5 ms·

Serious question, why does Brex even need to exist?

by pl0x 6y ago

streetcat1 6y ago
From what I understand, if you need credit as a founder, regular banks will want a personal guarantee, REGARDLESS of how much money you raised. I.e. the bank does not care about your company state. Brex on the other hand looks at your company state.
- mandelbrotwurst 6y ago
  This is my understanding as well, but what I don't yet understand is why this would apparently work well for Brex but not for the banks. Part of me has wondered whether it's some kind of VC-subsidized strategy to make a risk play that doesn't pan out actuarially, sort of like what Uber does with fares. Can anyone explain this?
  - mifeng 6y ago
    I'm a co-founder of a 15-person startup. We switched our banking and credit cards from Chase to Brex about a year ago and it's just lot better - UX, fees, data, perks, etc.
  - deleted 6y ago
    [deleted]
  - toomuchtodo 6y ago
    Brex minimizes their risk by offering a charge card versus a revolving line of credit. They also require access to your corporate bank account for liquid assets information to dynamically extend credit. This allows them to have a more nimble, forward looking-ish risk model rather than legacy institutions that rely primarily on credit histories. This allows Brex to capture card transaction fees from financial services other banks ignore (again, due to risk models), such as startup charge cards.
    - throwawaygh 6y ago
      > Brex minimizes their risk by offering a charge card versus a revolving line of credit. They also require access to your corporate bank account for liquid assets information to dynamically extend credit. For how many businesses is "a charge card for 15% of your cash balance and you're responsible for fraud" substantively different from just using a debit card? (Genuine question -- this isn't a market I realized even exists.)
      - toomuchtodo 6y ago
        30-60 day float plus cash back rebates (1-7 points per dollar depending on spend category). Whether that provides you value is up to your business requirements and cash flow constraints. If you can’t get working capital otherwise (venture backed pre revenue), it’s probably not a bad deal. I’d probably still go with Amex corporate cards and a personal guarantee, based on personal preference, a deep credit file, and a desire to outsource spend exception handling to the bank.
  - MaxGabriel 6y ago
    SVB, a popular bank for startups, started offering a card with no personal liability https://www.svb.com/business-banking/business-credit-card/svb-innovators-card https://www.svb.com/business-banking/business-credit-card/sv... and Stripe’s card also has no personal liability https://stripe.com/corporate-card?utm_campaign=paid_brand-US_Search_Brand_CorpCard-6499379182&utm_medium=cpc&utm_source=google&ad_content=382065891592&utm_term=stripe%20corporate%20card&utm_matchtype=e&utm_adposition=&utm_device=m&gclid=EAIaIQobChMIi5Kvq_Pf6QIV1eDICh3gKAatEAAYASAAEgIjQPD_BwE https://stripe.com/corporate-card?utm_campaign=paid_brand-US... I think the reason large banks haven’t offered this yet is they’re not very catered to startups, which might have a large balance but no credit history (either as a business, or because the founders are young or foreign). (My company somewhat competes with Brex cash but doesn’t offer a charge card or credit card product)
- texasbigdata 6y ago
  It goes against your personal credit score. So you can get one that's unsecured, but perhaps not if you've immigrated and/or have no track record.
- HeavenFox 6y ago
  I think what the parent is suggesting is, Brex seems to have practically no moat. If one day, say, Amex, which is already a huge issuer of business credit / charge cards, decides to eat Brex's dinner, can Brex survive?
  - icelancer 6y ago
    For us, the consumers, do we care? If AMEX was gonna do this, they would have done it by now. If they buy/eat Brex, we still benefit from expanded financial instruments.
  - nrp 6y ago
    Amex actually did launch a startup targeted charge card that doesn’t require a personal guarantee, presumably to compete with Brex. Brex’s gameplan though seems to be a full set of financial products targeted at startups that integrate well together, like per-employee charge cards, cash accounts, and revolving lines of credit. In that sense, they would start to look more like a streamlined and modernized (but riskier) SVB.
- supernova87a 6y ago
  Similar questions: Why is it that much better than a normal business line of credit or credit card? Do they give loans easier than those, or let you pay in equity or something? Do they have better integrations with corporate IT systems?
  - thoughtstheseus 6y ago
    They give you a credit card you can use to spend your cash. Normally credit for businesses this size require a personal guarantee. They do not.
ponker 6y ago
Brex is a leveraged bet on the entire startup economy without needing to identify individual winners. Because they're taking on credit risk from startups, if the startup economy as a whole does well, those credit risks won't ever come knocking and Brex will make a lot of money. If the startup economy goes down the tubes and they all default, then Brex will burn up.

Serious question, why does Brex even need to exist?

by pl0x 6y ago

Serious question, why does Brex even need to exist?

From what I understand, if you need credit as a founder, regular banks will want a personal guarantee, REGARDLESS of how much money you raised. I.e. the bank does not care about your company state. Brex on the other hand looks at your company state.

mandelbrotwurst 6y ago
This is my understanding as well, but what I don't yet understand is why this would apparently work well for Brex but not for the banks. Part of me has wondered whether it's some kind of VC-subsidized strategy to make a risk play that doesn't pan out actuarially, sort of like what Uber does with fares. Can anyone explain this?
- mifeng 6y ago
  I'm a co-founder of a 15-person startup. We switched our banking and credit cards from Chase to Brex about a year ago and it's just lot better - UX, fees, data, perks, etc.
- deleted 6y ago
  [deleted]
- toomuchtodo 6y ago
  Brex minimizes their risk by offering a charge card versus a revolving line of credit. They also require access to your corporate bank account for liquid assets information to dynamically extend credit. This allows them to have a more nimble, forward looking-ish risk model rather than legacy institutions that rely primarily on credit histories. This allows Brex to capture card transaction fees from financial services other banks ignore (again, due to risk models), such as startup charge cards.
  - throwawaygh 6y ago
    > Brex minimizes their risk by offering a charge card versus a revolving line of credit. They also require access to your corporate bank account for liquid assets information to dynamically extend credit. For how many businesses is "a charge card for 15% of your cash balance and you're responsible for fraud" substantively different from just using a debit card? (Genuine question -- this isn't a market I realized even exists.)
    - toomuchtodo 6y ago
      30-60 day float plus cash back rebates (1-7 points per dollar depending on spend category). Whether that provides you value is up to your business requirements and cash flow constraints. If you can’t get working capital otherwise (venture backed pre revenue), it’s probably not a bad deal. I’d probably still go with Amex corporate cards and a personal guarantee, based on personal preference, a deep credit file, and a desire to outsource spend exception handling to the bank.
- MaxGabriel 6y ago
  SVB, a popular bank for startups, started offering a card with no personal liability https://www.svb.com/business-banking/business-credit-card/svb-innovators-card https://www.svb.com/business-banking/business-credit-card/sv... and Stripe’s card also has no personal liability https://stripe.com/corporate-card?utm_campaign=paid_brand-US_Search_Brand_CorpCard-6499379182&utm_medium=cpc&utm_source=google&ad_content=382065891592&utm_term=stripe%20corporate%20card&utm_matchtype=e&utm_adposition=&utm_device=m&gclid=EAIaIQobChMIi5Kvq_Pf6QIV1eDICh3gKAatEAAYASAAEgIjQPD_BwE https://stripe.com/corporate-card?utm_campaign=paid_brand-US... I think the reason large banks haven’t offered this yet is they’re not very catered to startups, which might have a large balance but no credit history (either as a business, or because the founders are young or foreign). (My company somewhat competes with Brex cash but doesn’t offer a charge card or credit card product)
texasbigdata 6y ago
It goes against your personal credit score. So you can get one that's unsecured, but perhaps not if you've immigrated and/or have no track record.
HeavenFox 6y ago
I think what the parent is suggesting is, Brex seems to have practically no moat. If one day, say, Amex, which is already a huge issuer of business credit / charge cards, decides to eat Brex's dinner, can Brex survive?
- icelancer 6y ago
  For us, the consumers, do we care? If AMEX was gonna do this, they would have done it by now. If they buy/eat Brex, we still benefit from expanded financial instruments.
- nrp 6y ago
  Amex actually did launch a startup targeted charge card that doesn’t require a personal guarantee, presumably to compete with Brex. Brex’s gameplan though seems to be a full set of financial products targeted at startups that integrate well together, like per-employee charge cards, cash accounts, and revolving lines of credit. In that sense, they would start to look more like a streamlined and modernized (but riskier) SVB.
supernova87a 6y ago
Similar questions: Why is it that much better than a normal business line of credit or credit card? Do they give loans easier than those, or let you pay in equity or something? Do they have better integrations with corporate IT systems?
- thoughtstheseus 6y ago
  They give you a credit card you can use to spend your cash. Normally credit for businesses this size require a personal guarantee. They do not.

ponker 6y ago

Brex is a leveraged bet on the entire startup economy without needing to identify individual winners. Because they're taking on credit risk from startups, if the startup economy as a whole does well, those credit risks won't ever come knocking and Brex will make a lot of money. If the startup economy goes down the tubes and they all default, then Brex will burn up.