Episode Thumbnail
Episode 4  |  47:17 min

Why the Launch of Brex Cash Nearly Cost the Company Everything

Episode 4  |  47:17 min  |  08.24.2021

Why the Launch of Brex Cash Nearly Cost the Company Everything

00:00
00:00
This is a podcast episode titled, Why the Launch of Brex Cash Nearly Cost the Company Everything. The summary for this episode is: <p>Launching your first product is hard. But the second one? It can make or break your company.</p><p><br></p><p>Henrique Dubugras launched Brex as a corporate credit card for early-stage companies. But as the company grew, their second product Brex Cash was met with weightier investor and customer expectations, missing tools, and one giant question mark over Henrique's head.</p><p>Henrique talks about how he made the decisions around why he kept pushing the launch of the product, how he measured for success, and ultimately, pulled it all off.</p><p><br></p><p>Learn more:</p><p><a href="https://listen.hubspot.com/public/83/The-Shake-Up-f996e60a" rel="noopener noreferrer" target="_blank">The Shake Up</a></p><p><a href="HubSpot Podcast Network" rel="noopener noreferrer" target="_blank">HubSpot Podcast Network</a></p>
Takeaway 1 | 01:17 MIN
What Brex offers for small businesses
Takeaway 2 | 01:55 MIN
A look into Brex Cash and Brex Card
Takeaway 3 | 02:09 MIN
Brex Card rewards program
Takeaway 4 | 02:07 MIN
Brex vs traditional banks
Takeaway 5 | 01:44 MIN
How Henrique decides where Brex should invest
Takeaway 6 | 04:03 MIN
How Henrique started coding at the age of 12
Takeaway 7 | 01:42 MIN
Hard decisions to be made to stay focused on SMBs and startups

Launching your first product is hard. But the second one? It can make or break your company.


Henrique Dubugras launched Brex as a corporate credit card for early-stage companies. But as the company grew, their second product Brex Cash was met with weightier investor and customer expectations, missing tools, and one giant question mark over Henrique's head.

Henrique talks about how he made the decisions around why he kept pushing the launch of the product, how he measured for success, and ultimately, pulled it all off.

Guest Thumbnail
Henrique Dubugras
Founder and Co-CEO, BrexConnect with Henrique

Alexis Gay: The Shake Up is brought to you by HubSpot Podcast Network.

Brianne Kimmel: That's right. The HubSpot Podcast Network is a one- stop audio destination for business professionals.

Alexis Gay: It's where education meets inspiration with amazing shows like My First Million, where you can hear stories from the entrepreneurs who made it big.

Brianne Kimmel: And where the hosts, Sam and Sean, don't shy away from the tough questions.

Alexis Gay: With access to a collection of marketing, sales service and operations shows, you'll have all the information you need as your company goes from startup to scale up and beyond.

Brianne Kimmel: Listen, learn, and grow with the HubSpot Podcast Network at hubspot.com/ podcast network.

Speaker 3: inaudible.

Alexis Gay: You're listening to The Shake Up, where we explore the business decisions that dare to be different and the leaders who are shaking up their industries. My name is Alexis Gay.

Brianne Kimmel: I'm Brianne Kimmel. And on each episode, we'll bring research and data backed insights to dig into the minds of business leaders and learn how they make the decisions to challenge the status quo.

Alexis Gay: You can support the show by following us on Apple Podcasts or Spotify, or honestly, wherever you get your podcasts.

Brianne Kimmel: We'll be there hanging out, talking business, ready and waiting to shake things up with you.

Alexis Gay: Okay. Today on The Shake Up, we have a great show for you. We're going to be talking with Henrique Dubugras, the founder and co- CEO of Brex. How he grew the company to hundreds of millions in revenue and how he made some of the important decisions that got him to that point. Not only that, we'll be talking about how Henrique from a wee pre- teen age began building his entrepreneurial mindset. So let's get started. When I think about Brex, my connection is actually very personal because I have a Brex Card. I'm thrilled to have it. I obviously love the product, but the truth is that I have a Brex card for my LLC because I couldn't get approved for a regular business credit card by the bank.

Brianne Kimmel: Yeah. Actually, I've heard this quite a lot specifically for LLCs, for small businesses, for even early stage startups. It can be really hard to get the banking system all set up. The one thing that I love about Brex as well is they're really an all- in- one offering because they're doing expense reporting. They've essentially built all of the things that you need to really understand your business from the very beginning, so I've been very impressed so far. And that's aligned with a lot of things that we've talked about before, around just the rise of small businesses. And so many people are starting their own podcast or thinking about ways to freelance or do projects on the side. And so, the fact that Brex was able to support that, that's a real competitive advantage for their business. And for early staged tech companies, which is their bread and butter and where they initially got started, you can also measure things like your AWS spend and a lot of expenses that come up at the very early stages. And so, it's nice to see that they've created this really intuitive way for businesses of all types to just track exactly what's happening behind the scenes.

Alexis Gay: Oh, yeah. I mean, it's hugely important. I had everything on my personal credit card for a couple months and I was going crazy because just mentally not being able to figure out what's what, it was just taking a lot of brain power. So, I'm thrilled to have a card. Plus, I like to be able to say, " Oh, it's a business expense," even though it all comes from the same place. inaudible Alexis Gay LLC footing the bill.

Brianne Kimmel: I mean, that sounds great. That's your free lunches and coffees and everything else.

Alexis Gay: Oh, yes. Very free.

Brianne Kimmel: Now that we're working from home, everything is a business expense. I was talking to a friend that said, " Are we working from home or are we sleeping at the office?" And I think that's still a question that's largely still unsolved.

Alexis Gay: Wow. That sounds like a tweet. Did you Tweet that?

Brianne Kimmel: I did not.

Alexis Gay: You should... But okay. What you pointed out that many of us have side hustles and many people like myself are starting a podcast or starting sub stacks, or even just starting companies right now, it's interesting that I turned to something like Brex. And I think that the reason I did is that Brex, to me, is a brand that I associate with what I would consider the startup stack. Like when you are starting a company or you're starting a small business venture, what are the tools that you gravitate towards to start that business? And so, to me, it was like, okay, I need Brex. I know I need QuickBooks for small business. And then I have a couple pieces of software that I use to keep the rest of my business running. I've got a premium Notion subscription. I use some podcasting software, but I look at it as like all these different facets of my stack that I use to run my business. And Brex is top of mind, I think in part, because of just how much mind share they've earned over time within the startup in tech communities.

Brianne Kimmel: Yeah. That's exactly right. I mean, their name comes up consistently with a lot of companies that I meet and that I'm working with on a daily basis. And it's like their ability to visualize your expenses and a lot of the design decisions that they've made have made this a very differentiated product that makes it more relevant and makes it feel like it's something that's uniquely designed for startups.

Alexis Gay: One of their primary offerings is that they help you scale, or rather they'll grow with you. And that's not my situation at all. I don't anticipate getting some big round of funding and then hiring 30 people or whatever, but I still chose Brex because that's the card that I was most familiar with. And I guess the reason I say all of this is I'll be curious to see if this space gets more niche over time, if it's not just, oh, the card for early stage companies, if it's like the card for creators, the card for freelancers, the card for subscription- based companies or whatever.

Brianne Kimmel: Yeah. I guess we'll find out. I mean the interesting thing with Brex and what I'm excited to talk to Henrique about is the fact that they start with many venture- backed startups that may sign up with a handful of employees, but ultimately these startups can scale very quickly and they can scale into very meaningful accounts. I know that the startup ecosystem is very important to Brex and that's one that they'll continue to invest a lot of programs and services to be as helpful as possible behind the scenes.

Alexis Gay: Yeah. And I certainly think that's the move given that that's their core customer set. Also, you mentioned serving customers that will grow with them. And it's also funny because something that, the way that I first learned about Brex was that it felt like they were on every billboard in New York and San Francisco for a period of time.

Brianne Kimmel: Fun fact, actually, and this was when they were a little bit earlier stage, they actually had a Brex- branded coffee shop in San Francisco.

Alexis Gay: What?

Brianne Kimmel: And so, they took a page in the Capital One playbook where they had a branded coffee shop, which if you're selling to SMBs, and you're also serving startups-

Alexis Gay: Oh my God. That's so cool.

Brianne Kimmel: ...it was really funny to see that startups were going there every morning to get coffee, or maybe you have VCs meeting with startups outside. And so, it's one of these things where I think they've done a great job on building brand awareness and maintaining that mind share through a lot of more experiential things.

Alexis Gay: Yeah. God, that's some cool shit. That's brilliant. I love that stuff. And that's the kind of thing. And I think that I'll be curious to hear more and learn more about Henrique, but it seems like the idea for Brex is not one that I would consider blowing everything wide open, having talked about Square before, that's a concept that I think really blew everything up. Like, " Holy shit, this is really novel." Brex, I feel like took a good idea and just did it really, really, really well.

Brianne Kimmel: Yeah, absolutely. I would say where we're at today is a lot of startups are outspending each other through paid marketing or they're coming up with creative ways to really differentiate. I think Brex took a little bit of a hit. There were some criticism of like, " Oh, wow. Why would you do a branded coffee shop? What a waste of venture. Your VC money..." But what they did really well is that signaling, they understand who their customer is. They understand small businesses, they understand coffee shops, they understand restaurants, they understand the needs of startups, because those are the people that are coming in every morning to get coffee. I actually really liked that they did that.

Alexis Gay: Every once in a while a company does something legitimately cool. And I'm like, " Honestly, thanks. Thank you for giving us this one little moment in the day that was like,'Nice, good job, Brex.'" I wonder if they'll do anything like that again.

Brianne Kimmel: I hope they do. I mean-

Alexis Gay: Maybe they want to run a comedy club.

Brianne Kimmel: Yeah, exactly. I mean, post- pandemic, the world is their oyster. I could see them doing pop- up food trucks in different parts of the country. They could easily do a comedy festival. I think that's a great idea because it's so easy to sign up. And I know they want to stay very true to SMBs. And so, a way to do that is to continue to just branch into different creative communities and to do more creative events. And so, I would love to see them to double down on that strategy.

Alexis Gay: Me too. Well, we've definitely been talking a lot about how great Brex is and how they've done a lot of things that were really innovative, and interesting, and fun, and cool, and not boring. I do want to talk a little bit about what I certainly considered to be a little bit of a stumbling block for the business. Which was that in 2019, the company announced Brex Cash, but the launch of the company's second product, Brex Cash was met with months of pushed launches, publicly pushed launches. Not great, probably a tough time over at Brex HQ.

Brianne Kimmel: And typically when these delays happen, if this is the second product that's going to market, they have spent a lot of time with their existing customers perfecting the feature set and really figuring out how they're able to solve a number of future requests at once through the second product. And so, that actually puts them in a really difficult position with customers who are eagerly awaiting this product.

Alexis Gay: And to add a little bit of context around the product itself, Brex Cash is a business cash management account integrated with Brex Card. So basically, Brex, like any other bank, uses the cash in those user accounts to lend it out to other banks and then they collect interest from those institutions. And so, you're essentially saying to your customers, " Hey, we have a new product coming. We're going to manage your cash." But then before launching it, I think you definitely run the risk of reducing the credibility of that product before it even hit the market, which I think is a bummer because obviously now in hindsight it was able to launch successfully. But I'm curious, what do you think is important for leaders to be thinking about during this time?

Brianne Kimmel: Yeah, the interesting thing with Brex is, well, this isn't as severe as crisis management.

Alexis Gay: Totally. Totally.

Brianne Kimmel: This is something where your managing investor expectations, you're managing customer expectations. I would say that increasingly the relationship between tech and media is a little bit challenging. I will say that historically, startups have relied very heavily on traditional tech press for funding announcements and for announcing new features. I think today, we're seeing a shift away from some of those things where startups want to control their own narrative.

Alexis Gay: What I think is important here for companies that are in a moment like this, which like you said, this is not a crisis moment. This is not, we're out of money. This is not, we've made a huge mistake and there's been a data breach. This is just, this is going to take longer than we initially thought. I actually think it's really important for the company and the leadership to set the tone both internally and externally about what size problem we're dealing with here, right? Because if you sound the alarm bells and you call up all your investors and it's this big, heavy, serious situation. But if you are honest and if you are authentic, I really think that can help you weather the storm. And I think the storm itself will be a lot smaller as a result.

Brianne Kimmel: Yeah. Absolutely. And typically inside of tech companies, the team does a great job of forecasting how long something is going to take. The challenge and where sometimes it takes a little bit longer to release some of these large scale projects such as like an entirely new second product are bottlenecks that are dependent on other companies. I think oftentimes startups will choose to stay as independent and heads down on product without some of those external dependencies, if they can.

Alexis Gay: Yeah. But in Brex's case, to deliver on this all- in- one solution for startups and small businesses and now medium to large size companies, you're going to experience some of these delays and some of these challenges because they're doing so much.

Brianne Kimmel: I just think you have a much higher burden of trust and credibility when you're dealing with people's money or with their data. I'm trying to think about what I would do in Henrique's position or in the leadership's position at Brex when you've already made this public announcement and now you have to navigate through changing it.

Alexis Gay: I want to make a statement, but I want to be clear that I'm not saying that this is what I think was happening at Brex at all. But I do want to bring up that something this type of situation usually signals to me is that there was an internal communication breakdown. So again, I'm not saying that that's what happened at Brex. I don't know. I'm not even speculating that that's what happened to Brex. But I'm just saying, it makes me think, what is the culture of transparent and candid communication at a company if these types of things are not being communicated in the manner that they need to be? You know what I'm saying? If I was in this position as a leader, I would be scared that we got into this position at all and I would be investing as much energy in figuring out why we got there internally as I would be managing the external comms. I'd be doing a full post- mortem. Because this is the kind of thing that, yes, you can fix it. And of course they ultimately did and people use the product, but how can you make sure that it absolutely never happens again? Because I think this is the kind of thing that you really only get to do once.

Brianne Kimmel: Absolutely. And you bring up such an interesting point as well, because one concern that I had over the last year when teams were making this transition to remote first culture is that problem identification, problem sizing, creating a culture around when to flag issues that are coming up is actually a new muscle for a lot of companies. I'm finding that many of the best companies that have introduced a culture of radical transparency and are not afraid to really quickly diagnose problems and flag it company- wide, those are the types of teams that are working really well remotely. And oftentimes that comes down to the CEO setting an expectation broadly that we're a team and teams perform best when each person is actively contributing, that they're flagging things when they're not trending well or when something's taking longer than expected.

Alexis Gay: Totally. And a point you mentioned that I think is really important is setting expectations upfront about something like that. When I was hiring at Patreon, what I would do is I would share a document with all of my new hires on their first day that laid out, of course, your normal stuff, right? Helpful things to review, blah, blah, blah, documents to read. But then I also had a section about our team values that I'd written and gotten feedback on from the team. And then I had a little section called other things I care about. And that's where I went into my stance on honesty, professionalism, respecting and supporting your teammates and things like that. But one of the things I had in there was if you're in trouble, if you're going to miss a deadline, tell me before you miss the deadline, because I can help you. But if you tell me after the deadline has passed, I can't help you. It paid dividends because I had a team where we just had that culture. If there's a problem, tell me. And it was never met with, I don't get angry. It's just like, oh, amazing. Okay, cool. Now I know. How do we fix it?

Brianne Kimmel: Yeah, that's great. I mean, I really love this idea of values at the team level. I think a lot of companies invest in company- wide values and the challenge with them is they are oftentimes very high level. It's like, we're a team. We're very open. We care about the environment. It's all of these very high level lofty goals that make people feel good when they join the company. To have team level goals is really awesome because then you start to specialize based on things that your individual team cares about in the context of your particular role inside of the company.

Alexis Gay: Totally agree. Okay. Let's switch gears for a second. I want to talk a little bit about something that Brex did that it sounds like really contributed to their success. When you're a Brex Card user, you gain points on the card and you have the opportunity to spend them with a series of partners. And a lot of them are really startup, relevant partners like AWS, Slack, Zoom, et cetera. There's a lot of obvious reasons why that's a great move strategically for Brex, but one of them, I think, is the signaling. By choosing this set of partners as your rewards redemption partners, you're signaling what type of customers you're looking for.

Brianne Kimmel: Absolutely. Yeah. This is really smart from a marketing perspective. Keep in mind, I mean, Brex does have many of the standard perks that you would get with other credit cards as well like its 8X point on Rideshare, its 5X points on travel, they have restaurants. But the thing that I liked is they were the first credit card to really directly communicate that there were 3X points on software. And so, I mean, they say recurring software. So it's things such as AWS, Slack, Figma, Notion, any of the tools that people are using day to day. It was really awesome to see that Brex was building this directory of perks and bonus credits and benefits and all of these things that you need to run your business in a way that it was very clear that they were uniquely designed for startups and for small businesses.

Alexis Gay: I think that's a great point and I think calling out the software piece in particular is something that I know is going to speak to a lot of founders and small teams and early stage companies and stuff like that. From a distribution standpoint, it's great because Brex is then able to do more partner marketing with Slack or Gusto or Asana or Freshworks, like any company that they're offering some of these really progressive partner perks, they also have the benefit of doing partner marketing with them, which is awesome because then they can access the customer base of a lot of these software companies that had already been around for a number of years and that already had a large percentage of startups using their product. And so, it was great just from a market coverage perspective.

Brianne Kimmel: Oh, that's a good point.

Alexis Gay: Well, I'm excited to learn more. We're going to take a quick break. And after the break, we'll talk to Henrique. We're going to hear how he thinks about scaling Brex, obviously. Hello, that's the whole reason we're here, but we're also going to learn how a pre- teen, Henrique, got his first cease and desist. You always remember your first, you know, and how he managed millions of dollars at the retirement with the age of 16. All that and more coming up after this quick break. Today's episode is sponsored by those fine folks over at HubSpot. Managing conversations with prospects and customers and creating remarkable experience can be tough.

Brianne Kimmel: HubSpot wants to change that.

Alexis Gay: That's why they created a CRM platform that makes it easy to align across teams.

Brianne Kimmel: Oh, it's so much easier. With HubSpot's Unified System of Record, all teams can create a better customer experience without missing a beat.

Alexis Gay: We love a Unified System of Record. We always say that. You can install live chat on your website and allow sales or support to get in touch with prospects directly.

Brianne Kimmel: Or send marketing emails on behalf of sales reps or customer success managers.

Alexis Gay: Not to mention, it allows prospects to book meetings with reps without wasting time.

Brianne Kimmel: Yeah. And best of all, teams can get access to all of the contacts history so they can have more informed conversations with prospects and customers and design a better overall experience.

Alexis Gay: The result, all your customer people can align around the same goals, consistently great customer journeys that drive growth and lifetime loyalty. Learn more about how you can scale your company without scaling complexity at hubspot. com. We are back. And may I be the first to say, I am so excited to talk with today's guest, he's the founder and co- CEO of Brex, Henrique Dubugras, welcome to The Shake Up.

Henrique Dubugras: Thank you for having me. Super excited to be here.

Alexis Gay: Yeah, we are thrilled to have you.

Brianne Kimmel: Yeah, this is going to be a ton of fun. So Henrique, we've been talking about how Brex has grown to over 59 million in revenue. And we're going to spend some time on the company's focus on SMBs, and not just startups. And we want to do a deep dive on a lot of the partnerships and how many of the rewards- based models have come about.

Alexis Gay: A lot of exciting stuff to talk about on the numbers front. We're also excited to get inside your mind to hear about how you're growing the company and how you make decisions. And I thought it would actually be a fun place to start to let you know that I'm a Brex user myself. I'm a Brex card holder.

Henrique Dubugras: Amazing. Love that.

Brianne Kimmel: I really like Alexis's point earlier, especially as someone that's recently created an LLC, that's building a new career as essentially a self- taught comedian. I feel like Brex continuously delivering new products and new solutions is really interesting because historically, for someone getting a business off the ground, they'd have to discover multiple different tools where Brex is essentially rolling up all of these tools into a single place. Why do you think traditional banks have been so hesitant to do so? Or is this something that's been completely overlooked on their part?

Henrique Dubugras: The problem with the banks is purely technology. So, most of them run on these systems that were built 20, 30 years ago. So imagine you want to build anything. You have to go and integrate or change something in the core that hasn't been touched for 20 years, right? So, what we did at Brex, which is we knew this and we basically said, " Hey, we're going to rebuild the entire core software stack from scratch. We're not going to use any of these legacy software players that the banks used, which a lot of FinTechs in the past did, we're just going to rebuild everything from scratch." So, I don't think that the banks never had the idea of like, " Well, let's build this," a lot of them tried for many years. It's just really hard for them to build on top of their existing systems.

Alexis Gay: That's really interesting. It sounds like what you're saying is that other FinTech companies had maybe attempted to solve this problem. I'm curious, why was Brex ultimately more successful?

Henrique Dubugras: I think that it had a little bit to do with timing and a little bit to do with just our own experience. I think we had built a FinTech company before starting Brex that was a payment processing company. And we saw a lot of the issues of the industry of basically having these legacy technologies and trying to build on top of them. So, it was something that we felt very strongly about more than I think most founders before. And I think the other thing is just about capital. I think 5, 10 years ago, it was really hard to raise a lot of capital for FinTech. FinTech wasn't a thing. Right? And it was really hard to attract a lot of the best engineering talent for FinTech because it wasn't a thing. So if you're hiring engineers and the best engineers, you want to go to social media companies or O2O companies, right? That was cool. And FinTech just became a big thing over the last four, five years around the world. A new bank. There's a ton of them now that just got to scale recently that made it so it's possible to raise a lot of money for FinTech.

Alexis Gay: Yeah. That makes a ton of sense.

Brianne Kimmel: So, it seems like, and I think the data would back this up, small business credit card volume is on the rise. One of the stats that we have said that it's set to balloon from 493 billion in 2017 to 686 billion in 2022. What other shifts in customer behaviors have helped fuel Brex's growth?

Henrique Dubugras: A big one is the percentage of vendors that take credit card has been increasing. So, if you think about a business of the past, like let's say you got a, I don't know, like a restaurant, right? Your biggest costs are your rent, which you can't pay on card, your food, which is usually like a wholesale so you pay over check, you have employees which are payroll. So, it didn't really have a lot of card expenses. Which is a core part of our monetization and business model. Then if you go to an e- commerce company, very different. They pay a ton of ads on credit cards. They pay servers on credit cards. They have a lot of SaaS vendors, like Shopify, or Toast, or Slack, et cetera, all going through credit cards. And that being a bigger part of a company's total expenses. That has been really good for Brex.

Brianne Kimmel: Totally. Those types of shifts all make a ton of sense. And then of course, the booming number of former tech workers leaving to become comedians. I mean, that must be a huge portion of your revenue.

Henrique Dubugras: Huge. Yeah.

Brianne Kimmel: Massive.

Henrique Dubugras: We're going to have a GM for comedians. Yeah.

Alexis Gay: Let me know. Hook us up on email. I can deliver product feedback.

Henrique Dubugras: Amazing.

Alexis Gay: So Enrique, as you're thinking about those decisions and where to go next with your customers and thinking about how all of those customer behavior trends are shifting, how do you make those big decisions about where Brex should invest next? What's your personal decision- making process like?

Henrique Dubugras: It's something that we've been iterating. Right? Because in our view, building a company is just a series of small and big decisions gone right. And I think there's two types of decisions. One is the ones that you're not making yourself because they're smaller and they're more day- to- day, or even they're bigger, but they're just, the company grew enough. And the important thing there is creating the right systems for your team to basically make those decisions correctly. Right? So, if you have a decision between prioritizing product A or product B, how do you make so that they know to prioritize product B instead of product A, because of the system you put in place, right? So where are the incentives that they have? What are the North Star metric? What is it that we're optimizing for? Who's the customer they're supposed to be talking to, to serving the needs? Making sure all those things are super clear and you spend a ton of time thinking about those things makes the entire company make better decisions, right? And then sometimes there's these big, strategic decisions that you have to make. And for me, the big trade off there is, when you're making really big decisions, you need to make sure you have a mix between strategy and doing the right things for your longterm vision and what you want your business to be like after a long time. But also things that customers want from you. Right? Because it's not only doing, I think a lot of companies when they grow, they think that they earned the right to do everything because it makes sense for their strategy, but then they don't think enough of like, " Why will the customer actually want this?"

Brianne Kimmel: Totally.

Alexis Gay: Henrique, I want to go back to a little Enrique lore that we read. I want to hear a little bit about you at age 12. I read about you at age 12 and I heard that it all started with a video game. Can you tell us a little bit about that?

Henrique Dubugras: Yeah. So, that's how I started coding. I started coding when I was around 12 because there was this game I wanted to play. It was a paid game. Gambling and playing in Portuguese is the same word.

Alexis Gay: Oh, really?

Henrique Dubugras: Yeah. And when I asked my parents about, " Hey, can you pay for this thing for me?" They said, " No, why are we going to give you money to gamble?" And it was hard to explain. It was different. So, I learned that if I learned how to code, I could actually play the game for free and build a pirate version of the game that-

Alexis Gay: Oh my God.

Henrique Dubugras: ... meand my friends could play. And then I launched this pirate version of the game and it became super popular. A lot of people started playing because it was free and a lot of people don't have the money. So, that's how we started out. But like six months later, unfortunately, I got some legal notifications saying I was breaking some patents.

Alexis Gay: Oh my God.

Henrique Dubugras: I didn't really know what patents were, but my mom got super upset.

Alexis Gay: So, after that, you created some education startups, but at the ripe old age of 16, you created Pagar. me. And what I read was that in just three years, Pagar. me grew to 1.5 billion in volume of transaction processed. Can you tell me a little bit about how you went from coding this game at 12 to building a company that processed billions of dollars in volume by 16?

Henrique Dubugras: Yeah, totally. So basically, after I got these little notifications, I would just spend all my time doing this. A hundred percent of my time and energy was building this thing, so I was having this 14 year old crisis a little bit, of what do I do with my life? But then what happened was, I started doing some normal stuff, to fill my time. So, I found a girlfriend and I started watching TV shows and I started watching a TV show called Chuck.

Alexis Gay: Oh, yeah.

Henrique Dubugras: I don't know if you've seen it. It's a really good computer hacker and programmer that saved the world through code. And he was very clumsy, so I identified a little bit. And I was like, " Oh, I want to be exactly like Chuck. Chuck is so awesome." And Chuck had gone to Stanford and so I got obsessed with getting into Stanford because Chuck had gone to Stanford.

Alexis Gay: That's amazing.

Henrique Dubugras: That was why.

Brianne Kimmel: Really, that was why?

Henrique Dubugras: Yeah. I just wanted to be Chuck. And so, when that happened, I basically started getting obsessed with how to get into Stanford, but it was a complicated process for Brazilians. The whole U. S application process is not super easy. And then I found this Brazilian that was graduating from Stanford and I added him on Facebook, and started chatting with him. He gave me some attention, and turns out he was starting a startup in Brazil that was like a event inaudible in Brazil. So ticketing in Brazil. And I was a coder, so we did this deal on which I would code for him for free, in exchange, he would teach me the Stanford application process and write me a recommendation letter.

Alexis Gay: Wow.

Brianne Kimmel: Wow. That's great.

Henrique Dubugras: So, that's how I got into startups. I went to work for this guy for a year and he basically taught me so much about startups and I was super involved in building a product and everything. And I don't know. It just sounded like a really cool life, his entrepreneurial life. So after a year working, I decided I wanted to try to do a company myself. Why not? So, I learned how to get into college in the U. S, even though I hadn't gotten in yet, I at least learned the process. So, I decided to build a company to help other Brazilians with the whole process. So, I built this education company to help Brazilians with the U. S application process, which got a bunch of users early on, but never monetized in any way, so it failed miserably. But it's how I got into startups. I met a bunch of people. It was interesting. It was in the press a good amount. So it opened some doors. And then I was having these huge fights with my mom because she wasn't really into this entrepreneurship thing. And I wanted to do more of that and less of school.

Alexis Gay: What did she want you to do instead?

Henrique Dubugras: Just normal school and go to college and stuff. And at this time I was saying I'm not going to go to college and all these things.

Alexis Gay: Oh, wow. Okay.

Henrique Dubugras: So, I had to get emancipated. I moved out on my house, started supporting myself this whole drama.

Alexis Gay: Oh my God, yeah.

Henrique Dubugras: And so, I was running out of money, and I found this hackathon in Miami that was worth$ 50,000. And I was like, " Wow, if we can win this thing is more time without going back to my mom." So I went there with two friends and we built this app that was like a dating app that was like Tinder. But instead of geolocation it's Facebook friends. You could like and match your Facebook friends. And we tried and we won it. And we tried to launch the app as a business and it didn't really work again, but that's how I got into payments because I started trying to charge for this thing. And it was a really, really terrible experience. So, that's how I had my first experience with payment methods.

Alexis Gay: Oh, interesting.

Henrique Dubugras: And it's around the time my co- founder, Pedro, and Pedro, he was working at a payments company. So what happened is when Pedro was 14, he got hired by Brazil's largest payments company. Because he was one of the only people in Brazil who understood about iOS security and they were launching an app and needed to be secure. He was hacking iPhones, so it made sense. So he got hired at that company and that's how he knew about payments. And then we met at the end of 2012 over Twitter, actually.

Alexis Gay: Really?

Henrique Dubugras: Yeah. Fighting text editors, VIM versus Emacs. I was VIM. He was Emacs. It got too complicated to fight over 104 characters. We went to Skype. On Skype, we became best friends and decided to start our company, Pagar. me, together.

Alexis Gay: Oh my gosh. Wow. That's amazing. Twitter fights very rarely end in friendship. Speaking of your relationship with Pedro and your co- founder, in an interview with The Takeoff, you said, " Pedro and I always liked the idea of working on something for 30 plus years. Some people are serial entrepreneurs and they want to build and sell companies and build multiple things. That was never really our thing. We just wanted to work on something for a long, long period of time." It sounds like prior to Brex, you were already on the way to becoming a serial entrepreneur. What changed in your focus to want to stay on one concept for a long, long period of time?

Henrique Dubugras: Well, the first thing I couldn't do anymore, because I got some legal notifications and my mom crosstalk.

Alexis Gay: Right. Right.

Henrique Dubugras: The second thing failed miserably.

Alexis Gay: Sure. Happens.

Henrique Dubugras: The third thing also didn't work. And then the fourth thing, Pagar.me actually worked. And selling that company was a big decision, but I think one thing that we're always like, " Look, if we're going to work on something for 30 years, we want it to be something really big." And at the time when we sold Pagar.me, there wasn't any Brazilian unicorns. And it wasn't clear that they weren't going to happen anytime soon.

Alexis Gay: Interesting.

Henrique Dubugras: We always thought like, " Look, if we're going to working on something for 30 years, it might as well be something really big." And we thought that we could build something much bigger in the United States, building something global, et cetera. And that's what got us to decide to sell the company in the end. And also, look, we were 20 and broke, right? And we sold the company to change our lives and much easier to think in 30 year horizons when you don't have to worry about your credit card next month.

Brianne Kimmel: It's interesting too because while you intend to build for a long, long period of time, the Brex team is consistently shipping new features and new products essentially. And so it does look like the company is constantly evolving. One question that I have for you is more on how you think about various different markets and how you approach the SMB segment, because I think that's one that's very dynamic and always changing, and there's a bit more of a cyclical nature to the business model. And so, how do you think about, will there be a moment where Brex essentially needs to move up market or you'll go more enterprise, or do you feel like the market size for startups and SMBs is large enough and that's where you'll stay focused?

Henrique Dubugras: We're definitely going from tiny to really big. I think our model, similar to Stripe and a few others is getting companies when they're young and sticking with them till they're public and plus, right? And I think there's two big initiatives in Brex right now. One is going even lower market, and one is going more upmarket, which there's a lot of execution challenges with that, but we definitely want to serve companies that are mid- market in enterprise and we definitely want to serve companies that are just getting started. So, we definitely see with both. We think that innovator's dilemma is like our Bible a little bit on how we build products, that in order to build a really successful product for more high margin customers, like the mid- market, you need to nail and be super efficient on the low side, at least in our industry. Because you just create a cost structure, an efficiency structure that makes your cost of serving these larger customers much lower. And that allows you to price more aggressively, build more than before, so that's how we think about it.

Brianne Kimmel: Yeah. That makes a ton of sense. I mean, I know you talked about building the operating system and especially as companies start to get larger, and for small businesses, maybe they introduce multiple locations or evolve to different geographies, it's awesome to see that you're constantly releasing new products and new features for this segment in particular. What do you think have been some of the hardest decisions that you've had to make in increasing the efficiency for the self- serve business and maybe turning away even big customers to stay focused on SMBs and startups at the beginning?

Henrique Dubugras: Everyone gives advice that it's important to stay focused. Right? But then as the company grows, you're doing more stuff so that becomes a little bit more, okay, what does focused mean when you have a lot of people that can do more than one thing? And then making sure that you're prioritizing correctly. I think the hardest in that has been built cash, right? Like our bank account replacement product, because it is something that will take a long time for us to win like Walmart in our cash account. Will take a while. Versus card, it's much, much faster. But we also believe that the bank accounts in a cash management probably is like the center of gravity for a company. That if you own that, the company is more likely to buy everything from you, versus, other products are a little bit more tangential. So, I think building that at the time that we did and investing as much as we have in that product has probably been the most non- obvious decision we made.

Alexis Gay: And you're referring to, you said Brex Cash, right? The central account for businesses.

Henrique Dubugras: Yeah.

Alexis Gay: So, something that I saw is that in launching that product, you had to keep pushing the launch. Can you tell me a little bit about what was going through your mind then and how you handled that decision to push the launch out?

Henrique Dubugras: Look, it was just a lot more complex than we thought it was going to be. That's the reality. When we started to build it, we thought it was going to be six months with 10, 15 engineers, and then it just started becoming more complex, and more complex, and more complex, and more complex. And, it probably took three times as long, three times as many engineers. It happens, right? But I'm super happy with it though.

Alexis Gay: Oh, for sure.

Brianne Kimmel: And on the engineering front, was it hiring constraints? Was it a need for specialization? What were some of the challenges that the team was facing internally?

Henrique Dubugras: I think it's just a bar for being a company's main operational account was much higher than we expected. So, we saw these consumer companies launching bank account products. Right? And they seem to be working and getting traction, et cetera, but turns out that the bar for businesses to have as their main account is much larger. They have a bookkeeper, they have employees, they have approvals, they have a lot more constraints and requirements than the consumer accounts have. So, we had to build a lot more before we had good product market fit and good, and I guess, it was just a bunch of missing features early on.

Alexis Gay: Totally. So, Henrique, that's a really difficult decision to push a launch, to have to publicly say that you're pushing a launch, tell the team internally. And I think that it's something a lot of leaders have to go through. I'm wondering if you could take us into the moment that you realized this was a decision that you were going to have to make and announced to the team and externally. Can you tell me a little bit about what that felt like?

Henrique Dubugras: It was two forces at the same time. Force number one was, we have all these investors that expected the product to launch, expected the revenue to start to come, and the customer acquisition and the models. And the other side was our brand, which is like, whenever we released a product, what will our customers think about it?

Alexis Gay: Yeah.

Henrique Dubugras: And I think for us, the second one was stronger than the first one that we wanted our second product to be so good that customers would want to buy our third product. Versus if you screw up your second one, you lose their trust a little bit in trying to the third one later on. So, we just wanted to make sure that our second act was as good or better than our first act. And if that took more time to do it, so be it.

Alexis Gay: And I'm wondering, was there ever a moment where you started to question things? Did you wonder at any point if you had made a wrong turn to go down the central accounts path?

Henrique Dubugras: Absolutely. Yeah.

Alexis Gay: Really?

Henrique Dubugras: Yeah.

Alexis Gay: What were you thinking?

Henrique Dubugras: It's hard, right? Because when we launched Brex, we went from, I'm going to make up numbers. Okay?

Alexis Gay: Yeah.

Henrique Dubugras: I don't know, 100K in revenue to 200K in revenue in a month, we thought, amazing. Right? We're growing a hundred percent. This is great. And then after a year or less we were, I don't know, a million, and then we were going to 1. 3 million, 1. 5, et cetera. Again, I totally made up numbers. And then let's say we're at 10 million in revenue and then cash launched, and cash went from 10K in revenue to 20K in revenue in one month. It's great if you were tiny, but now that I have a basic 10 million, it doesn't really move the needle.

Alexis Gay: Yes.

Henrique Dubugras: So, I think you set your own expectations really high for these things and you think that they're going to go much faster than they do, but every new product is almost like a new startup, right? It takes some time to mature and grow and get to the scale. So, you need to give it time to mature, but I think before I was realizing that, we were just, " Oh, this is not growing as fast as we thought it was going to grow. Is it bad?" And it took a little while to then start inaudible to a scale that was meaningful for us, for us to get that confidence. And now every time we launch a new product, we're like, " Okay, we know it's not going to be super meaningful in the beginning, but if we keep investing and we keep making it better and we keep doing it, eventually it's going to be really good." So, I think we're a little bit more patient there.

Alexis Gay: That's great. So, it does sound like something learned came out of that, that you can then apply moving forward.

Brianne Kimmel: So one thing I'd love to spend a little bit of time on is the fact that Brex has partnerships with Amazon and Slack and Zoom, and a great rewards program that's really served as a competitive advantage and something that's created more of a holistic offering for so many types of startups and small businesses and customers that you serve. How did you think about measuring the impact of each new partner and how did you really structure some of those early partnerships?

Henrique Dubugras: You know, we spent a lot of time early on. We wanted to redesign rewards, right? So traditionally, rewards for cards were built for individuals. It's very focused on the consumer and we wanted to like, what are rewards the businesses would care about and startups would actually care about? And so, that's where we went. It's like, " Hey, what are the best software startups that... What other companies do startups use? And let's get discounts and better deals so we can actually create a rewards package that competes in a different angle than AmEx, because we're never going to beat them at their own game and it's actually more relevant to our target customer segment. So, that's how it came to be early on.

Alexis Gay: Awesome. Okay. So Henrique, we have one more question for you. Something that you said earlier, you said when you were getting into Stanford or when you wanted to go to Stanford, you said that all you wanted was to be Chuck. And I'm wondering after all of the incredible success of Brex and all the success that you still have ahead of you, who do you want to be now?

Henrique Dubugras: Honestly, I want to be Henrique. It's been pretty cool to be Henrique recently. I think that one of the things that you learn as an entrepreneur is to, you have all these role models, right? You think that a successful entrepreneur looks like this or looks like that. And the more time you spend, you realize that being authentic is what allows you to go for many years. It's really hard to try to be someone for 20 years, 30 years. And I think one of the lessons, and I think Silicon Valley has a weird effect in this that it wants to just mold a founder that we are lucky to be on that mold. And that's, I think, why we had an easy time raising money early on, but I think as we grow, we're like, " Hey, we just want to be ourselves. We want to be authentic. We don't want to go into some mold that Silicon Valley created of what great founders look like. We just want to do our thing for a long period of time.

Alexis Gay: Amazing.

Brianne Kimmel: It's such an amazing story. I'm excited to watch you guys do it.

Alexis Gay: So, Henrique, for companies looking to get Brex, where can they find out more?

Henrique Dubugras: Just go to brex. com and you'll see everything there.

Alexis Gay: We love it. Okay. Henrique, thank you so much for joining us on The Shake Up. This was such a delight.

Henrique Dubugras: Thank you so much for having me. I really enjoyed as well.

Brianne Kimmel: Awesome.

Alexis Gay: Hey Brianne, are you ready to do that thing we practiced?

Brianne Kimmel: Oh my gosh, is it time? I'm ready.

Alexis Gay: Okay. Three, two, one. Don't forget to subscribe and leave us a review.

Brianne Kimmel: Don't forget to subscribe and leave us a review.

Alexis Gay: Pretty good. Today's episode was written and produced by Matthew Brown. Production support comes from Lauren Shield. Our engineer is William Lowe, with research from Corey Broccolini. And special thanks to Kyle Denhoff and Lisa Toner.

Brianne Kimmel: We have some amazing guests coming up this season that you won't want to miss.

Alexis Gay: See you next time.

More Episodes

From Hot Dogs to HubSpot, Why It’s Always Been About The Hustle

How to Reduce Friction and Leverage AI like Checkr

Step Away from Hands-On Development and Step Into Leadership like Hopin

How Roku Is Moving Beyond the 30 Sec. Ad Spot

How Glow Recipe Moved from K-Beauty Curation to Creation

How Algorithms Feed Customer Creation at Daily Harvest