Brex, the fintech startup once valued at $12.3 billion, has recently undergone significant changes, including a workforce reduction of 282 employees, constituting about 20% of its staff. This move comes as part of the company’s efforts to pivot towards a more sustainable and profitable future. The company’s Chief Operating Officer (COO), Michael Tannenbaum, is transitioning to a board member role, while Camilla Morais, formerly the Senior Vice President (SVP) of global operations, is being promoted to the position of COO.
Brex announces significant workforce changes
The firm also announced that Cosmin Nicolaescu, the Chief Technology Officer (CTO), will be transitioning to an adviser position this summer. In a communication to its employees, co-founder and co-CEO Pedro Franceschi outlined the company’s renewed focus on “long-term thinking and ownership over short-term gains” in its compensation structure. Franceschi expressed optimism about the vast opportunities ahead for Brex and emphasized the importance of aligning employees with the company’s long-term success.
The operating model is also set to change, encouraging leaders to operate at all levels, promoting from within, enhancing in-person collaboration, and concentrating on specific time zones. This significant workforce reduction follows a restructuring in October 2022, during which Brex laid off 136 employees, accounting for 11% of its workforce at the time. After these layoffs, the company had slightly over 1,150 employees. While the current total employee count is not explicitly stated, the recent layoffs suggest a figure of around 1,400 before the latest cuts.
Reports surfaced indicating that Brex burned $17 million a month in the fourth quarter of 2023 and had cash reserves to last through March 2026. However, a company spokesperson disputed this information, deeming it “inaccurate” and stressing the company’s desire to enhance agility, accelerate profitability, and build on the impressive 35%+ revenue growth and 75% gross profit increase achieved in 2023. The spokesperson clarified Brex’s financial plan, stating that the goal is to be well above cash flow positive with approximately four years of runway.
Leadership transitions and long-term focus
Despite experiencing a short-term boost after the collapse of Silicon Valley Bank, Brex faced challenges due to increased interest rates and a broader slowdown in venture capital funding, leading to reduced spending by its customers. In the fourth quarter, Brex reported annualized net revenue of $279 million, marking a substantial 32% increase. However, it’s worth noting that a significant portion of this growth occurred in the first quarter of the year. Employees affected by the recent restructuring will receive eight weeks of severance, with an additional two weeks of pay for each year of service.
Furthermore, the company is offering a waiver of the one-year equity cliff for those who have not yet reached theirs. Brex’s journey has been marked by fluctuations since June 2022 when the company declared that it was “less suited to meet the needs of smaller customers,” causing shockwaves in the startup community. Despite subsequent clarifications about focusing on small- to medium-sized businesses and non-funded startups, the initial announcement represented a notable reversal for a company that had initially positioned itself as a credit card provider for startups.
In June of the same year, the company seemed to shift course, appointing Jason Mok, a former Andreessen Horowitz operating partner with over 16 years of experience at Silicon Valley Bank, as its new head of startups. Brex co-founder and co-CEO Henrique Dubugras emphasized that “founders and startups have always been at the core of Brex.” The spend management space has become increasingly competitive, with players like Ramp, Navan, Mesh Payments, and Airbase vying for market share. In December, Navan, an expense management startup formerly known as TripActions, laid off 5% of its staff, signaling challenges within the expense management sector.