Brex has once again made the surprising, but perhaps realistic, decision to partner with another one-time competitor. This time Zip, the CEOs of both companies told TechCrunch exclusively.
In April 2022, fintech Brex announced it was making “a big push” into both the enterprise and software.
The news was notable considering that Brex originally was a startup focused on startups. It provided corporate cards aimed mainly at startups and SMBs. Brex gradually evolved its model with the aim of serving as a “financial operating system” for companies.
When the company announced that it was branching out into software, its goal was to diversify its revenue streams. So instead of just primarily making money off of interchange fees, it was seeking to also generate recurring revenue from subscriptions to its software.
But over the years, it seems that Brex has realized that there are some aspects of serving enterprise customers that it may not have the capabilities to do in the way that it wanted to. And, according to chief business officer Art Levy, the majority of its revenue today still comes from interchange fees (although software is steadily growing, he said).
So in what might be considered a surprise move, Brex announced last fall that it was partnering with Navan to offer “BrexPay for Navan,” combining its corporate card with Navan’s travel management in a product aimed at enterprises. Once Navan (formerly called TripActions) expanded from just offering travel services after the COVID pandemic hit into overall expense management, it was increasingly competitive with Brex. So the news that the two were joining forces raised a few eyebrows.
And Tuesday, Brex is now announcing another partnership aimed at boosting its offering to the enterprise. It is partnering with Zip, a five-year-old procurement startup that raised $190 million at a $2.2 billion valuation last October, to offer “Brex for Zip,” the two companies shared with TechCrunch exclusively. The new offering embeds Brex’s virtual cards directly into Zip’s platform with the goal of giving enterprises “the ability to streamline procurement and payment workflows, prevent unauthorized spend before it happens and simplify global operations with a single card program.”
Brex co-founder and CEO Pedro Franceschi and Zip CEO and co-founder Rujul Zaparde told TechCrunch that one reason the partnership made sense was that the two companies together serve more than 30,000 businesses, with some overlap. For example, companies which both Brex and Zip count as customers include Anthropic, eToro, BetterUp, Carta, Coinbase, Gong, Zapier, Wiz, and Neuralink, among others. Both are heavily focused on growing their enterprise customer base and hope that the new combined offering will strengthen their respective positions in that segment.
In the first quarter, Brex saw its enterprise revenue grow by 70%, and net revenue retention for the segment climb by over 130%, according to Franceschi. Meanwhile, Zip had the largest quarter on record overall for Zip, with 155% growth within its strategic enterprise segment, Zaparde told TechCrunch. Besides those mentioned above, other companies that Zip counts as customers include OpenAI, Discover, Snowflake, Reddit, and Sephora.
In Brex’s case, the startup realized that what Zip had built for procurement was further along than what it could offer when attempting to sell to the enterprise.
“When you’re a startup, but you don’t really have a complicated procurement workflow, then typically a corporate card works. But when you go into a more sophisticated enterprise, something like Zip really comes alive in a differentiated way, because you have a complicated procurement process,” Franceschi told TechCrunch.
Interestingly, Zip touts that it has “never lost a single enterprise customer.”
Brex’s humility is also notable considering that the startup itself admitted to trying to do too much too fast, and thus hitting some road bumps in its growth. At a TechCrunch Disrupt panel in 2022, co-founder Henrique Dubugras acknowledged that the startup needed to focus more strategically on serving its startup customer base.
But perhaps Brex is really getting the last word. The decisions to partner with Zip and Navan also mean that Brex is spending less money on building out products. As such, the moves could also potentially be traced to reducing cash burn, something that Brex too has admittedly been working on. In January 2024, Brex announced it had cut 282 employees, or nearly 20% of its staff, in a restructuring. The move came after reports the company burned $17 million in cash each month during the fourth quarter of 2023 and that it was trying to preserve runway.
Efforts to slow cash burn seem to be paying off, according to Franceschi. In the first quarter, cash burn for Brex was down about 90% year-over-year, he said.
Burn baby burn
Since its 2017 inception, Brex has brought in over $1.5 billion in both primary and secondary transactions. It was valued at over $12.3 billion at its peak in 2022. As of February, the startup was expecting its annual net revenue to reach $500 million this year. In April, the company saw a more than 154% increase in realized revenue. Brex is not yet profitable, although Franceschi expects that it will be by year’s end.
Going public is still on the roadmap, too. Eventually.
“We want to be a public company, but we want to go public when we are ready to do so,” Franceschi told TechCrunch. “There is a lot to this, but getting the governance structure is crucial. While we are closer on the IPO front, there are other considerations as well such as financial profile and market conditions.”
Meanwhile, it seems to be leaning in on this strategy of partnering with other companies. In the case of teaming up with Navan on travel, Franceschi said Brex recognized that it could meet its smaller customers’ needs but that it might benefit from help in serving its enterprise base.
“We kept hearing the same thing from customers: disconnected systems were slowing them down,” he told TechCrunch.
The phrase for these sorts of relationships could be described as “coopetition,” or the combination of cooperation and competition. In fintech especially, many companies are realizing that it makes more sense to partner with or invest in other startups that have built something they are interested in offering or improving upon. For example, equity management startup Carta recently wrote a check into SimpleClosure’s $15 million raise after abandoning its own plans to build a similar product.
For both Brex and Zip, the decision to partner ultimately boiled down to listening to their customers.
“It was just a very natural partnership,” Zaparde told TechCrunch. “And really, the customer base pulled it out of us.”
Franceschi agrees.
“We asked ourselves, ‘how can we build a deep product integration where one plus one equals five, and that’s what we’re bringing to market now.”
