Brex, a fintech startup that made a splash with its corporate credit cards and transitioned to cash management accounts for technology companies, laid off its staff by 20%. About 282 people were laid off on Tuesday following reports of heavy cash burn in the last three months of last year.
Less than a year has passed since Brex saw a massive influx of customers and deposits as Silicon Valley Bank collapsed. As panic spread over the bank’s collapse, Brex saw billions of dollars pour in and more than 4,000 new customers sign up through its digitized process; This makes opening a business account much faster. However, growth has slowed since then.
“Seeing so many talented people having this experience is never what you hope for as a founder,” Brex co-founder and CEO Pedro Franceschi said in a memo to employees. He founded the company with Henrique Dubugras in 2017. “It’s incredibly difficult to say goodbye, and we’re so grateful for their contributions to making Brex what it is. We’re doing everything we can to make the transition easier.”
Affected workers will receive eight weeks of severance pay, plus an additional two weeks for each year they work at the company; subsidized health insurance for six months, as well as mental health support; and allowing employees who have been with the company for less than a year to potentially receive some form of equity from the company.
Brex has grown too quickly and created too many layers of management, Franceschi said. He wrote that along with the layoffs, the company also flattened its organizational structure.
The cuts follow a report in The Information earlier Tuesday that stated Brex’s average monthly cash burn in the fourth quarter of 2023 was about $17 million. This burn is below the $22 million average for Q4 2022, but still significant, the story noted. The Information also reported that Brex still has four years of cash runway.
Brex spokeswoman Danielle Bereznak said the numbers in The Information, other than the track figure, were inaccurate.
“The financial plan for Brex will be well above positive cash flow with the available cash we have available, which requires about a four-year runway,” he told Fast Company. “Also, looking only at certain months for the financial burn is not the right way to look at the burn.”
Just two years ago, Brex was valued at $12.3 billion. Since then, the company has experienced two significant layoffs: today and in October 2022, 136 people were laid off, or 11% of the company. (In June 2020, Brex laid off 62 workers, accounting for 17% of its staff at the time.)
“This will not be an easy change, but it is a valuable change,” Franceschi wrote Tuesday. “Even though we have generated hundreds of millions of dollars in revenue in a short period of time, Brex still serves less than 1% of the US market; and we have a huge opportunity ahead of us in the next few years. . . . “We have a unique opportunity over the next 5-10 years and these changes will increase the density and quality of our practice, connect us more deeply to our clients’ needs and put us on a clear path towards profitability and independence.”