Financial technology startup Brex has laid off 11% of its staff -- or roughly 136 employees -- CEO Padro Franceschi disclosed in a blog.
The layoffs reinforce how quickly the venture capital and startup market has evolved over the past year. Indeed, Brex raised $300 million at a $12.3 billion valuation in October 2021. The financial services and software company supports "startups, scaled companies and e-commerce brands."
Describing Brex's evolving business focus, TechCrunch wrote in January 2022:
"Brex started its life focused on providing credit cards aimed mainly at startups and SMBs. It has gradually evolved its model with the aim of serving as a one-stop finance shop for these companies. Last April , Brex said it had combined credit cards, business cash accounts and new spend management and bill pay software “together in a single dashboard” as part of a service called Brex Premium that cost $49 per month. Today, the company is focused on the corporate card product it’s been building since its inception, banking products and expense management products. Or put more simply, it aims to serve as a “financial operating system” for its customers."
Brex also offers a partner program for affiliates, accounting firms, brokers and lenders and VC investors.
Still, signs of trouble arrived in mid-2022. Indeed, Brex alienated thousands of SMB customers when it decided to exit the small business market in June 2022.
Related: See all technology industry layoffs listed here.
Ahead of Layoffs: Brex Exits SMB Customer Market
Fast forward to October 2022, and CEO Padro Franceschi blamed the layoffs on two factors:
"...increasing focus on our strategy, and adjusting to the new macro environment. Late last year, we decided to sharpen our focus and serve fewer customers really well. Today’s change is a continuation of this. We’ve been laser-focused on serving early-stage startups and scaled companies this year, and we’re very grateful for the momentum we’ve seen on Empower since we launched in April."
Empower is a software platform "designed to enable a culture of trust and financial discipline at scale." Empower is now the foundation for all Brex products, starting with a completely new spend management product, the company said in April 2022.
Technology Industry Layoffs: Recession Speculation As IPO Windows Remain Closed
The Brex layoffs reflect continued job cuts across some Silicon Valley startups as well as established giants. Indeed, layoff news from Oracle, SAP and Intel also surfaced this week.
The job cuts come amid continued speculation about a potential recession. A recession typically is defined as two quarters of negative economic growth along with other factors such as a widespread job losses, CNBC notes.
Amid that backdrop, the IPO (initial public offering) window generally remains closed on Wall Street, and venture capital firms are pulling back on high-valuation deals. As a result, some companies are pursuing debt financing as a bridge to a potential IPO and/or future VC funding rounds. For instance, security firms Arctic Wolf and Huntress both raised debt financing in mid-2022.
Meanwhile, we don't know Brex's monthly cash burn rate, or whether the company will need to raise more money.
