Brett made another surprising, but perhaps realistic decision to work with another one-time competitor. Zip, the CEO of the two companies, specifically told TechCrunch this time.
In April 2022, Fintech Brux announced that it would make a "big push" to enterprises and software.
This news is worth noting considering that BREX was originally a startup focused on startups. It offers corporate cards that are primarily targeted at startups and small and medium-sized enterprises. BREX gradually developed its model with the goal of providing a "financial operating system" for companies.
When a company announces branching it into software, its goal is to diversify its revenue stream. So it not only makes money by swapping fees, it also tries to generate frequent revenue from subscriptions to its software.
But over the years, it seems that BREX has become aware of some aspects to provide enterprise customers that it may not have the ability to do it. And, according to Chief Business Officer Art Levy, the majority of its revenue today still comes from swap fees (although software is growing steadily, he said).
So, in what might be considered a surprise move, Brux announced last fall that it is working with Navan to offer “Breexpay for Navan”, combining its corporate card with Navan’s Travel Management in a business-oriented product. Once Navan (formerly known as Tripactions) expanded to a common pandemic since it only provided travel services in overall expense management, it was increasingly competitive with Br Dunn. Therefore, the news of the two teaming up attracted some eyebrows.
On Tuesday, BREX now announced another partnership aimed at enhancing corporate products. It partnered with Zip, a five-year procurement startup that raised $190 million last October at a valuation of $2.2 billion to provide “Zip Brex,” the two companies shared with TechCrunch. The new product embeds BREX's virtual cards directly into the ZIP platform, with the goal of enabling enterprises to "simplify procurement and payment workflows, prevent unauthorized spending before it occurs, and simplify global operations using a single card program."
BREX co-founder and CEO Pedro Franceschi and ZIP CEO and co-founder Rujul Zaparde told TechCrunch the reason the partnership makes sense is that the two companies work together to serve more than 30,000 businesses with some overlap. For example, companies that consider Bret and zip code as clients include Humans, Etoro, Betterup, Carta, Coinbase, Gong, Zapier, Wiz, Neurolink, etc. Both are very focused on growing their corporate customer base and hope that the new merged product will strengthen their position in this segment.
In the first quarter, BREX's corporate revenue rose 70%, and the segment's net income rate climbed more than 130%. Meanwhile, Zip is Zip's largest quarter overall, with 155% growth in its strategic enterprise sector, Zaparde told TechCrunch. In addition to those mentioned above, other Postal companies for clients include OpenAI, Discover, Snowflake, Reddit and Sephora.
As far as BREX is concerned, the startup realized that what Zip built for procurement was farther than it offered when trying to sell it to a business.
“When you’re a startup, but you really don’t have a complex procurement workflow, and then it’s usually the job of a company card. But when you get into a more complex business, businesses like Zip do live in differentiated ways because you have a complex procurement process,” Franceschi told TechCrunch.
Interestingly, the zipper touts it “never lost a single corporate client.”
It is also worth noting that BREX's humility is also worth noting, given that the startup itself admits to trying to do it too quickly and thus encounters some bumps in its growth. In the 2022 TechCrunch Disrupt group, co-founder Henrique Dubugras acknowledged that the startup needs to focus more strategically on serving its startup client base.
But maybe Brex is indeed getting the last sentence. The decision to work with Zip and Navan also means that Brex spends less money on building products. Therefore, this move can also be traced back to reducing cash burn, which is something the UK's recognized as working on. In January 2024, BREX announced that it had reorganized and reduced its employees by 282 or nearly 20%. The move comes as reports that the company spent $17 million a month on cash in the fourth quarter of 2023, and it attempted to save the runway.
Franceschi said efforts to slow the burn of cash appear to be paying off. He said that in the first quarter, BREX's cash burn dropped about 90% year-on-year.
Since its inception in 2017, BREX has generated more than $1.5 billion in revenue in junior and middle school transactions. It is worth over $12.3 billion at its peak in 2022. As of February, the startup expects annual net revenue to reach $500 million this year. In April, the company's revenue increased by 154%. Franceschi expects Brex to be profitable by the end of the year.
The public is also on the roadmap. final.
"We want to be a public company, but we want to be open and open when we are ready to do so," Franceschi told TechCrunch. "There are a lot to do, but it's crucial to get a governance structure. While we're getting closer in terms of IPOs, there are other considerations and financial and market conditions."
Meanwhile, it seems to be relying on such a strategy that works with other companies. Franceschi said that if they work with Navan, Brenschi said it could meet the needs of its smaller customers, but it could benefit from helping its corporate base.
"We keep hearing the same thing from customers: Disconnected systems are slowing them down," he told TechCrunch.
The phrases of these relationships can be described as “cooperation” or a combination of cooperation and competition. In FinTech, especially, many companies realize that it makes more sense to work with other things that are interested in providing or improving or investing in other startups. For example, stock management startup Carta recently wrote a check on SimpleClosure’s $15 million salary increase after abandoning its own plan to make similar products.
For Brex and Zip, the decision to work together ultimately boils down to listening to the client.
"It's just a very natural partnership," Zaparde told TechCrunch. "In fact, the customer base pulls it out of us."
Giuseppe agreed.
“We asked ourselves, ‘How do we build a deep product integration, where one plus one equals five, and that’s what we’re bringing it to market now.”