Expense management startup Brex, which was valued at $12.3 billion two years ago, has announced a significant change in its company structure. The once high-flying fintech startup has laid off 282 employees, or approximately 20% of its workforce today.
In a note addressed to employees and simultaneously published on the company’s website, co-founder and co-CEO Pedro Franceschi stated that Brex is now “emphasizing long-term thinking and ownership over short-term gains” in its compensation structure. This decision has resulted in the need for a reduction in workforce.
In addition to the layoffs, Brex has announced changes in its leadership team. Michael Tannenbaum, the company’s COO, will be transitioning to a board member role. Camilla Morais, previously the SVP of global operations, has been promoted to COO. And Cosmin Nicolaescu, who served as CTO, will be transitioning to an advisor position in the summer.
This is not the first time Brex has undergone a restructuring. In October of 2022, the company laid off 136 employees, or 11% of its staff, in all departments. This brought the company’s total workforce to just over 1,150 employees at the time.
The exact number of employees affected by the most recent layoffs is unclear, but it is estimated to be around 1,400 employees before the cuts. The decision to downsize comes after a report by The Information that Brex had burned through $17 million per month in the fourth quarter of 2023 and had only enough cash to last through March 2026.
However, in a statement to TechCrunch, a Brex spokesperson clarified that the data from The Information was “inaccurate” and directed attention to the note announcing the layoffs. The spokesperson stated, “The changes today are driven by a desire to make Brex more agile and accelerate our path to profitability, building on the growth we had in 2023. We grew our revenue 35%+ in 2023 while gross profit increased by 75%. This reduction in force puts us on a clear path towards profitability.”
The spokesperson also addressed the company’s financial plan, stating, “Brex’s financial plan is to be well above cash flow positive with the current cash we have, which calls for around 4 years of runway. Plus, cherry-picking certain months for financial burn is not the correct way to look at burn.”
The collapse of Silicon Valley Bank last year initially provided a boost to Brex’s business. However, that growth has slowed due to an increase in interest rates and a resulting decline in venture capital funding. With a large number of startups failing or not experiencing growth, many Brex customers began cutting back on spending.
In the fourth quarter, Brex’s annualized net revenue was $279 million, a 32% increase. However, most of this growth was seen in the first quarter of the year.
Employees impacted by the restructuring will receive 8 weeks of severance, with an additional 2 weeks of pay for each year of service. Additionally, the company is offering a waiver of the one-year equity cliff for employees who have not yet reached it.
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