Brex CEO Pedro Franceschi on the $5.15B Capital One deal: 'One plus one equals five'

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and uh

uh Pedro is in the waiting room. Bring him on in billion dollar ready. Wow, what a day. Pedro, how are you doing? How are you feeling? Congratulations.

How are you guys? Thank you.

Good to see you.

We're super good to see you as well.

Give us the news. How'd this come together? What happened? I want to ring the gong.

Yeah. So, uh, so today we're announcing the largest, uh, bank fintech merger in history, uh, between Brax and Capital One. Uh, I'll let you go for it. Go for it. 5.15. [clears throat]

Uh, congratulations.

Thank you.

Thank you. We We're really excited about this. And

And as we as we thought about this, right, Capital One is the first fintech ever. They invented this concept of bringing technology into financial services.

That's right. That's right.

And as we got to know them, what we realized was there was a a really obvious oneplus 1 equals 5 scenario here. And and and really when you look into that they operate, it was completely different

than anywhere else uh compared to Brex. They had, you know, hundreds of millions of consumers, millions of businesses, you know, $150 billion in market cap, $900 billion in KG&B. And really the way that we we thought about this is when we combine the product that we built at Brex, right? We created this new category of company that brings financial services and software under one platform to help customers make better financial decisions, right? And we combine this with uh you know the the product and the platform with Capital One's unprecedented scale brand distribution and balance sheet we have this unique opportunity to accelerate our go to market and product with a level of investment that we would never be able to match as a standalone company. So it's really about how do we build uh the most important financial platform for businesses in the US. Uh and this is such a unique combination of being two founder-l like companies that fundamentally believe uh in growth and being here to win.

Uh they always say what's the phrase like you meet your acquirer, you know? Yeah. How did you guys like first? How did the conversations first start?

So uh so I've I've heard of Rich uh and the Capital One team uh for many many years. Actually, even when I was back in Brazil, uh they were already an inspiration. These guys have been building in fintech for for a long time. They invented this idea of bringing data into underwriting which of course is one of the big things that we pioneered back in 2017 as you know. So so a lot of this has been you know deep admiration and respect. And then as we started to spend time with them, I think the biggest thing to me was uh the deep respect they had for technology and the fact that when you think of a bank M&A, people really think about okay, we're going to go and integrate all these teams and spend all this time and make super slow. Um and and really the the the main idea is keeping Brax independently and just accelerate like accelerate the growth and we're going to integrate a few parts of the business but the majority of it will run uh independently and and you know when you put in behind the $6 billion R&D budget of Capital One the $6 billion marketing budget that gets a very special uh a very special combination and and I wouldn't be doing this if I didn't believe that this was the easiest and fastest path for Brex to be the number one player in our space uh operating with this you know unprecedented scale and ambition with them.

Uh what what uh I want to talk about other exciting areas of plugging bringing like a Silicon Valley ethos to a larger company. uh how much of what you see over the next few years is like uh deploying AI transformation and bringing uh like that that high energy early adoption of AI throughout the organization or any other areas like even just marketing there's so many different areas that you have a unique view from the founder seat in

oh 100% 100% and and and look I think I think the thing that about about capital on the special is being a founder company is just this ability to make uh you know quote unquote bold decisions much more aggressively than others right

and and when you look into for example the engine that they've built on the go to market side for a small business

uh I think I think it's nowhere in the world matched uh in to the scale in which they operate

when you look into the technology and data and what they do on the credit side and underwriting uh it's really sort of an end of one thing so I think there's a lot for us to learn from them um and and I think the the things that we're really excited to bring to the table is especially when you think about this space right and bringing financial services and software into one uh is really just AI and the direction of the roadmap that we're building as a standalone company and and now that we can you know double triple our level of investment over the next few years together um it's going to be a really unique thing to do uh and just bring this capability to the millions of businesses that are already on their platform will also be uh huge right so you Super super and and maybe the biggest thing to say is, you know, uh we're not going anywhere. I'm saying this I think this is going to be the most uh exciting years of my career. Uh yes, we're making history here.

Super great.

Yeah, I was going to ask, are you coming for Rich's job? Are you going for the top spot? Some people want to sell, you know, they want to, you know, just rest, but I know you're ambitious. I can see you going to straight going straight for the top.

We advocate for this for every acquisition. We want the founders to get inside, take over.

I I have immense respect for Rich. He is one of the greatest entrepreneurs of this generation. Uh and and he's incredibly private and doesn't talk a lot about the he says that the you know the story of Capital One is the book that would never be written

and and uh and there's some there's some amazing stories there, but but just the way in which he runs a company is founder mode to to the extreme. Uh and and there's a lot there that that that inspires us. But look, the reality is for now there's so much to build in the space that we're in, right? We're still Brexit's 1% of the market. Yeah. When we bring it together with the existing, you know, commercial card, there's a lot more room to go. We're going to be the third largest corporate card issuer in the US.

Uh, and there's a very clear path to build the most important financial platform for businesses in the country. So, yeah, uh, really excited.

What about location? Uh, I think of you as a San Francisco company. I'm sure you've expanded. I think of them as New York company. Do I have that right or they're going to be like just lots of flights or Yeah.

Yeah. They're mostly based in Virginia. So,

yeah. So, uh in DC. So, so the the biggest thing for us is we're actually keeping Braggs mostly standalone. Okay. Uh and and large, you know, operating largely independent. So, the idea is I remain in San Francisco, our leadership team remains in San Francisco and, you know, spread over the US. Yeah. Uh we continue to hire in Brazil, we continue to hire in Seattle, we continue to hire in New York. And really it's like how do we add fuel to the fire? That's that's really the mindset.

Uh and we're going to integrate a few parts of the business that are important like some risk management functions over time of finance reporting and all that.

But but fundamentally the cool thing of this is you know how do you play this game at a completely different level of scale and just uh get ahead like five, seven, 10 years of what we would as a standalone company. Uh and we're really excited about it. Yeah.

Uh lessons for entrepreneurs, you know, looking back since 2017, I mean, crazy ride, one of the fastest growing companies of its era. Then through COVID and Zerp, like it's been an insane roller coaster and and you know, the last few years,

uh, you know, focusing on, um, on, you know, just navigating through that whole process is, uh, and getting to this outcome is, uh, uh, super inspiring. But uh any any lessons that you're taking from it, learnings?

I mean so many right. Uh I I I think you know it's it's I started this company I was 21. Uh I didn't know a lot about uh about about things and the world and and I think a lot of the journey of the company is is you know also a reflection of the founder journey. Mhm.

Um and and over the years, you know, we've made a lot of mistakes. We learned a lot and and I think the last two years honestly were uh the most challenging but also the most rewarding years of my career because I ran this company, you know, as sole CEO. I have an amazing leadership team and I have a fantastic team across all of Rex, but it was a it was a very different game to play. M

and then when you see what we did on growth, what we did on the enterprise side and the level of deals that we're winning across every single player, uh the majority of AI companies now operating on Brex uh when you look at the momentum uh and the revenue growth as well as you know profitability, right? Uh it's it's really remarkable what the team did here over the past few years. Uh, and I think the biggest lesson is um, you know, continue to believe in the in the things that made you start and the things that keep you going because there are roadblocks, right? Brex wasn't in a great place in 2023. Um but I just had this belief uh that we were not living to al to all our our fullest potential

uh and we could be much more as a company and and I think what we got today is uh first a really exciting milestone that this was all [clears throat] worth it but the most important part is what the company get to become and just cementing Brex as a part of the US financial system forever and the fact that a company will be around this product that we created that we have so much conviction and belief will be around for 10, 20, 30 years uh at a massive scale. Uh so really sort of unique and emotional moment uh for me. Uh I I really have so much gratitude for the team we build at Brex uh some of the most talented, hardworking, smart uh and kind people that I know. Uh and that without them like none of this would be possible. So uh just just immensely grateful for for everyone that contributed to the journey uh and and getting us here today. And again, we're just getting started in this new in this new phase.

What a moment.

Congratulations.

Uh we were we were joking earlier. It is it is uh interesting that you now have more common ground with with Kareem and Eric over at RAMP and that you've both sold the company to Capital One. So, [laughter] uh but uh great stuff. Uh super super inspiring and congratulations to the to the whole team and the whole cap table on the milestone and uh uh it's great uh great to catch up.

Amazing. Thanks for having me. Really

talk to you soon. Cheers. Bye. You guys

see you.

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