There is a feeling of schadenfreude in Silicon Valley when a unicorn stumbles. So when the Wall Street Journal broke the news Thursday afternoon that Capital One will acquire Brex for $5.15 billion in cash and stock, you could practically hear the collective snickering from Sand Hill Road to San Francisco’s South Park. That figure represents less than half of Brex’s last private-market valuation of $12.3 billion from its 2022 Series D-2 round.
Before everyone sharpens their knives, consider that for the VCs who backed Brex at its outset, the sale is a triumph. Micky Malka’s Ribbit Capital, which led Brex’s $7 million Series A soon after its 2017 founding, is likely staring down a very handsome return. That early bet has multiplied somewhere in the neighborhood of 700-fold. Even accounting for dilution across subsequent rounds, early stakeholders are walking away with the kind of gains that have long made venture capital seem like such an attractive asset class to outsiders.
Still, the sting of that valuation haircut is sharper when you consider what happened to Brex’s chief rival, Ramp, during the same period. Just as Brex lost momentum several years ago, Ramp went on a tear. The competing expense management fintech has raised $2.3 billion in total equity financing and saw its valuation zoom from $13 billion in March of last year to $32 billion by November across successive funding rounds. Assuming Ramp is presenting a truthful picture to the world, its traction is undeniable. The company announced last October that it had surpassed $1 billion in annualized recurring revenue and secured more than 50,000 customers. The contrast is probably more painful for Brex’s later-stage investors, who watched a competitor lap them multiple times while they awaited an exit.
The Capital One deal comes at a bit of an inflection point for Brex. Just five months ago, the company announced it had secured a license to operate in the European Union. As CEO Pedro Franceschi wrote at the time, the move enabled Brex to directly issue credit and debit cards and offer its spend management products to any business in all 30 EU countries with no workarounds required. Previously, the company could only work with EU firms that maintained a U.S. presence, a significant limitation for a would-be global player.
For Capital One, the timing is as good as it gets. The bank, which already swallowed Discover Financial in a $35 billion deal last May, gains Brex’s tech platform and client roster, including reportedly TikTok, Robinhood, and Intel, as well as immediate access to European corporate banking customers through its freshly minted EU license. The $13 billion in deposits that Brex reportedly oversees at partner banks and money-market funds also presumably sweetened the pot.
The founders, Brazilian entrepreneurs Pedro Franceschi and Henrique Dubugras, dropped out of Stanford as freshmen to launch Brex in 2017 after being accepted into Y Combinator’s winter 2017 batch, initially pitching a virtual reality concept. But they were bound to circle back to payments having sold, at the tender age of 16, a payments processor startup in Brazil that had raised $30 million and was later acquired for more than $1 billion. Dubugras stepped back from day-to-day operations in 2024 to serve as board chairman; Franceschi will remain CEO post-acquisition.
As with nearly every startup, Brex’s path wasn’t without its stumbles. There was a questionable detour in 2019, when the then-23-year-old co-CEOs, who had never run a restaurant, bought San Francisco’s beloved South Park Cafe. The pair had envisioned Brex cardmembers dining before heading upstairs to an exclusive lounge, a timing decision that proved spectacularly lousy when COVID-19 shut down most of San Francisco for over a year.
Then, in 2022, as the macroeconomic picture darkened, Brex made a decision that generated considerable ill will; it abandoned tens of thousands of small- and medium-size business customers, informing them their accounts would close unless they had professional funding from VCs, angels, or accelerators. The move, designed to focus resources on higher-margin enterprise clients and a nascent SaaS business, struck many as tone-deaf.
That strategy may be what positioned Brex for this exit. By concentrating on corporate clients with deeper pockets and predictable revenue streams, the company stabilized its business model, even as Ramp ramped up its fundraising. Mercury, another competitor, also doubled its valuation to $3.5 billion with a $300 million raise last March and more recently shared it had hit a rate of $650 million in annual recurring revenue.
Capital One said it expects to close the deal in the second quarter. For Brex’s later-stage investors, all of which invested at a $7.4 billion valuation or higher, the exit may not be quite what they hoped, but they’re still liquid, which, in today’s climate, counts for something.