SAN FRANCISCO (NYTIMES) - Things should be dismal in Silicon Valley right now, with technology's biggest companies under attack from regulators, lawmakers and even US President Donald Trump.
Not for Henrique Dubugras and Pedro Franceschi. The two Stanford dropouts, both 23, are the founders of Brex, one of the hottest young companies today. Their start-up's mission? To provide charge cards to other start-ups.
"We knew that if we could build what we wanted to build, people would want it," Dubugras said. "We never had questions about that."
Dubugras, sporting a black hoodie and tortoiseshell glasses, was speaking from Brex's new San Francisco headquarters, where an orange "511572" mural displayed the bank identification numbers that appear on all its charge cards.
The two-year-old start-up moved into the sun-filled space this year as investors poured in tens of millions of dollars, valuing Brex at US$2.6 billion - and making Dubugras and Franceschi worth roughly US$430 million (S$591.8 million) each on paper, according to EquityZen, a marketplace for private stocks.
Brex is an example of Silicon Valley's unflagging start-up exuberance, even amid the Big Tech backlash. start-ups raised US$55 billion in venture capital in the first half of this year, the most since 2000, according to CB Insights and PwC. And a burgeoning class of these companies is thriving by catering to a fast-growing market: other start-ups.
Apart from Brex, there is Carta, which helps start-up employees manage their equity and is valued at US$1.7 billion. There is Guideline, which provides retirement services to start-ups. There are Brex copycats. And there is InterPrime, which helps start-ups manage their "idle cash" and has more than 50 customers.
"start-ups are great because they're underserved and provide a lot of feedback to companies like ours," said Kanishka Maheshwari, a founder of InterPrime, based in Menlo Park, California.
Brex's journey began in Brazil, where Dubugras and Franceschi were raised. At age 12, Franceschi gained notoriety for "jailbreaking" iPhones to remove their software restrictions. At 14, Dubugras created a gaming company that was later shut down over patent violations, causing what he joked was a "14-year-old life crisis".
The two met on Twitter as teenagers and together built a payments start-up, Pagar.me, based in Sao Paulo. By the time they turned 20, they had sold it to Stone, a Brazilian charge card processor.
In 2015, they moved to Silicon Valley to attend Stanford University. Going to Stanford was a dream, they said, because of the TV show Chuck, whose protagonist was a hacker who studied there.
But after eight months, the pair dropped out. They were participating in Y Combinator, a start-up accelerator, with an idea for a virtual-reality company, Veyond. There, they noticed how difficult it was for entrepreneurs to get bank credit from traditional sources, which required a credit history and a personal guarantee. So they turned Veyond into a credit card company, which they later renamed Brex.
The idea was to appeal to start-ups by offering nearly instant approvals and requiring no personal guarantees. Brex struck a partnership with Sutton Bank, in Ohio, to issue the cards. To mitigate risk, the company constantly monitors customers' bank accounts and adjusts credit limits. It also requires that the start-ups pay off their balances each month.
The cards cost US$5 a year per user after the first five users, who are free. Brex would take transaction fees from merchants.
Dubugras and Franceschi became co-chief executives. Dubugras now handles partnerships, fundraising and communications, with Franceschi focused on technology and operations.
Immediately, Brex had more demand than it could handle.
"We call that 'things are on fire,'" said Anu Hariharan, a partner at Y Combinator's Continuity Fund, which invested in Brex. "Everyone wants it, and you're like, 'Oh, my god, I don't know how to deal with this.'"
Among the start-ups that flocked to Brex's charge cards were Hims, an online medicine provider; SoFi, a personal finance start-up; and ClassPass, a fitness company.
Another was Boxed, an e-commerce start-up in New York, which began using a Brex card a year ago to pay for items like inventory and digital ads. The card let Boxed sell some merchandise before paying for the goods, which freed up capital to fund more growth, said Chieh Huang, the chief executive.
Boxed, which has nearly US$250 million in funding and more than US$100 million in annual revenue, had an extremely high limit, Huang said.
"It's so much that we don't want anyone physically holding the card," he said. "It's, like, melting your hand."
While growth took off, Brex initially struggled to recruit engineers because of the competitive talent market, said Larissa Rocha, the company's first employee and chief community officer. "You'd Google us and nothing came up," she said.
That changed after Brex raised funding in February and October last year. Within six months of being in business, the company hit a US$1 billion valuation. Its investors include Peter Thiel and Max Levchin, co-founders of PayPal.
Brex then went on an advertising blitz, covering San Francisco's bus stops, billboards and airport terminals with its logo and tag lines like "The corporate card that actually lives up to the hype" and "Don't charge it. Brex it."
In November, Dubugras showed off the billboards at a conference, saying they were a cheaper way to reach potential clients and employees than digital ads. Afterward, San Francisco's billboard prices rose, he said. Now he has a new rule: "Don't talk about advertising that works."
Today, Brex has 220 employees. The company estimates it will have just under 400 by the end of this year.
Brex's rising profile soon drew more venture capitalists. Dubugras and Franceschi turned down many of them, but used the meetings to pitch their charge cards for the other companies that the venture capitalists had invested in.
One meeting was held at a cafe in San Francisco's South Park, near the offices of more than 10 venture capital firms. It was crawling with entrepreneurs and investors, all potentially eavesdropping. So in March, Brex opened a private lounge, the Oval Room, directly above the coffee shop.
Named after the White House's Oval Office and South Park's shape, it is one of the perks that Brex offers its customers. Others include credits for cloud storage, discounts on WeWork office space and points for spending on scooter rentals.
Dubugras and Franceschi are enjoying some fruits of leading a hot start-up. Dubugras said he now bought subscription home-cooked meals for his Bernese mountain dog, Ruby, who is named after the coding language Ruby on Rails.
How long Brex's success can continue is unclear. Since most start-ups fail, hundreds of Brex's customers have gone out of business.
Brex tries to be understanding when that happens, Franceschi said. Unlike credit card providers that tell customers, "You're running out of business, you didn't pay us, I'm going to cut you off now," he said, Brex sees failed entrepreneurs as future customers who may try again with a new idea.
Dubugras said he did not expect venture capital to disappear if things turned, and added that as long as Brex served the fastest-growing start-ups, it would be all right. Brex can usually tell when customers will run out of money, he added, because it constantly monitors their financial health and adjusts credit limits.
But just in case, Brex, which is unprofitable, has stockpiled money. In June, the company said it had raised another US$100 million from investors, including DST Global and Kleiner Perkins. That brought its total funding to US$315 million, including debt.
Neil Mehta, an investor at Greenoaks Capital, which led Brex's funding round in October, said he was taken by the start-up because it offered a "JDCE" - jaw-dropping customer experience - comparable to the first time he used Uber or drove a Tesla.
"It's just the beginning" for Brex, Mehta said.
This year, Brex also started working with life sciences and e-commerce companies; the latter now make up 30 per cent of its business. Some publicly traded companies have asked Brex about its card, but the company has turned them away.
As Brex gets bigger, it's crucial to stay disciplined, Franceschi said. In Silicon Valley, "it's easy for you to kind of get your feet off the ground and forget what matters," he said.