- Brex, the $2.6 billion credit card startup, hosted a webinar Tuesday for other startups that were planning to fundraise in early 2020.
- With recession bells already ringing, many startups are concerned that venture capital funding may be hard to come by through the end of 2020 and could spell disaster for young companies.
- Brex has spent the better part of the last 12 months developing a series of community-oriented initiatives, like its members lounge and extensive programming, among its cohort of startup peers.
- The three-year-old company shared its contingency plans in a presentation on Tuesday, including revisiting headcount and an interim board meeting, as guidance for what other startups should consider during any moment of prolonged economic uncertainty.
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Even Brex’s community programming has gone virtual as Silicon Valley enters week two of widespread shelter-in-place orders across the state.
The $2.6 billion credit card startup spent the better part of the last 12 months creating a robust network of perks, programming, and physical spaces dedicated to building a community among its cardholder members. It opened a cafe, a lounge space, and started hosting regular fireside chats and how-to sessions geared towards its peers — founders of small and medium startups.
On Tuesday, that turned into “Brex-fast in Bed,” a virtual gathering of Brex’s network of startup founders and entrepreneurs to figure out how to navigate the fundraising process during the current period of economic uncertainty.
“We fear the impact of COVID-19 on the economy,” Brex cofounder and co-CEO Henrique Dubugras told the hundreds of startup employees tuning in on Tuesday. “Most small businesses don’t have more than one month of savings.”
The credit card startup caters mainly to other startups and has launched dedicated financial services for young companies in the e-commerce and healthcare industries. It is mostly insulated from the immediate fallout, which has primarily impacted restaurants and brick-and-mortar retail, although it did have to shutter its South Park Cafe after an employee there tested positive for COVID-19 in early March.
But Dubugras and Brex CFO Michael Tannenbaum urged other founders to start coming up with a contingency plan even if, like Brex, the impact isn’t immediately obvious. The biggest changes will come months down the line, once venture investors slow deal sourcing and write fewer, smaller checks to the hoards of startups in desperate need of financing.
“The reality is, you need to make plans but still be able to pivot very quickly,” Dubugras said. “The decisions we have this week is probably not what we will have next week.”
Dubugras explained that part of Brex’s own contingency plan, which will be reviewed at an interim board meeting in the next week, is looking at where spending can come down without permanent ramifications. Things like office leases are longer-term and require more effort to pull off while cutting online marketing costs or digital enterprise tools are much easier to dial back up once the situation has become more clear. Brex, for its part, said it was already looking at the hiring plan for the second part of the year and may revise headcount as one of the contingency measures.
“For things like contingency planning and the downside, you have to assume it lasts for the long term,” Tannenbaum said.
Here is Brex’s contingency plan, and what it is telling its community of like-minded startups who need to weather the economic downturn.