How Brex went from a valuation of $12.3 billion to a billion-dollar (but frustrating) sale.

In 2021, Brex was one of the most shining symbols of the new generation of global fintechs. Founded by two Brazilians in Silicon Valley , the company had transformed corporate cards and expense management into an explosively growing business. And it reached a valuation of approximately US$12.3 billion, joining the select group of so-called decacorns.

Four years later, the outcome was very different from what had been imagined at the time. An IPO , which seemed only a matter of time, did not happen. And the fintech company agreed to sell itself to Capital One for just over US$5.15 billion.

The amount is significant in absolute terms, but lower than what investors and founders projected during that period of venture capital euphoria.

The sale represents less than half the value attributed to Brex at its peak. For founders Pedro Franceschi and Henrique Dubugras , the deal guarantees liquidity, continued control of operations, and participation in the company's next phase within a major bank.

For investors who got in early, the return could still be significant. But for funds that invested capital in recent cycles – when the fintech company was already worth more than US$10 billion – the outcome fell short of expectations.

But in some cases, the return may have been modest or even negative, according to market sources. This accurately reflects the hangover that hit global venture capital after the inflated valuations between 2021 and 2022 that pushed many upwards, including Brex.

The big question is what the terms of the agreement are. According to Filipe Costa, founder of NewHarbour Partners, an M&A boutique focused on technology, even though investors expected a higher valuation, it doesn't mean that those who invested in the round where Brex was valued at just over US$12 billion lost money.

Brex's cap table, which completed its last private funding round, Series D, in 2022, includes: Greenoaks, IVP, Tiger Global , Y Combinator, Kleiner Perkins, DST Global , and PayPal co-founders Max Levchin and Peter Thiel , as well as Lone Pine Capital and Ribbit Capital.

“There may be a liquidation preference , a preference for returning funds to investors from the last round, preserving their value,” says Costa. “We don’t know if the founders or the investors covered the difference in value, or if it was something negotiated between them.”

A manager in the Brazilian venture capital ecosystem points to the possibility that Brex employees who heldstock options may have to bear the consequences of this decision. "Some people were hit hard, especially employees who joined since the last funding round, which had high strike prices ; I don't know what will happen," he says, requesting anonymity.

The sale comes at a time when Brex faces competition from a similar company called Ramp, which has grown much faster and larger, and is worth more. Costa points out that Ramp is currently valued at US$32 billion, with a growth rate of around 100%, while Brex is growing at around 50%.

“The decision to sell may have prevented the company from reaching its full potential on its own, but it’s very important to return money to shareholders,” says Arnaldo Rocha, managing partner at DealMaker, an M&A and fundraising advisory firm. “Despite its success, Brex wasn’t that big.”

From the model to the cycle change.

From Capital One 's perspective, the acquisition reflects a search for technological shortcuts. Incumbent banks struggle to innovate at the same speed as startups, and Brex can deliver a modern platform, data, digital products, and access to new customers.

Founded in 2017 by Franceschi and Dubugras, Brex grew by riding the wave of the American startup boom. Its corporate card promised to simplify credit, payments, and financial control for rapidly expanding companies.

The model worked, and within a few years, the fintech attracted big names in venture capital, multiplied its customer base, and became a constant presence on lists of the world's most promising startups.

However, the tide turned in 2022 when soaring interest rates in the United States ended the cycle of abundant capital and profoundly altered market logic. Rapid growth was no longer sufficient, and investors began demanding profitability, efficiency, and cash generation.

It was just over three years ago that Dubugras had to make one of the most difficult decisions in Brex's history: the attempt to expand services to small businesses.

The fintech company had around 60,000 clients when it decided to open the product to a wider audience, and within a few months, that base doubled to 120,000. The result was poor unit economics and an overburdened customer service department, which ultimately harmed the experience of its most strategic clients.

In response, Brex made the difficult choice to "let go of 60,000 customers" to preserve its focus on well-funded startups that were driving greater growth – a decision that generated negative news and criticism in the market, but which, according to Dubugras, was necessary to realign the business.

Brex, like many fintech companies of the same generation, needed to reinvent itself. The company reduced its exposure to small startups and began to focus on larger companies. This move brought stability, but also slowed the growth rate that had sustained previous valuations.

For Dubugras, learning from mistakes was part of the company's maturation process. He said that the focus on unit economics was an essential lesson, and that the episode with the smaller customer base highlighted the importance of unpopular but fundamental strategic decisions during times of adjustment.

This reflection helps to understand why Brex needed to reorganize its strategy and product, adjusting its growth model to compete with larger, globally funded companies.

The transaction with Capital One concludes a journey that helps explain not only Brex's path, but also the profound transformation experienced by the global startup market since the end of cheap money.

Despite the valuation issue, the feeling in the Brazilian venture capital ecosystem is that the operation represents a victory. For one manager, even if the sale represents a down round , the value at which the operation was closed is significant, in the range of R$ 30 billion.

“It’s a business that doesn’t exist in Brazil; this level of liquidity hasn’t been seen here in eight years,” he states. “ Itaú valued XP at R$12.6 billion when it was going to buy it in 2017. It’s a deal of similar magnitude.”

For Costa, the transaction is very symbolic for the fintech market. “It was the largest deal in the world ever made by a bank involving a fintech. Although it is a substantially lower value than the last round, 50% of the value was paid in Capital One shares, so if both believe in the synergies of the businesses, they should capture a significant upside,” he says.