Brex Co-Founder and CEO Henrique Dubugras shares what he’s learned building the fastest-growing B2B company. Henrique started his first company at 16 and has now built two successful companies from nothing. Learn what he did differently the second time around and the specific decisions he made to drive growth among B2B companies with Brex. And yes, he explains the reason behind all the billboards in SF in this session. 🙂

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Henrique Dubugras – CEO & Co-Founder @ Brex

Anu Hariharan – Partner @ YC Continuity

Opening video:

Hey, all these startups, they have a lot of trouble getting corporate credit cards. They’re like, “Okay, let’s investigate that.” And then figured out that one, we couldn’t get one-

Mm-hmm (affirmative). Why?

Because we went there, and they’re like, “Well, you don’t have any financial history.” I was like, “But I have 120 000 dollars.”

The whole point of building a corporation, is not having personal liability attached to it. So, there’s all these people who are just using debit cards, and just walking around with debit cards with 120 000 in the bank, or just using their personal card for all these things. It’s like, okay, that has to be inefficient. There has to be a better way to do this.


Anu: Hi everyone. It’s really great to be here. I know you all got to see a preview of the video of Brex. I’ve known Henrique for a very long time, because he went through YC from the early days. But for the talk today, we thought we would touch upon a few things. How they came up with the idea of Brex, and product market fit. We’ll also talk about growth, and fundraising, and we’ll have some time left for Q and A, as well. So, please feel free to ask questions. This is your opportunity to also learn from some of the lessons that founders go through.

Anu: So, without further ado, Henrique, I know that when you first applied to YC, you actually applied with a VR startup idea, but the video showed all about credit card. So, can you talk a little bit about the early days of going through that idea iteration phase, and how did you decide to launch Brex?

Henrique: Yeah. So, both Pedro, and I, my co-founder, we were born, and raised in Brazil. And we started out, we were both coders, and I started coding by the time I was around 12, Pedro when he was nine. And we both, kind of, worked in tech, and tried to start tech companies while we were teenagers. And the end of 2012, or beginning of 2013, we actually met, and decided to start one called Dashboard, which was a payments company back in Brazil that did payment processing, like Stripe, Braintree, or ePay, all those … That’s you guys’ versions of the company.

Henrique: And we grew that company for a while, and sold it in September 2016, and came to college. And after college … Not after. Before it was college. After three months of college, we decided that we wanted to start a company, and we tired of payments. We’re like, “We’re not going to go into this payments thing.” We all have all these banks, and they’re a pain to deal with. It’s a lot of trouble. We’re going to go into the bleeding edge of technology, and the bleeding edge of technology was VR. VR seemed super cool, and seems like the next thing that’s going to happen.

Henrique: So, we applied to YC with this VR idea, which, looking back, it was pretty bad, but at the time we thought it was great. And within YC, we were like, “Yeah, we don’t even know where to start to build this.” It was pretty complicated. So, we started to look for other stuff to do within YC, and we circled through a few ideas until we got some feedback that we should start a company that we, as founders, have an unfair advantage by starting that company. And we felt, well, we know a lot about fintech. We know a lot about payments. That might be an area.

Henrique: And we figured out there were all these startups in YC that couldn’t get a credit card, and had raised millions of dollars. And we thought that was super dumb. Why can’t they get a credit card if they raise millions of dollars. And that’s, kind of, how, working through with the YC partners, we came to the idea of Brex.

Anu: Yeah. And I think two things that you mentioned there. One, actually when Henrique and Pedro applied, they were class of 2020 Stanford, so it was literally the first year. And I think when we went through the application, it was like, “Why are these people actually doing VR as an idea, given everything they’ve done in the past is something in fintech?” So, it’s very interesting you mentioned that.

Anu: It’s something we look at very actively in YC applications, is does the founder really have unique insights about the space that they are working on that others don’t know? Because then you’re truly solving a pain point.

Anu: So, you mentioned that you came up with this whole idea during those three months. One of the things that I feel like fintech companies really struggle with is what is product market fit? Because if you’re launching a consumer company, or even B2B size product, you can pretty much sell, or have a product ready in those three to six months, and even have 10 customers. But for fintech companies, it’s hard.

Anu: Can you talk a little bit … You came up with that idea during those three days, but by demo day, did you have any customer? Did you have a product? How do you really … because it takes a long time in fintech for product market fit.

Henrique: Yeah. So, I think one of the different things about fintech is that starting out is, kind of, hard, because you have to line up a bunch of stuff. And we came up with a clever hack to actually start earlier. So, by demo day, we actually didn’t have a product, but we were able to raise our series A. But then we actually got our first transaction going in June. But it was really hard to actually get that product out, because we needed to get partnerships, we needed to give credit. So, there were all these licensing things we had to do. And regulatory, and fundraising. There’s a lot of things that needed to go right.

Henrique: I think the advantage was that we knew that people needed a credit card. All of you, if you work at a company, probably someone has corporate credit card somewhere. The only thing we had to do, is how do we work through the backend to make it better than the others. So, it wasn’t a question of finding if people need what we’re building. It was a question of, “Can we build what we say we will build? And if we can, we know that a lot of people will want it.”

Henrique: So, when we actually did build it, and launch it last June, it just exploded really quickly, because it was something that a lot of people needed.

Anu: And you took at least 10, 12 to 15 months after demo day to launch publicly?

Henrique: Yeah. So, we … demo day … We raised money in March. We launched it in June.

Anu: March of 2017.

Henrique: ’17. And we launched it June ’18. So, it was 15 months between idea, and actually launching. Between now, and then, we got our first customer probably in August or so. But they didn’t even have a dashboard. It was, kind of, like a developer friend who had a startup, so they saw their transactions on the terminal. And that was, kind of … We never launched it publicly until June. We probably, by the time we launched, had a 100 customers, or something like that.

Anu: And so, talk about what were the two, or three important things you did in those 12 to 15 months.

Henrique: So, I think during those 12 to 15 months, the thing we focused on is one, actually getting the product ready. Building the basic functionality. And two, was figuring out what people want, and what people like about this. What is the main … We’re building … We can build a lot of stuff. We go in a lot of directions. What are the things that people really care about? And we found out that, for Brex, not having a personal guarantee was something that people cared about. Having higher limits was something people cared about. Expense management was something people care about. And also very fast onboarding.

Henrique: If you’re a startup, for us, it’s very important to build something that you could get a card in five minutes. And that one was actually the toughest one to do, this really instant onboarding that we have. It took probably six months developing all the back, and infrastructure, KYC, AML, and all the regulatory requirements to be able to issue a card in five minutes.

Anu: And one of the things that we often tell in YC is talk to your users a lot, because then you, sort of, learn how they’re using the product. How did you, sort of, do that in Brex, given in your early days, you probably had one to five to ten customers? Was this … it took almost a year for you to get to 100.

Henrique: Yeah. So, I think in the beginning it was … We had a few learnings. The first time it was like we didn’t know … We could have imagined this, but in the beginning, we didn’t know it was, kind of, creepy to tell people what they were spending on. So, it was like, “Cool, though. You went to Starbucks yesterday,” and people were completely creeped out. So, we were like, we should stop, not do that, and then encrypt all of this, so we know we don’t have any problems.

Henrique: But we were in regular touch with users, just asking, “Hey, what do you like about our card? What do you think?” And a lot of the feedback we got was super, super helpful to build what the first version of the product was. And also, a lot of people got stuck. For example, never onboarding. So, we were like, “Hey, we need to make this onboarding more simple.”

Anu: Got it. And what are some of the lessons from the first startup,, that you guys pretty much founded at age 16? And then you launched this two years ago. So, what are some of the lessons that you feel were very valuable for you from the first startup that you brought to Brex.

Henrique: I think all the payment lessons, and the payment lessons that we had in the fintech lessons, is that if you rely on a banking partner to do something, you will be slowed down more than you think you will. So, try own everything yourself, otherwise your product will be slowed down by the bank. I think that’s the first thing that we learned. That …

Henrique: So, we do the credit, we do underwriting, we do technology. We do basically everything. We have a banking partner, but we basically do everything. And getting that, and being able to control the entire stack, was something that we learned from the first company. The second more applicable to outside of fintech thing that we learned was that … I think we were very cash-constrained in our first startup, so I think we lost good talent because we didn’t want to pay. And I think for Brex, one thing that we’ve had since the beginning, is we’re not going to lose talent. We’ll do whatever it takes, but if we want someone, that person is incredible, we’ll do whatever it takes to get them.

Henrique: And that has been paying out for us a lot. And it’s very helpful.

Anu: Got it. And can you talk a little bit about touching on the hiring point, because you did say that you focused a lot on talent, and recruiting. So, talk about … You were one of the few startups that I saw had a GC in your, pretty much, the first five hires. So, talk about the first ten hires of Brex in those 12 to 15 months, and why did you decide to hire a GC?

Henrique: So, on this thing about owning everything. Banks, they are only comfortable letting you do everything if they feel that you know what you’re doing. And we had a lot of experience with payments, and engineering, but with U.S. regulation is not something that we were super comfortable with. And a lot of people go over the route of, “Oh, I’m going to have this external lawyer, and he’s going to do stuff for me.” But we felt that if we were in the bank’s position, we wouldn’t trust just an external lawyer. We wanted someone internally.

Henrique: So, we wanted … Actually our GC hire was our third hire in the company. And it was fundamental for us to get all our banking deals, and regulatory stuff done, because there was someone that actually knew what they were doing. And more than that, we could learn some of the stuff. Not as much as he, but we could learn some of the stuff. But more than that, it’s just also the credibility of having someone there, and to bet someone that’s super visionary, seeing you’re not going to do some crazy regulatory thing, makes the banks very, very comfortable.

Henrique: And our CFO was actually our first hire, because we thought, “Hey, this is actually a financial business. We have to raise debt. We have to underwrite. We have to do all these things.” So, hiring a CFO as our first employee was actually critical for the company to be what it is today.

Anu: So, the CFO was the first hire. When was the GC?

Henrique: The third.

Anu: The third hire.

Henrique: Yeah.

Anu: And then the rest of the team? The first end team.

Henrique: It was actually hard for us to hire the rest. It was basically engineering and design. And coming from Brazil without a big network in Silicon Valley, un-launched, without a website, it was actually really hard to recruit the first ten people. And honestly, I wish I had a better story for this. We just spend a lot of money on recruiting fees for these outsider recruiters to help us get the first ten people. But after that, referrals started going, and started making it better.

Henrique: But hiring the first ten people, especially in San Franciso, was really, really hard, with the bar that we wanted. If we wanted to lower the bar, it would’ve been easier, but with the bar as high as we wanted it, it was really tough.

Anu: Got it. And you mentioned quite a few times about banking partners. One of the things that fintech startups often have to do, is they need to have contracts in place with not just the banks, but quite a few of the partners to really build a full stack solution. How do you get these partners to trust you, especially given you’re a startup, and you probably haven’t been in the fintech world as long?

Henrique: So, one, you need a team. Like I said, a CFO, and the GC. THey’re a team that you need to make them trust that you know what you’re doing on that side. Second, what helped us a lot, was credibility. So, getting good investors of good credibility makes the banks perceive that you have a higher chance of success. Because in a way, they’re also investing in you, in somehow.

Henrique: So, it’s a little bit like an equity pitch, when you’re raising equity, that they need to believe that you will be a successful company, and that their time is worth spending. And three, you need to think ahead. You need to go in the first presentation that you meet them, you already need to have thought of all the problems that they might have. And think about that, and already present it in a way that works.

Anu: Got it. And switching gears a little bit. So, you launched one year in, in June, publicly last year. You had around 100 customers, you mentioned.

Henrique: Yeah.

Anu: Accelerate that to now February, like probably close to eight months. Talk a little more about Brex’s scale so far, and what, sort of, contributed to that scale, and that acceleration?

Henrique: So, for us, we scaled faster than we thought we would. I think we had a very aggressive plan-

Anu: They did have a very aggressive plan.

Henrique: Yeah. And I think we did two X what we thought we were going to do. So, it scaled really, really fast, and I think if I wanted to a little bit about the things we did for that, was one, we went to where other people weren’t going, and we went bold. So, one of the things that a lot of people know us for is the billboard campaign in San Francisco. We basically bought a shit ton of billboards in San Francisco, and a lot of people recognize us from that.

Henrique: And when we did that, honestly, I wish I could say, “Hey, that was … Our team was this marketing genius, and knew what was going to happen.” But it was basically for awareness, and recruiting, and we thought it was a good investment. But turns out that a lot of our niche, our market, is in San Francisco, and what people do when they go by offline media, is that they want to buy one billboard. A lot of people are engineers, and they’re like, “Oh, I’m going to buy one billboard. I’m going to try to measure that, and then I’m going to measure that. I’m going to go, and scale it up.” And they’re stuck in this mentality of you have to put one dollar, and get out three dollars.

Henrique: And I think what we did, is we took a little bit of a bold move, and said we’re just going to buy all that we can. We actually got a really good discount. We paid like 300 000 dollars for three months of a lot of billboards.

Anu: And I think you want to pause there, because a lot of people don’t expect that.

Henrique: Yeah.

Anu: When you see billboards, you immediately think outdoor advertisement is the most expensive channel advertisement a startup could use.

Henrique: Yeah. No. It’s not that expensive, especially if you buy a lot of them, it becomes cheaper.

Anu: Yeah.

Henrique: And the thing about billboards, is you have to buy a lot of them to work, because marketing’s about repetition. It’s about awareness, and people hearing about you many times. And it’s really hard to attribute, but a lot of times when we went to do outbound, and we reach out to our customer, and we talk to them, they’re like, “Oh, I saw your billboard already.” So, we had actually a higher response rate on outbound emails because we did this billboard campaign.

Henrique: And that was super powerful. And like that, we had a lot of other things that we tried to think a little bit outside of the box. And more outside of the box is outside of Google, and Facebook, honestly. So, we did podcasts. We did all these things that started helping a lot, that is not the traditional thing.

Henrique: And the thing is, it was hard to … We put a lot of effort to measure the ROI, but … And the effort we put on that paid off, because we could use these more different channels.

Anu: Yeah. And I think what helped also in Brex’s case, in particular, was the niche target market. Like you were so specific that this is for startups.

Henrique: Correct.

Anu: And that helped accelerate that, as well.

Henrique: Yeah. So, people asked us, “Hey, why did you … Why is your slogan: Brex, the best credit card for startups?” They’re like, “Why did you make that decision? Are you not restricting yourself to startups?” And actually, it was a very conscious decision of because of brand, as well. In the sense that a lot of our Brex customers like, “Oh, why do you use Brex?” “Oh, because it’s for startups. I know it’s the best for me.”

Henrique: So, we have this very strong brand association of founders today, that people feel it’s for them. So, whenever we go to our next niche, we’re going to be Brex for that niche, and we’re going to use that strategy. And that helps with the brand, and it helps also target, and make your distribution strategies more targeted, which helps a lot.

Anu: Yeah. And one of the other elements we actually talk about a lot in YC, is it’s not just customer scale that happens at this space, especially if you’re hitting a huge pain point. But also, how do you scale the company along? Because when you … In June, you had probably like 12 employees.

Henrique: Yeah.

Anu: And how big are you today? Is it-

Henrique: 95.

Anu: 95. So, how do you go from 12 to 95, and what do you prepare, and how do you prepare internally to keep up with that pace?

Henrique: So, you’ve got to have a little bit of a counter advices that is a little bit against what people say. So, one thing that worked really well for us, is bringing executives really early on. But the type of executives that we brought was a very specific, where people who’d been in successful startups in the beginning, and scale of the startups. So, we brought people from SoFi, Stripe, Zenefits, and all early employees, early executives there that grew with the company.

Henrique: And having these people early on, helped a lot, because they’re people who know what they were doing, and they had people from their network that they could hire. And it was insanely helpful. So, one of the things that we tell people is if you can, you can afford, you have the brand, hire executives earlier on. They’ll take just a huge chunk of your time, just doing things by themselves. That was very helpful.

Henrique: The second thing is-

Anu: And how early did you bring those execs?

Henrique: So, GC and CFO-

Anu: Like CFO, and GC were the first ten.

Henrique: First ten. Our head of sales, he was probably 10th, or 11th, or something like that. Maybe 13. Definitely under 15. And now we brought our head of engineering … We were probably, when we hired him, 50 or 60. And all these people, they managed much larger organizations before, but they also were at the beginnings of startups. So, they, kind of, had both, and they could do it best of both worlds. So, it was pretty early compared to a lot of startups.

Anu: And one of the things I’ve seen you do really well, is spend a lot of time on the recruiting side. Can you talk a little bit about how your role has evolved in this two years, and where do you spend a big chunk of your time?

Henrique: So, this is advice for all the CEOs out there, and I was doing this for the second time. Is that you, as a CEO, you have to be staying … Hey, what is a CEO job? And you see all these CEOs you admire, and you see Elon Musk, and Elon Musk, you hear the stories where someone was not doing a great job, and then he worked the entire night, and then did that person’s job in one night. And you’re like, “Oh, shit. I’m not like that. Or I don’t know I can do that job that I never did before.”

Anu: He also runs two companies.

Henrique: Mm?

Anu: He also runs two companies.

Henrique: Yeah. And runs two companies, and all these things. And the thing that I learned the most about the CEO job, is that the CEO job is doing what you’re great at, and hiring for the rest. That’s your only job. You’re probably good at something, otherwise you wouldn’t be starting a company, and things are going well. So, do that, and hire for everything else. So, your job is just this. Is doing what you’re good, and hiring.

Henrique: So, I took that to heart when I heard this for the first time, and that’s the only thing I do. There are some things I’m really good at, and I focus on doing those things, and I hire for all the others.

Anu: And is this something that you did different from when you run

Henrique: Oh, totally different, because the thing about running a company outside of Silicon Valley, and the U.S., is that there are very few executives outside of the U.S., so people who actually seen growth stage of startups. So, you’re either having big company people, who sometimes don’t know how to bootstrap something, or you have people that never had experience doing what you’re doing.

Henrique: So, there’s this very particular thing that happens in Silicon Valley that you have these executives. But in the first company, everyone that we hired was, kind of, our age. Well, older, but they were 24 or something. And they didn’t know what they were doing, and we didn’t know what we were doing. So, we, kind of, had to learn, and teach them at the same time. So, it was very different. We actually went functionally into all these areas.

Henrique: Today, I think we focus much more on who’s the best person we can hire for this role instead of … and they know what they’re doing, instead of trying to do everything ourselves, or learn everything ourselves.

Anu: And as part of scale, one of the key things for startups, and especially probably more so for fintech startups, is you start with an anchor product, or a service, or a feature, but then you need to have a clear strategy, or vision in terms of where your company is headed. And what is the longterm vision.

Anu: And we often see at YC, that this is where we clear difference between CEOs that scale versus not. They’re able to clearly articulate where the company is headed, at least for three to five years. How do you, and Pedro do that? How often do you think about strategy? How often do you think about where is Brex headed? Especially given the idea was born in three months.

Henrique: Yeah. So, I think we think of … I, personally, think about that a lot. I have … because we hired all these executives early, I’m not the kind of CEO that doesn’t have one minute to drink water during the day. Because the team does a lot of stuff. So, I actually have time to think about strategy a lot. But then I’ll jump in fundraising. That actually is a really interesting thing, is that I talked to a lot of founders about fundraising, and the interesting thing about VCs, and you confirm or not, Anu, but is a lot of times they say no, and they don’t want to find a mean reason to say no. So, they pick on the metrics. They pick on …

Henrique: Oh, it’s because I want to see you get here. I want to see you get there. And a lot of times, my impression is that … And when VCs say no to you because of this, you get in this mode which is how do I not get rejected, instead of how do I get accepted? And how I not get rejected, is you get obsessed about pitching these metrics, or sales efficiency RY, and all these things. And in the long run, a lot of these things adapt.

Henrique: It’s like if you have economics stats that are decent, it gets better over time. The thing that helps a lot, is which is the bigger market you’re attacking? How are you going to be a ten million dollar company, or more, and how are you going to get there? So, actually thinking more through the strategy, and more through not only your niche product that you are today, but how are you going to get to be this very big company. And thinking more clearly through that, and testing out some of the hypotheses there, is actually time well-spent before fundraising.

Henrique: And leading the pitch with that. More around, “Hey, where is this company going? Why this is going to be gigantic, and why my strategy is the winning strategy,” instead of obsessing about what is the sales efficiency, or the payback period in the very, very early days.

Henrique: My opinion on this, is focus on growth. Have positive … Good … You need economics. But spend some time pitching, and articulating how you’re going to be a 10, 20, 30 billion dollar company in the future.

Anu: And I want to come back to the spend carefully, because I know, as part of Brex’s mission, you have that for startups. But I want to dive in a little more on the fundraising point. So, you are right. The art of storytelling, and being very clear, and articulate where the company’s headed is something that, I think, most investors look for, and it’s not just … It’s a sign that tells you that the founder can actually attract really good talent to come work at the company behind that mission.

Anu: So, it is one of the important attributes. So, talk a little bit about you did your … By demo day, even though you hadn’t launched, you did your series A round, and you Micky from Ribbit led that round. And then YC, we did the series B in June, and then you announced the C late last year, as well. So, talk about the three … because you’ve done three rounds now, informally priced rounds. Talk a little bit about each of those rounds that you raised, and how … Were they all similar, or were there certain differences depending on that stage of investor you were pitching?

Henrique: Yeah. I like to say that our rounds, they were called a letter ahead of what they were a little bit, and I think that’s, kind of, true in fintech, and that may not be true in other industries. Our series A was, kind of, more like a series B, was more like an A, and our series C was more like a B.

Henrique: But I think the general advice I had there, is I think one of the things that is usual advice, is, “Hey, you should just fundraise through this period of time, and then don’t fundraise anymore, and then go back, and focus on your company.” One thing that we did for all the rounds, is just we kept meeting, and building relationships with VCs. Instead of just saying, “Hey, now I’m fundraising. Look at my business,” we just met them throughout a long period of time, and got them excited over a long period of time.

Henrique: So, when the time came to actually raise money, they already, kind of, made a decision. It wasn’t like … They didn’t have to think too much about it. It was already … They’ve been thinking about it for a longer period of time. And we didn’t engage before. It’s not the first person, “Oh, I might want to give you money,” that we engaged in the fundraising process. We actually engaged by the time that we thought we were strong, and it was the right time to raise.

Henrique: But the first raise was with Ribbit and Mickey, I think a lot of that was Mickey we knew for two, three years. He had seen us in the previous company. It was a lot of a bet on us. And the market is like, “Hey, these guys seem to be good,” and educated in the market, because we didn’t have one line of code, or a PowerPoint. It was just literally us selling them.

Henrique: And then on a series B, I think that the thing that we did is we got to launch … We had a card that worked, and that’s actually hard. And people who invest in fintech, they know that is not the most simple thing, to actually get a working credit card. So, I think we got to the barrier of entry, actually getting the licensing that we needed, getting the card working, the product working, was already a barrier of entry. So, I think that was the point.

Henrique: And then the series C was like, wow, we launch, and the early traction looks great, and we need capital to scale this faster than every other company. So, that was a little bit more of the pitch. But all of them, with Anu, and then the series C leads, we knew for a longer period of time. We kept talking to them for a longer period of time, and when the time came, we pulled the trigger.

Anu: Yeah. And I think one thing I would say that was common across all your pitches, and probably the theme was you had a clear … Both you, and Pedro had to clearly articulate vision for where Brex is headed, even if it’s not there today. And I think that’s one of the most important thing that you can do as CEOs. Whether it’s pitching to investors, or pitching to future employees, because everyone is trying to get behind the mission that you’re going after.

Anu: One of the things that … We partner conversations or, with fundraising, one of the things I’ve noticed with you, in particular, that you have, is you’re really good at hitting what’s the key thing that the partner is really looking for. And really good at negotiation. So, where did you learn that? And are there lessons from your first startup that helped you in the second phase?

Henrique: Yeah. Just really quickly, because I think we’re running out of time. But the two lessons here are, one, it’s like selling … I’ve had to learn how to sell and program, because Pedro coded better than I did, so he sent me to sell. So, you need to listen more before you talk. So, listen about the fund. Listen about what they believe in, and you, kind of, show the part of your company that they’re excited about.

Henrique: And two, negotiation is just about having other options, and if you’re more comfortable to negotiate. Because then like, “Well, if this isn’t work … I’ll be a little bit more risky here, because if this doesn’t work, I’ll at least have that.” So, you get more aggressive if you have any other options. So, lining up more than one option is the advice.

Anu: That’s great. Well, thank you so much. I apologize. We don’t have Q and A in this room. I just saw the notes. But hopefully you can catch hold of Henrique once we’re done. Thank you.

Henrique: Thank you so much.

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