Brexit in Fintech

That’s what you call going out with a whimper. Capital One’s agreement on Thursday to buy Brex, a corporate credit card startup, for $5.15 billion is an uninspiring end to Brex’s life as an independent company. Those with long memories will remember that the nine-year-old Brex’s ambitions were once so grand it claimed to be disrupting American Express—Brex even used the term “BuyAmex” as the Wi-Fi password in one of its offices, we reported in this 2021 deep dive. In that same story, we noted that the founders of Brex and its archrival, Ramp, believed “older institutions such as American Express and Capital One have overlooked the needs of some businesses.” We’d bet Brex executives didn’t use that as a talking point in their discussions with Capital One.

As of last September, Brex was still a quarter or two away from turning a profit, according to comments made by co-founder and CEO Pedro Franceschi to the Financial Times. (Capital One, in contrast, on Thursday reported a fourth-quarter net profit of $2.1 billion.) Brex has had a tough few years, as a 2022 downturn in venture funding curbed spending by its startup customers and forced it to slash costs. (For more, see this story.) Lately things have been looking brighter for the company. We reported last September that Brex had just crossed the $700 million mark in annualized revenue and was growing at more than 45% a year. Even so, the $5.15 billion price, to be paid half in cash and half in stock, is less than half Brex’s peak valuation of $12.3 billion from early 2022. That implies a painful haircut for some of its investors.