Brex, an all-in-one finance for growing businesses founded by Brazilians in Silicon Valley, has decided to expand its portfolio and launch a venture debt business called Brex Venture Debt. The company developed the product over the past year and to get it off the ground raised a $150 million fund, according to The Information. Brex has been making loans to early-stage companies since the beginning of this month.
In a note, Brex explained that the idea of launching a venture debt product came after the startup realized that the model enables startups to gain traction with minimal dilution, allowing them to delay fundraising until a more interesting moment in their journey. Brex itself took this route when it started in 2017. However, according to the startup, the process for raising funds via venture dept is complicated and long and tends to take companies away from their core focus.
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“We’ve met with over 100 founders who share many of these frustrations with existing financing solutions. They want capital that can be drawn at any point, that’s available early in the company life cycle and that minimizes dilution,” the Brex announcement says.
According to Brex, while most venture debt is a one-time offering until maturity, Brex’s venture debt will have on-demand debt lines and will serve companies early in their cycles, when the capital raising process is most dilutive to the company.
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“We believe the excessive dilution is unnecessary, especially for companies generating repeatable and growing revenue. At the time of IPO, company founders own on average <15% of their company (across all founders!) and some own <5%. Taking venture debt enables these figures to be meaningfully higher.”
The Brex Venture Debt website reports that the startup has already closed venture debt with at least three clients, virtual event platform Welcome, contact center platform Edify and ad platform AdQuick.
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Founded by Brazilians Henrique Dubugras and Pedro Franceschi in 2017 in Silicon Valley, Brex is valued at over $7.4 billion and recently raised $425 million in a Series D round led by Tiger Global.
Brex defines itself as a “company reimagining financial systems so growing businesses can realize their full potential.” Brex offers an all-in-one platform to small and medium-sized businesses (SMBs) and larger organizations to manage their finances with a combination of payments and cash management services, expense management and bill pay software.