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Sold for $5.15B. Brex last raised $300M in Oct 2021 at a $12.3B valuation.
by paxys 10mo ago
Sold for $5.15B.
Brex last raised $300M in Oct 2021 at a $12.3B valuation.
- rvz 10mo agoThat is a 50% discount, which isn't great for those who got into the latest round. Seems like Capital One is very excited on the deal and announced it earlier while Brex hid the announcement and made it hard to find. (It's on the Brex [0] journal directory, but you cannot see it featured on its front page) What (really) happened? [0] https://www.brex.com/journal https://www.brex.com/journal
- hn_throwaway_99 10mo agoIts not great for those who got in later rounds, but I would assume all the investors had at least 1X preferences, so they'll at least get all their money back. I think this is a pretty decent outcome for Brex. I read they received a total of 1.3 billion in funding, so a 5.15 billion exit isn't bad, especially since the bottom dropped out of the market for so many fintechs that were founded and had big raises between 2015 and 2021.
- itake 10mo agoI'm curious how the employees faired. Seems like they may bet getting nothing out of the deal if the investors get their money back.
- Carrok 10mo agoWe know how the employees did. Same as ever. They got whatever slop was left in the trough after the big pigs ate their share. Bitter about VCs? Me? Never.
- rahimnathwani 10mo agoBrex has been around for a long time, so employees will have been issued stock options with vastly different exercise prices. Early employees' options will have value, but more recent options are likely underwater.
- bpodgursky 10mo agoI strongly suspect they shifted to RSUs at those valuations.
- rahimnathwani 10mo agoIt seems unlikely that regular employees would be issued RSUs. Tax is due at vest, and you can't liquidate to fund the tax bill.
- glpgeFwac 10mo agoThe usual move here is "double trigger" RSUs that don't vest until a liquidity event, thus no taxes due until said liquidity event.
- rahimnathwani 10mo agoAre those common for regular employees?
- milkshakes 10mo agohighly common
- Romario77 9mo agoRight. Plus often the tax is paid out of RSUs given, you just get less in RSUs, some is subtracted to pay tax.
- haneefmubarak 10mo agoThere's double trigger RSUs and so on that allow you to have reasonable tax treatment, due to the theoretical threat of loss if liquidity isn't available. I worked at a company that had this at least while I was there.
- baumy 10mo agoI was a regular SDE at brex for a couple years and my various documents about comp say I have RSUs, and carta says so as well. I've never bothered to understand the details since none of the private companies I've worked for have had the non-cash portion of their comp be worth anything but $0 before.
- YetAnotherNick 10mo agoWhile I don't think it's the case here, but a lot of time there is more liquidity preference than the deal value so employees can only get what investor want them to pay.
- zamfi 9mo agoThese days, most employees getting nothing out of the deal is par for the course for acquisitions, unfortunately. The acquisition price is almost never exchanged directly for shares in the company as implied, often a chunk of it is kept for key personnel retention, etc. Typically just enough goes towards the share purchase to make investors happy, and the rest is structured as incentives for founders and key execs with milestone payouts. That‘s the set of people with leverage towards making the acquisition happen, so that‘s who gets paid. If you‘re just a regular employee with some options, and the acquirer doesn‘t want to keep you on, you should expect nothing.
- neilv 9mo ago> Typically just enough goes towards the share purchase to make investors happy, and the rest is structured as incentives for founders and key execs with milestone payouts. So they're getting the employees' shares without compensating the employees? And there's incentives paid to the people who approved the deal, separate from their shares? (I've heard of liquidation preferences, but never by the person making a job offer with stock options. Bribery also never came up.)
- lotsofpulp 9mo agoBecause “shares” are not all the same. Preferred vs common, so unless you negotiated some kind of preferred share terms, assume your shares are worthless. For a non publicly listed company. For a publicly listed company, the details are all publicly available, so the different types of shares will have their different prices be easily available to see.
- neilv 9mo agoIf that's true, when a startup is making you an offer for ISOs of common shares, and explaining it... how likely are they to know that, in event of a successful exit for the startup, your shares would be diluted and preferenced to 0 value? (The two most recent offer equity components I accepted were "2%" and "a million shares". On the latter, an upper exec did a kind of deal-closer meeting for their offer, showing me a spreadsheet, estimating how much the options would be worth if there were an exit in X years at $Y valuation.)
- n2d4 10mo agoThis is a weird theory. Brex sent an email to all customers, alongside posting everywhere on social media. You are making your conclusions because they didn't put the announcement on their landing page?
- fragmede 10mo agoSome people, (eg people who aren't already Brex customers), aren't going to get that email, and aren't following Brex's social media presence. They may not even have a social media account of their own, not even a Linkedin. The only way they would hear about is is via their landing page. How much you use social media, and are a Brex customer, is going to influence how big you think that group of people is, but it's for sure, non-zero.
- bflesch 10mo agoIt's as easy as some VC bros desperately searching for a bigger fool and finding it. Most likely CapitalOne management consists of friends with the VCs. It's just another case of the principal/agent problem and normalized white-collar fraud in US tech.
- coliveira 10mo agoI don't know why the downvotes, that's most probably what happened. These deals are rarely done for some economic reason, it's mostly because somebody knows someone else who can do it and get mutual benefit, a legalized version of fraud.
- greyw 10mo agoSo you are saying VC bros are defrauding Capital One shareholders?
- bflesch 9mo agoIt's simply an example of the principal/agent problem, finance 101. CapitalOne shareholders will decide if they want to sue the management over buying a company which primarily focuses on AI-bubble-startups. We're at a very late stage of the AI bubble which might be the last ZIRP-fueled bubble to pop after which VC as an investment vehicle will be dead for years to come. Rising tide lifts all boats and all, but many of the "genious" VCs already have problems returning capital from their older funds. Capital One management is friends with VCs, VCs want to cash out from their investments without big losses, some parties, some holidays, as easy as that.
- paxys 10mo agoLate round investors at least have liquidation preference. It's the worst outcome for employees.
- manquer 10mo ago> 50% discount There are liquidity preferences, nobody took a haircut, they may not made a lot of money as long as the sale price($5.1B) is greater than funds raised($1.2B) everyone made some money not as much as they thought, but nevertheless some. The reason may be different than you think, Capital One is known for its aggressive marketing campaigns and physical mail spam, it is more likely they didn't want to upset the customers and end users on what Capital One will mean It is quite likely Capitial one will mine the data, monetize the brand, sell other products and target high value users the typical Brex user.
- gabaix 10mo agoLiquidation preferences may have multiples. A 3x liquidation preference would have erased most gains for anyone who didn’t raise in the last round, employees and founders included.
- x0x0 10mo agoFair point, but Brex' business would have had to have been incredibly weak to raise on those terms.
- seattle_spring 9mo ago> as the sale price($5.1B) is greater than funds raised($1.2B) everyone made some money Absolutely not true. It means someone made money, but it very much does not mean that "everyone" made some money. In deals like this, common stock often is valued at $0, and employees are instead given a 4-year grant of RSUs in the new company. In other words, their time at Brex was worthless, and they have to last 4 years to get anything. The schedule is often back loaded (eg $0 in the first 2 years, 50% at year 3 and 4). Since most folks won't make it to 3 years, the company knows they won't be paying out almost any of these grants.
- mkozlows 10mo agoI mean, welcome to literally every tech startup valuation 2021 vs now. 2021 was so amazing for stock valuations.
- dzonga 9mo agofintechs are a hard hat area - they make a lot of noise while raising money - but hardly ever mention costs, profitability hence few fare well in the public markets or when its time for acquisition
- Ancalagon 10mo agoAll of these SaaS and Fintech startups from ZIRP were so overvalued.
- hopelite 9mo agoZIRP is basically still a major factor. The cancer of ZIRP was with us for literally a whole generation, that is not simply just undone by stopping the consumption of the carcinogen. Unfortunately for the majority of people, there are effectively zero good outcomes from any of this. Just like none of the previous promises and assurances of how {insert technology} would make things better for everyone, while always turning out to only benefit a few; so will the current lies of the same pattern result in the same output.
- throwawa1 10mo agoEmployees got wiped out!
- prasoon2211 9mo agoMay I ask if you're an insider / some who has first hand information about this?
- irjustin 9mo agoThere's a lot of speculation about how different rounds will get paid out. Unless someone has insider information and is willing to post, we have absolutely no idea who was made whole, who lost and/or who gained. At the size of Brex, anything is possible and it depends on how much leverage they had at each priced round. Guaranteed payout, equal, founders multiplier, lead multipier. All possible. Additionally, what people don't realize is the headline number can get severely inflated IF debt is included in the purchase price. If say their book was 4.3B in debt then the equity part is ~800m and all of a sudden everyone's underwater. We simply don't know the details.
- HWR_14 9mo agoWhat is a founder/lead multiplier?
- seattle_spring 9mo agoAn opaque method of ensuring investors get a huge payout at the expense of employees with ISOs that convert to common stock. Many startups refuse to share this multiplier with candidates, and will instead insist their equity grant is "competitive with the market" and "very generous." I wouldn't be surprised if, despite the large-sounding acquisition sum of ~5b, many employees are getting their equity zero'd out and replaced with a back-loaded 4 year grant, with vesting starting today and no credit for time already worked.
- irjustin 9mo agoIt's a different form of guaranteed payout where their value is a multiple on the next round or buyout event. Both guaranteed payout and multiplier are forms lowering your specific allocation of the evaluation so you get a larger payout vs the rest of that group or future groups.
- DANmode 9mo agoEven more notable since 80% of the US’ money supply was created after that. So that number should be even closer to 12…