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Capital One to acquire Brex for $5.15B

reuters.com

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Re: Capital One to acquire Brex for $5.15B

#61

Post by throwawa1 »

blindriver wrote: post #21
fairity wrote: post #7

Why are people saying this seems like a bad deal? If they really only raised $1.7b, per Crunchbase, then this seems to me like a very good outcome for everyone involved except its late stage investors. And, even for the late stage investors, they're breaking even.

No. The last two investment tranches will get back their money, based on 1X liquidation preference. Employees who joined in the last 5 years if they got options are fucked. If they have RSUs then they will take a fraction of their equity. It sounds like investors got out okay, but employees got fucked big time. It's a terrible exit and Brex waited too long until their growth stalled.

Silicon Valley seems gamed against employees - it gets worse every year. Companies don't even share the cap table (including many YC companies).

Re: Capital One to acquire Brex for $5.15B

#62

Post by itake »

hn_throwaway_99 wrote: post #32
rvz wrote: post #17

Earlier quoted context omitted.

That is a 50% discount, which isn't great for those who got into the latest round. Seems like Capital One is very excited on the deal and announced it earlier while Brex hid the announcement and made it hard to find. (It's on the Brex [0] journal directory, but you cannot see it featured on its front page) What (really) happened? [0] https://www.brex.com/journal

Its not great for those who got in later rounds, but I would assume all the investors had at least 1X preferences, so they'll at least get all their money back. I think this is a pretty decent outcome for Brex. I read they received a total of 1.3 billion in funding, so a 5.15 billion exit isn't bad, especially since the bottom dropped out of the market for so many fintechs that were founded and had big raises between…

I'm curious how the employees faired. Seems like they may bet getting nothing out of the deal if the investors get their money back.

Re: Capital One to acquire Brex for $5.15B

#64

Post by manquer »

rvz wrote: post #17
paxys wrote: post #13

Sold for $5.15B. Brex last raised $300M in Oct 2021 at a $12.3B valuation.

That is a 50% discount, which isn't great for those who got into the latest round. Seems like Capital One is very excited on the deal and announced it earlier while Brex hid the announcement and made it hard to find. (It's on the Brex [0] journal directory, but you cannot see it featured on its front page) What (really) happened? [0] https://www.brex.com/journal

> 50% discount

There are liquidity preferences, nobody took a haircut, they may not made a lot of money as long as the sale price($5.1B) is greater than funds raised($1.2B) everyone made some money not as much as they thought, but nevertheless some.

The reason may be different than you think, Capital One is known for its aggressive marketing campaigns and physical mail spam, it is more likely they didn't want to upset the customers and end users on what Capital One will mean

It is quite likely Capitial one will mine the data, monetize the brand, sell other products and target high value users the typical Brex user.

Re: Capital One to acquire Brex for $5.15B

#65

Post by apparent »

weird-eye-issue wrote: post #63
LgWoodenBadger wrote: post #35

Capitalone is going to need something to make up for switching all their debit cards from MasterCard to Discover

Who in the world uses debit cards

People who don't have credit? I used a debit card at one point, though I don't anymore.

But also, they're looking at moving their credit cards to Discover as well, which would make huge waves (both in the credit card/banking world, and for their customers, who would probably find it very annoying).

Re: Capital One to acquire Brex for $5.15B

#66

Post by tfehring »

logicallee wrote: post #19
blindriver wrote: post #16

The investors all have liquidity preferences so the ones that invested at higher valuations didn't lose any money. But all employees after 2021 are underwater. I wonder if they got any relief from management or if they got screwed.

do you know, is that 1x?

Not publicly disclosed as far as I'm aware, but likely 1x. In Q4 2021 when Brex last raised, only ~3% of rounds had >1x liquidation preference according to Carta. https://carta.com/data/state-of-private-markets-q2-2024/

Re: Capital One to acquire Brex for $5.15B

#67

Post by Twisol »

weird-eye-issue wrote: post #63
LgWoodenBadger wrote: post #35

Capitalone is going to need something to make up for switching all their debit cards from MasterCard to Discover

Who in the world uses debit cards

Setting your incredulity aside, I'm curious why you think using a debit card would be so shocking. I effectively don't use a credit card at all: I use a debit card (or an equivalent Apple Pay representation thereof) exclusively. From my perspective, if I want something and I have the money, I'll pay for it. If I want something and I don't have the money, I won't pay for it. I don't often want things outside my budget (and I am not well-off, as a grad student), so I don't often feel any pressure to amortize the purchase over time with a credit card. And I prefer that state of affairs, because I don't want to get in the habit of using someone else's money if I can't afford to pay them back.

This isn't a value judgment on people who do use credit cards. There are plenty of reasons why using a credit card by default would be appropriate, and I'm not shocked to hear of someone who does so. But I am curious where your shock comes from, so I shared my story as a data point.

Re: Capital One to acquire Brex for $5.15B

#68

Post by apazzolini »

Twisol wrote: post #67
weird-eye-issue wrote: post #63

Earlier quoted context omitted.

Who in the world uses debit cards

Setting your incredulity aside, I'm curious why you think using a debit card would be so shocking. I effectively don't use a credit card at all: I use a debit card (or an equivalent Apple Pay representation thereof) exclusively. From my perspective, if I want something and I have the money, I'll pay for it. If I want something and I don't have the money, I won't pay for it. I don't often want things outside my budget…

Because you're leaving 2-3% on the table for every transaction. Using a credit card doesn't mean you can't pay it off in full every month, costing you zero in interest, while taking advantage of reward programs.

Re: Capital One to acquire Brex for $5.15B

#70

Post by c2h5oh »

weird-eye-issue wrote: post #63
LgWoodenBadger wrote: post #35

Capitalone is going to need something to make up for switching all their debit cards from MasterCard to Discover

Who in the world uses debit cards

Majority of EU population. Even in US debit is more popular than credit in 18-25 age bracket.
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