Hi HN –
We are Henrique and Pedro of Brex (https://brex.com/). We've built a corporate credit card for startups that has high limits, an instant online application and no personal guarantees.
Pedro and I built our first payments business in Brazil, Pagar.me, when we were teenagers. We came to the U.S. to attend Stanford. We joined YC W17 and realized quickly – even with a seed round in the millions – that we could not get a corporate credit card. We are Brazilian, young, and do not have U.S. credit. Even if we did have credit – we know that personally guaranteeing a credit card makes no sense for a business (more on that later).
In Brazil, we raised $300K initially (when we were 16) from an investor that was willing to take a chance on us. In Brazil, even though there are 200 million people, there is very little venture capital financing and limited startup infrastructure (accelerators, resources, technical talent, executives experienced with high growth). We knew that $300K was all we were getting, so we had to find a business that could be cash flow positive quickly. It was easier to do that accepting payments online (which naturally generates cash), but it was an operational challenge for sure. We were able to grow quickly in Brazil because we hit the market at the right time, as ecommerce was transitioning to online payments and because we, better than any of the foreign competitors, understood the nuance of Brazil. Specifically on that point, in Brazil the consumer has the option to pay for any card transaction in installments, and that requires a cash outflow for the merchant. Pagar.me figured out how to productize that best to the online market there.
When we got to the U.S., we assumed that the payments system here would be significantly more mature and sophisticated than it was in Brazil, however that was not the case. Particularly on the issuing side (banks extending credit cards), there has been very little innovation or using technology to innovate on features. That is how Brex was born. Over the past year we’ve been incubating and improving and just launched with an online self-signup that lets you get access to a virtual card in minutes. We waited to launch until we had this feature, as we know how much of a pain it is to go through the back and forth of online and paper-based applications. Brex underwrites by connecting directly with your bank account, which means we can offer higher limits than other cards, often 10x-20x more.
From a software perspective, we rebuilt all of the payments tech from scratch, which we learned how to do in our last business. Even then, to build Brex it was still grueling having to deal with the obscure regulations surrounding Know Your Customer (KYC), heavy oversight from banking partners, and complexities associated with interacting directly with Visa. In doing so, we built awesome features like instant virtual cards issued to you and your team and we solved something this time that has been bugging us forever – the fact that you can never tell what a credit card charge is on your statement! We changed the data to give you the actual merchant / vendor and a link to the website. When we did this, we also realized we could do something really unique with receipts – because we know the actual vendor / merchant, we can match any receipt sent to us via SMS or email to your transaction immediately. No need to save receipts or deal with other integrations that have a huge delay between matching a receipt to a transaction, we do it in real time.
Interestingly, from a technical standpoint, we did all this in Elixir. We thought it would be a good choice (and so far we are happy with our decision) because of the distributed nature of the systems that we built and we could rely on the Erlang VM to provide that infrastructure out-of-the-box. Our domain knowledge from Pagar.me allowed us to anticipate the system boundaries and therefore we could build our backend as a distributed system from day one.
Another unusual feature about the Brex launch is that we are launching relatively late in our history and with a pretty significant amount of capital from our Series B. We launched the business at YC, but based on our background with Pagar.me and that we were focused on payments again, we raised a ~$7M seed round in Spring 2017. That round was led by Ribbit Capital – which we liked given our connection to Micky there and their expertise in Fintech. YC Continuity led our Series B. In both rounds, for us, it’s all about the relationship with the partner and firm, and we have been huge beneficiaries of the YC ecosystem.
On a personal note, for us the non-personal guarantee aspect of our product is most salient. As I mentioned, we are foreign entrepreneurs who don’t have access to banking products in the U.S. It was demoralizing to come to the U.S. after being successful in Brazil and not be able to get a card – especially given how much activity, particularly online, requires a credit card. Personal guarantees mean an entrepreneur who has already taken a ton of risk has to further put their personal financials on the line, which even if the company pays on time, can hurt his or her credit.
One aspect of the product that we’d love HN feedback on is the signup flow. We gathered great feedback from our beta, and we waited to launch until we had an instant signup product. In financial services, signup flows have meaningfully more constraints than do many consumer signup flows – particularly compared to those with freemium models. For example, we need to collect business information to comply with regulations around anti-money laundering and Know Your Customer standards, as well as ensure the customer’s ability to pay and set up autopay. These constraints mean not only a longer signup flow, but also one that integrates many third party vendors to do compliance, fraud and credit checks. The more integrations and data to handle, the more edge cases we need to be able to support seamlessly. It took a ton of engineering effort to get here, plus a lot of time enhancing our compliance processes and credit framework. In light of those constraints, we’re specifically looking for user feedback on whether or not the flow feels logical, intuitive and simple – and if there are adjustments to the order, text or design that could improve the UI. But we're interested to hear any of your ideas and experiences and discuss the Fintech space generally too. Thanks for taking the time to read this, we’re really happy to be posting here :)
Henrique and Pedro
I decided to trust you since you're a YC company, and put in my creds anyway. To log into my bank, they required me to send a verification code to my phone. The text never came, but your flow has no way to go back and either request the text message again or have them send an email instead, so I'm now stuck on bank account verification. :(
So, areas for improvement:
1) Use bigger text to show you're using a third party for bank login, and maybe some way to verify that.
2) Create a way to request another token via text or change to email.