Brex CEO Henrique Dubugras joins Yahoo Finance Live to discuss the future of startups as COVID-19 cases surge.
- Welcome back to Yahoo Finance Live. And today's startup spotlight exploring the truth behind a V-shaped recovery. We've talked about it in some sectors, that have clearly seen that play out. But what about America's startups? We're seeing a V-shaped recovery there as well. Let's break that down a little bit in today's startup spotlight.
Joining us for more on that is the pride and joy of Brazil, Henrique Dubugras, CEO of Brex, a startup that skyrocketed to do a $3 billion valuation by helping other startups access company credit cards joins us now. Henrique, good to be chatting with you again here.
I know you have insight into this since you work so closely with startups and they're spending. What have you seen in this recovery when it comes to them and how strong of a bounce back you're seeing play out?
HENRIQUE DUBUGRAS: Yeah. So first, thank you for having me. I think that this is probably the strongest I've seen you know, startups and venture capital since I got to the US. You know, seed deals are being chased after. So much money has been raised.
You know, since we launched our Brex cash product, which is a bank account replacement, we've seen so much investment coming in from overseas, at a pace that we haven't even seen in 2019. The other interesting thing that we saw is that there's so many SNBs that are being created right now that are looking more and more like tech companies.
So you know, traditional retail shops, instead of opening a second location, because that's obviously a bad idea right now, have been expanding online. Or the traditional restaurants, instead of expanding to the nearby city, have been building cloud Kitchens for delivery. So we've seen a lot of very interesting trends across digitally enabled companies.
- Yeah. Can you elaborate on that a little more? You've talked a lot about how you are seeing this huge boost in spending from startups, but the way in which that money is being spent is not the same. So there's a lot more investments, for example, being made in software. What does that tell you about the pivot we've seen from some of these companies during this pandemic?
HENRIQUE DUBUGRAS: Yeah. I think, you know, when it was March and April, our volumes were down a little bit, because basically, T&E was down. So restaurants and Ubers, you know, those weren't happening anymore. And then quickly by June, we saw that our average spend by customer kind of came back to where it was on a pre-pandemic level.
And we thought it was really weird because people were still weren't going out that much. But just turned out that they were spending so much more on things like software, SASS, servers. Even advertising and got a huge boost.
So, you know, that's been super interesting. I think also explains a lot of the-- the stock market, giving so many multiples in value so much SASS companies. Because the spend there has definitely increased.
- Yeah. And Henrique, when we talk about the shakiness, obviously, as a company that's lending to other startups that traditionally might be a little bit more risky than some other more established companies. You know, there were question marks around what you guys might see in 2020, and then now into 2021.
But it seems like we're out from the worst of it, especially if you guys are seeing a quick recovery here. Now 5% higher in terms of spend since before the pandemic. How much of those fears may-- may still exist, in terms of what you're seeing in working with the startups and where you think like funding is at-- at a fundamental level behind the scenes?
HENRIQUE DUBUGRAS: Yeah. So Behind the scenes, what we were seeing during a pandemic, which wasn't being reported, was a large amount of unannounced fundings. Right? So VCs were helping their companies get through the temporary coronavirus. Now we're seeing so much activity, basically assuming it's over from VCs and assuming 2021 is going to be a great year.
I personally think that 2021 is going to be a super strong year for tech, because with the proceeds of all these IPOs going back to venture capital, you know, it's definitely the asset class that has the best returns right now. So I think that's going to pour back into startups.
- There's been a lot of chatter about companies "moving" out of Silicon Valley. And you've heard them, whether it is Oracle or HP. Some of the founders like, Elon Musk, moving out of the Bay Area. You and your co-founder are also among them.
Although, you moved to LA, so not outside of California completely. I'm curious what you make of this conversation that's playing out right now. Is the exodus out of the Bay Area-- is that exaggerated? Or do you think the epicenter really is in fact shifting a bit?
HENRIQUE DUBUGRAS: I do believe that this is different than other times. I've seen a lot of arguments saying that-- you know, people exit the Bay Area all the time and then they come back. At least for us, you know, I think this move to remote work. We're one of the first companies to announce that we're a remote first company right now.
And you know, we're going to have offices again, but you're not going to be required to go to the office. And, you know, and if you decide to move out of the Bay Area. We also announced we're not going to readjust compensation for four years. So we've definitely seen this push out.
I believe though that, you know, for starting a startup, still the Bay Area has some advantages around the network there. But if you already have an established startup or, you know, a company-- in my view, there's not that many advantages to not expanding or hiring outside of the Bay Area.
And then if that is your choice, you know, then you can choose to live wherever you prefer to live. Pedro and I always wanted to live in LA, but we never found a business reason to do it. But now with remote, we just get to pick wherever we want to live. And it's still close enough to San Francisco, we can fly in and out for the day if we need to.
- Yeah. And I bet you have a lot more options in hiring too. Being able to hire from diverse regions. The CEO of Brex, Henrique Dubugras. It's great to talk to you today. Thanks so much for your time.
HENRIQUE DUBUGRAS: Thank you.