Expense management startup Brex, valued at $12.3 billion two years ago, has laid off 282 employees, which accounts for about 20% of its staff. The company also announced changes in its leadership team, with its COO transitioning to a board member role and the promotion of a new COO. Additionally, the company’s CTO is set to transition to an adviser position this summer.
Key Takeaway
Brex, a once high-flying fintech startup, has announced a significant workforce reduction, along with changes in its leadership team, as it aims to prioritize long-term growth and profitability.
Changes in Leadership
Brex’s COO, Michael Tannenbaum, is stepping down from his role to become a board member, while Camilla Morais, the former SVP of global operations, is being promoted to the position of COO. Cosmin Nicolaescu, the current CTO, will transition to an adviser role in the coming months.
Emphasis on Long-Term Thinking
In a note to employees, co-founder and co-CEO Pedro Franceschi emphasized the company’s shift towards long-term thinking and ownership over short-term gains in its compensation structure. Franceschi highlighted the massive opportunity ahead for Brex and expressed the company’s commitment to ensuring financial upside for its employees through equity.
Operational Changes
Franceschi also mentioned changes in the company’s operating model, with an expectation for leaders to operate at all levels, promote from within, increase in-person collaboration, and concentrate on specific time zones for operations.
Financial Performance and Restructuring
The latest layoffs come in the wake of reports indicating that Brex burned $17 million a month in the fourth quarter of 2023 and had cash reserves to last through March 2026. The company, however, refuted these claims, stating that the layoffs are aimed at making Brex more agile and accelerating its path to profitability. Brex reported a 35%+ revenue growth in 2023, with a 75% increase in gross profit.
Challenges and Market Dynamics
Brex’s recent challenges are attributed to a slowdown in growth, influenced by factors such as increased interest rates and a decline in VC funding. The company’s annualized net revenue in the fourth quarter was $279 million, marking a 32% increase, with most of the growth occurring in the first quarter of the year.
Employee Support and Company Direction
Employees affected by the restructuring will receive severance packages, and the company is offering waivers of the one-year equity cliff for eligible employees. Brex’s strategic shifts and restructuring reflect its evolving focus on serving larger, enterprise customers, marking a departure from its initial emphasis on startups and small to medium-sized businesses.
