Three months after announcing it would make a big push into software and enterprise, fintech giant Brex is apparently abandoning the very segment it started out to serve – small businesses.
Startup customers report that they got notice they would be booted off the platform on August 15. Brex published a brief explanation on its website, saying that it is constantly evolving its business and as it does, it has become “less suited to meet the needs of smaller customers.”
In that missive, Brex told its SMB customers that their accounts would remain active until August 15 – giving them time to move their money to an external bank account “or other alternative platform” and transact on their Brex card. The company provided the same deadline for topping up any deficit that may exist in their account.
The company ends its explainer by simply saying: “We’ve appreciated your business and wish you all the best in the future.”
For the unacquainted, Brex is one of a number of companies in the corporate spend management space that has grown increasingly crowded — and competitive — in recent years.
Originally, Brex was a startup focused on startups. Specifically, it provided corporate cards aimed mainly at startups and SMBs. Brex gradually evolved its model with the aim of serving as a “financial operating system” for companies. Historically, it has generated its revenue from interchange fees.
But earlier this year, the company announced it is making a “big push” into software, which means its revenue generation will be more diversified as it will now be making money off of recurring revenue from subscriptions to its software, in addition to interchange fees. Brex is also placing greater emphasis on moving upmarket to serve larger customers,
Its move to stop servicing SMBs is shocking to say the least, and one can only assume as market conditions have shifted, it no longer wants to take the risk of serving less cash-rich customers as a way to limit their own credit risk. Talk about a fair-weather friend.
Earlier this year, Brex confirmed a $300 million raise that valued it at a staggering $12.3 billion. The company as of March had about 1,100 employees, saw 100% YoY revenue growth in 2021 and a customer base “into the 50,000s,” according to CEO Henrique Dubugras. He has declined to reveal hard revenue figures, but previously told TechCrunch Brex was still focused on growth and not yet profitable.
The company also told TechCrunch in March that the majority of Brex’s revenue still came from interchange fees, but that it expected that the proportion of SaaS revenue and “other revenue lines” would grow over time.
TechCrunch has reached out to Brex for comment and will update this story if and when it gets back to us. More to come in the form of industry reaction later today.