Brex Bets on AI and Profitability Before Making Its IPO Move

In August 2021, a handful of Brex executives gathered in a windowless room at a hotel in Santa Barbara. Over the next three days, they debated, soul-searched, and wrestled with the challenges threatening their company’s future. Tensions ran high as they confronted the reality of their situation despite its rapid rise, Brex was at risk of collapsing under its own weight. Scaling to 1,200 employees in just three years had pushed the company to a breaking point, and if they didn’t make tough decisions, all their success could unravel.

Brex had started in 2017 as a bold experiment by two young Brazilian entrepreneurs, Henrique Dubugras and Pedro Franceschi, who had dropped out of Stanford University to solve a critical problem for startups. Founders, even those who had raised millions in venture funding, often found themselves unable to get corporate credit cards due to a lack of personal or business credit history. Having already built and sold a successful payment startup, Pagar.me—dubbed the “Stripe of Brazil”—Dubugras and Franceschi saw an opportunity to redefine corporate finance. Brex’s corporate card, designed specifically for startups, took off immediately. Within just four months of launch, the company raised over $100 million, achieving unicorn status. In just 18 months, it hit $100 million in revenue.

By 2022, Brex had grown into more than just a credit card company. It had transformed into a global spend management platform, offering corporate cards, business bank accounts, and expense management software. The company had positioned itself as a challenger to financial giants like American Express, JPMorgan Chase, and Citigroup, while competing with fintech rivals like Ramp and Mercury. At its peak in January 2022, Brex secured a $12.3 billion valuation. But growing this fast, this big, came with significant challenges. “That’s when everything started breaking,” Dubugras admitted. The company was expanding in multiple directions, and as the economic environment shifted, it became clear that a recalibration was necessary.

Now, Brex is positioning itself for its next major milestone: an IPO. But according to CEO Pedro Franceschi, the company is in no rush to go public just yet. “It’s easy to go public, it’s hard to be a public company with low volatility and very high predictability in the business,” he explained. Brex wants to ensure that by the time it debuts on the public market, it can offer investors a stable and predictable business. To achieve this, the company plans to be cash-flow positive by mid-2024 and expects to reach $500 million in annual net revenue by 2025.

Brex continues to gain traction among startups and enterprises alike, counting companies like DoorDash, Coinbase, and Roblox among its tens of thousands of customers. Meanwhile, its competitors are also expanding rapidly—Ramp was valued at $7.65 billion as of April 2024, while Mercury is in talks for new funding that could push its valuation beyond $3 billion. Private market research firm Sacra estimates that by the end of 2024, Ramp’s annual net revenue run rate had hit $648 million, while Mercury’s had reached $500 million.

Brex’s story is one of relentless ambition, risk-taking, and reinvention. From two teenage hackers who met on Twitter to the founders of a multi-billion-dollar fintech powerhouse, Dubugras and Franceschi have built a company that’s challenging the status quo in financial services. 

Brex Assistant

A defining aspect of Brex’s expansion has been its use of artificial intelligence to automate financial operations. The company’s AI-powered tool, Brex Assistant, simplifies expense management by eliminating many manual tasks. By analyzing data from calendars, past expenses, and organizational budgets, Brex Assistant can automatically populate reports, assign spending categories, and enforce compliance with company policies.

For example, if an employee books a flight for a business trip, Brex Assistant can automatically categorize the expense, fill in the necessary details, and generate an itemized receipt—without requiring any manual input. Employees can also use it to answer questions such as, “How much can I spend per day at this offsite?” or “What restrictions apply to this trip?”

The impact of these AI-driven efficiencies is substantial. Brex estimates that enterprise customers save an average of 300 hours per month on expense compliance while also preventing millions of dollars in out-of-policy spending annually.

Challenges and Strategic Shifts

Despite its success, Brex has faced significant challenges. The 2023 venture capital slowdown hit its startup-heavy client base hard, reducing overall spending and impacting Brex’s revenue. At one point, the company was burning $17 million a month, prompting layoffs and a strategic realignment.

In early 2024, Brex reduced its workforce by 21% and eliminated multiple layers of management. These changes, along with a shift in focus toward enterprise clients like Anthropic, Robinhood, and Sonos, led to an 80% increase in net revenue from its enterprise segment. As a result, Brex has improved its cash burn by 82% year-over-year.

According to Brex, AI will undoubtedly eliminate some jobs while making others significantly more efficient. However, rather than being a standalone disruptor, AI will increasingly become an embedded component of most jobs and the software used in daily operations much like the internet. While companies that adopt AI early may gain a competitive edge, individual professionals are unlikely to be left behind simply because they are not the first adopters. Instead, the real advantage lies in understanding how AI is evolving within a given industry, rather than mastering every technical aspect.

Dubugras and Franceschi initially shared leadership responsibilities, but as Brex scaled, Franceschi took on the sole CEO role to streamline decision-making. Meanwhile, Dubugras remains involved, focusing on high-level relationships with investors and banking partners. Brex has also seen turnover in key executive positions, including its chief revenue officer and chief operating officer, as it refines its long-term strategy.

A significant part of Brex’s evolution has been its emphasis on sustainability over rapid expansion. The company has restructured its financial model, prioritizing profitability over aggressive growth. Brex’s leadership projects that it will be cash-flow positive by 2025, a milestone that could pave the way for an IPO.

Competitive Landscape and Future Prospects

Brex operates in a highly competitive market, contending with fintech rivals like Ramp and Mercury, as well as established financial institutions such as American Express and Citi. Its competitive advantage lies in its vertically integrated tech stack, which allows for greater control and efficiency in managing global financial operations.

As competitors like Ramp raise fresh capital and expand their product lines, Brex remains focused on enterprise adoption. The company has shifted its revenue model beyond interchange fees, growing its software subscription business and expanding its foreign exchange and deposit interest offerings.

While Brex has no immediate plans for additional primary fundraising, a secondary sale could be on the table to provide liquidity for early investors before a public offering. The company is keen on minimizing volatility when it eventually goes public, aiming for financial stability before entering the markets.

Brex has transformed from a startup-focused credit card provider into a comprehensive spend management platform with a global reach by integrating AI-driven automation, expense management, and treasury services into a single system.

Despite economic headwinds and operational restructuring, Brex has managed to adapt and thrive, particularly by focusing on larger enterprise clients. If it achieves its goal of profitability by 2025, an IPO will likely follow soon after. For now, Brex remains a company in transition one that has already reshaped how businesses manage their finances and continues to push for greater efficiency in corporate spending.