move still felt like a stunning reversal, considering the company had started its life as a credit card company for startups. The announcement came about two months after Brex announced a “big push into software” and that it was placing greater emphasis on moving upmarket to serve larger, enterprise customers.
Last June, the company seemed to have an about-face, tapping Jason Mok, a former Andreessen Horowitz (a16z) operating partner and more than 16-year veteran of Silicon Valley Bank as its new head of startups. Brex co-founder and co-CEO Henrique Dubugras told TechCrunch at the time that “founders and startups have always been at the core of Brex.”
The spend management space has grown increasingly competitive with players such as Ramp, Navan, Mesh Payments and Airbase (among others) clamoring for market share. In December, Navan, an expense management startup once known as TripActions, laid off 5% of its staff, or 145 people.
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