As Brex exits the SMB space, its CEO says that doesn’t include startups… at least the funded ones

Brex’s decision to stop serving SMB customers surprised many in the startup and fintech community. 

TechCrunch spoke with CEO and co-founder Henrique Dubugras to learn more about what drove the decision, and to get clarity around exactly who is affected.

Firstly, Dubugras emphasized that the company “remains committed to startups.” When asked about the criteria in which it determined which businesses would be impacted by its move, he said that Brex chose to no longer work with any businesses that did not have some sort of “professional” funding – either venture capital, angel money or funding from an accelerator. As a result, “tens of thousands” of businesses were told their accounts would be shut down as of August 15. Dubugras admitted the set of criteria may not have been “perfect,” but that it had to “have one.”

Businesses affected, he said, are mostly brick & mortar businesses such as bakeries, restaurants and small design agencies — many of whom would argue are being impacted by rising inflation and a challenging macro environment the most.

And while Brex may still be serving startups, it is opting to no longer serve any boostrapped startups, if Dubugras’ words are to be taken literally. If a startup that has received funding did receive communication from Brex mistakenly, Dubugras said they would be reinstated. 

The thing that we’re exiting is the traditional businesses that weren’t part of the venture community. Those customers are who we decided not to serve anymore, but our core customer to Brex is the startup. That’s what got us here. We’re deeply committed to serving them and that’s the reason that we were doing this because they want and need a super high touch, white glove experience and they need a partner that can scale them from there when they’re really small until they’re really big. And that’s what we’re still committed to do.

“It’s really really hard to do both because of the sheer volume,” he added.

Dubugras said it was also getting pressure from customers “to go global faster,” and that also led to its decision. It wanted to divert resources that were going to SMBs to help its scaling customers, he said.

Brex began its push to serve SMBs in late 2019 and early 2020, according to Dubugras. Since then, he said, smaller startups that the company was serving were growing larger and had different needs. The company decided to evolve its offering to be able to serve larger businesses and enterprise customers.

He said it became difficult to serve brick and mortar companies that had a “completely different set of needs,” and so the company made the decision to stop working with those businesses.

“The decision didn’t come without a lot of thinking and a lot of pain. We know it’s going to be painful for the customers affected and we want to do as much as we can to help there,” Dubugras told TechCrunch. “But hopefully, we’ll come out as an even better offering for our core customers and be able to further our mission.”

Brex earlier this year announced a big push into enterprise and software, and he said that remains the company’s core strategy moving forward.

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This article was originally published on TechCrunch.com. Read More on their website.

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