00:00:01 [Music] moving the needle on founder failure one conversation at a time i'm your host lucas poles and welcome to startup 2.0 by spark xyz join us each week as we give you access to some of the top investors and entrepreneurs around the country to help you think through and overcome some of the top challenges that start-ups i think there's no better place in the country to be investing than los angeles what is the problem that you're solving and for who like what is that specific pain point sometimes when a company is not

00:00:31 listening to its customers and just thinks it knows better than it customers has a really really hard time finding product market fit i want to see somebody that that isn't gonna stop you know this person you just feel like they're gonna they're gonna they're gonna make it work [Music] a big heartfelt thank you to brex who without their support this show would not be possible we've seen firsthand the difficulties accessing basic corporate credit without providing a security deposit or personal guarantee early on

00:01:04 as companies grow managing expenses has become more difficult and time consuming which is why we've partnered with brex to offer a corporate credit card that is not personally guaranteed offers higher credit limits provides auto reconciliation and integrates with erps using receipt capture brex is the credit card of the start ecosystem and we highly encourage you to check them when i was nine because of a conversation i had with uh uncle and a teacher i decided that i really wanted to study economics at harvard and that was my

00:01:35 first big dream when i was young but there weren't any schools like british schools or international schools in my state so i had to do a lot of the research on my own and try to find people who who studied in universities and abroad and when it was you know the year before i applied i came across this program called the prep program which was a free preparatory um you know group to help brazilian kids study universities uh in the us and in that program i met enrique and pedro who at the time uh had

00:02:19 a fintech already which i thought was really impressive it was called pagar me and it was in brazil and they were at around the same time as i was applying to stanford so turns out that you we both apply we all applied we got accepted me myself to harvard them to stanford uh but i went in 2013 and they stayed because their company was doing extremely well yeah but we stayed in touch you know i really admired them and they thought that was cool that you know some girl who uh got out of like middle of nowhere in

00:02:53 brazil and was able to hustle my way and become the first one in my state to go to harvard so we maintained that friendship and literally one month before i graduated i had dinner with enrique in boston after you know just a catch-up and i said hey like i heard you guys sold pagarme uh and you finally went to stanford how's that going and he said well it's not really going three months later we had an idea on augmented reality we joined y combinator which for those of you who don't know is an accelerator

00:03:34 in the in the valley uh and when we were there we actually noticed that there was a huge gap uh in terms of payments for startups startups could not access a credit card and they didn't even really need the credit they needed a payment instrument uh to fulfill around 50 of their monthly expenses which require a credit card software travel and etc yeah and even them with at the time a couple million in in you know raised couldn't get a credit card to a traditional bank banks would then require a personal

00:04:13 guarantee which they didn't even have because they're they're just building a credit score in the us and they said you know what maybe we should give it back to fintech and and and fix this problem and they invited me to come on board as the the first hire and and the the rest is history that's super exciting so that's where uh very fascinating story um congrats on going to harvard and uh jumping out and very nice work thank you um yeah uh so so walk me through so uh did they end up continuing with the

00:04:51 business at y combinator or did they like being a total pivot with what they were doing or they shut down and restart uh brett to brex so in brazil they the story was uh enrique had like one of his first ideas ever back in the day was kind of like a dating app but instead of geolocation it was with facebook friends and so kind of like a tinder but with facebook friends no and when it was time to monetize it he was going to like charge users to find out who their matches were or something but when it was time to

00:05:29 monetize it he noticed that online payments processors in brazil were really really bad and that was a better market and a better problem to solve so that's when he got interested in payments then he met pedro over twitter and pedro has an amazing story of his own he learned to code by himself he was the first jailbreak of the iphone 4 in the world was always you know loft computers uh and programming and since a young age because he sort of made a name for himself for doing the iphone jailbreak

00:06:03 and hacking series so she could speak portuguese and i guess i think that was the first language that siri ever spoke other than english he worked he was hired at 12 by cielo which is a a payment acquirer in brazil and so they met over twitter and they that's how they got like two 16 17 year olds got into payments in the first place brazil has an extremely complex banking system and so they had to deal with that their entire you know working lives and when they got to the us you know they saw the company they said you know what

00:06:44 like we were too young when we started a company let's see what we can do it's you know with all the knowledge that we have starting something else in the markets like the united states um and they had one certainty they would would not do something fintech again because it was way too difficult way too complicated and so they were they're like you know what like seems like virtual reality is pretty cool so let's do something there yeah and while they were at yc they not only identified the huge you know lack of

00:07:19 proper service of payments to to startups but also realize that you know what vr is really difficult fintac at least is that difficult that they know yeah so that's when they pivoted back and an important lesson from there that i like to you know when i talk to founders in the early stage i like to mention is there is a very important question that comes even before product market fit which is founder market fit right like team market fit you should ask yourselves as you're choosing what problem to tackle

00:08:01 um why am i and my co-founder like why is our team the best suited to solve this problem out of seven billion people that we have in the world they didn't have a good answer for vr but they did have a very good answer for uh the problem of of of payments i really like that because i run into founders a lot of time that they're like oh i'm starting at so-and-so company it's like okay what what advantage do you have in there like do you know the space just oh it's just something that i'm interested in it's like

00:08:34 you need to be an expert in that field to be able to approve other experts that are already doing it so i think it's a super valuable piece of advice for for founders yeah 100 so we touched on a couple different points i would love to dive into so uh the transition from brazil to the us and kind of back and forth i mean how did that how was that process uh not just from maybe just an immigration standpoint but picking up uh addition like first customers possibly in brazil and then transitioning all to the us

00:09:10 like how was it even having a conversation with yc and the vcs here because i find a lot of the time when uh making investments remember we made one in columbia that it was that they had very like fortune 500 companies that were in colombia and they but they didn't have the u.s arm of the customer and you the vcs wouldn't fund them because they're like you don't have any us customers yet so walk me through some of the challenges that brex like ran into especially in those early stages just in general of going across the

00:09:44 board yeah so um enrique and pedro are from brazil i'm from brazil as well naturally we grew up here we know a lot of how society works and how companies work here definitely having to learn that or relearn that in the united states was one challenge um the other challenge was getting the necessary network to mobilize all of these resources and raise the first rounds enrique has always been exceptional at connecting with people and uh building strong relationships and when he got to the valley he didn't

00:10:26 really have anyone the his friends right pedro and enrique's friends at stanford were freshmen in college so it's not like they could you know they could hire them or they you know had much of a network themselves and one thing that enrique noticed was in pedro's the valley you know despite being yes a land of opportunity in a land where there's amazing people from all over the world doing amazing things it's more closed than we think so it's a place that it's pretty addicted to its own brands yeah you know brands like uh y

00:11:09 combinator stanford and grayson or if you're early employee or exec level at a a very big successful company until they were like you know what so we will need some of these brands on our site they had stanford uh they got into y combinator uh and kind of started making their way uh in that that sense and you know they were never shy to just come to someone they they met and say hey can you please introduce me to everyone that you know in fintech can you please introduce me to everybody that i know in venture capital

00:11:47 and really spend the time building that network from scratch so i think that was one thing the other thing was uh the regulatory compliance like navigating finance and not navigating payments really was pretty different right it's a different country and so they were very intentional about the early team i was just you know like oh she's like graduating she's kind of a hustler like to bring her will find something for her to do but they were very intentional about the first executives that they

00:12:23 brought on board the very two you know the very first two hires were uh michael tenenbaum who's our cfo and vince cogan who's our um our general counsel so finance and compliance yeah and it was the two hires that took a tremendous amount of time defined and something that they both had in common is that they held key positions at a very successful fintech and they actually brought that fintech from point a of like startup to point b of you know scale and growth um and bringing that expertise what's

00:13:11 something that made a huge difference so i would say these are the two ways that we navigated the transition that was very uh you hit on really two key points uh especially in there i don't think that people value the understand how valuable like a network actually is and how much it changes the outcome of your venture uh just in general and i feel like you guys have more appreciation for it because you started from you started from zero to build uh basically a brand new network coming from a different country

00:13:46 it's definitely not an easy thing to be able to accomplish so congrats um but then be being very i feel like entrepreneurs a lot of the time especially at the early stage will just grab whoever is around uh to join and if they're willing to have the tough conversations later that they can find something different for them different story but a lot of them will are not as intentional who they're actually hiring to be able to scale and it might work yeah i mean it might work for a year or two but you're gonna hit a ceiling

00:14:25 where the growth is going to stop and you're gonna have to start that process all over and so uh not only that it sets the bar for all of the like the the hires after that yeah right like as they're recruiting their teams that you know you're very very early teams like what is setting the quality bar for everyone else that is to come on board yeah that was a really good point nice yeah awesome um very valuable information uh so so let's dive into uh not more in tech so a little less a little more immune to

00:15:03 uh some of the stuff with covet happening right now but um let's walk through some of the maybe some of those first early challenges that brexit was running through and maybe how some of the strategies might have had to change as we're kind of looking at a new world for at least the next kind of year or two so you know the covet cut everybody off guard nobody no one could imagine this and yeah it's true and for us supporting our customers and supporting our team has been the top priority um we're very confident in our cash

00:15:46 position today but in may we raised another 150 million in case of an extended recession but adapting to the new normal or to this phase that we're leaving brought us some important changes like internally and also really reassured us of things we believed in from the beginning yeah and in terms of what changed internally for example we have been adopting a pretty strong written culture kind of like memo culture similar to what amazon has you know in the past a meeting was a lot of people in one room for a very

00:16:36 long time talking and decisions were made but they weren't really like properly documented but that's okay like uh startups grow and improve part of growth and now we need to be very mindful that this crisis is impacting different people very differently you know we have people at brex from all stages of their life some people are now having to support their children through school take care of loved ones and flexibility so that the team can be at their very best at a time that works for them is really important in this memo

00:17:18 culture we circulate a name or a document a few days before a meeting everyone has you know at their own time the chance to look through to read write comments respond to questions other teammates might have and when it's time for the meeting it's a lot shorter a lot more objective and if someone for whatever reason couldn't make it they can refer back to the document and understand how the decision was made this is something that was you know made a lot stronger during this time and we for sure plan to

00:17:53 keep it there's uh benefits beyond the flexibility so in a setting of a meeting there is there can be space for the loudest voice in the room effect where people who are you know more outspoken tend to kind of have the last word word and people who are less comfortable speaking on a public setting end up not ex you know having the chance to express their their ideas as much and the document kind of levels the playing field so that was a pretty cool thing too um and there were some certainties that

00:18:32 you know the like ideas that we had that were reinforced by this time one of them is that brex was built from scratch right so we are rejecting all of the legacy systems that banks are rooted to and that's what prevents them from being truly innovative is the fact that they don't really own their technology we spent a lot of time building breaks from scratch so that we could have autonomy over the way we underwrite over the way that we give rewards and that makes us faster and more effective in the

00:19:13 different verticals that we are entering and one of the things we did really quickly was you know uh covet hit uh everyone is in lockdown our the rewards that as we saw that this is something that was here to stay our rewards which were very focused on uh seven percent cash back on uber and ride share four percent cash back on travel three percent cash back on restaurants were suddenly useless right like for lack of a better word and in only one week and a half we were able to come with a program that was now giving

00:19:57 you know in companies to have the option to choose but the majority changed for the the new rewards which is seven percent back in work from home tools uh three percent back in food delivery instead of restaurants and so on and so this is something that showed us that all of that work that we put into building something from scratch instead of partnering with third parties and you know kind of skipping some steps were so so important especially at a time of crisis it's really nice having that uh having

00:20:35 that validation uh later down the line when you run into something you're like good i'm glad we actually went through this and uh and we did it and this is specifically the reason why um the agility must get very large competitive edge and honestly must keep customers super happy um compared with some of the other things are out there yeah that's nice um let's talk about uh so brex had an office before i'm assuming uh this now kind of work from home culture how is it fair how's the team fared um have people been enjoying it people

00:21:11 not like been missing the office and water cooler talk like how uh how is maybe the culture shifted and how are you keeping that culture alive with everyone having their names at home yeah most people are pretty welcoming of the the work from home they've been able to do other things that if you're at the office you don't have as much flexibility some people miss the office i myself miss the office and just seeing everyone and actually coming up someone's desk instead of sending select message but

00:21:48 it's the more we read about work from home and remote the more it's it's clear that it's pretty inevitable that the world at least you know starting with tactful migrates to that and covet just fast forwarded us five years or so yeah and so it's it's clear that that's where we're going and now we can we have to think of how can we make the content that is online and the engagement that the online world have work in a office setting or in a a company setting yeah that's the the question that we're

00:22:37 trying to answer but we don't know yet what that what exactly that's going to look like yeah i imagine it's going to be different and evolve for everyone uh as we kind of move forward and we because i mean every majority of people this is brand new entire working from home and developing culture and understand that and get a message across so uh it'll be interesting to uh to kind of watch as this evolves over the next year or two um what do you think i from my perspective uh even with my teams before like when i was at adp uh

00:23:15 we were mainly remote because either they were in the field and i would see them at the office monday mornings and fridays um from my perspective it's just it's staying tight with each individual employee that's on your team so making sure that it goes a lot back to servant leadership where it's removing barriers from in front of them so they can run faster and whether that's something that is uh has to do with work or honestly most of the time it had to do something personally so that they could not have to spend emotional

00:23:51 energy somewhere else and they could direct it towards everything at work from my perspective it was just staying tight and having good conversations and deep real conversations with them to be able to make sure that they were in a good space going forward um i think a lot of this especially is in kobe and it's a mental battle which is which is tough and it's one of the tougher ones to be able to to kind of fight um but staying tight and making sure that everyone is okay and that their needs are being

00:24:26 met and then doing what you can to help alleviate that any of the challenges they're running into i think is is big um trying to think of the uh there was one uh there was one rep that uh had a did a fitness class that was her life uh it was at 9 00 a.m on mondays during our team meetings um and when we instituted her not being able to go to that her sales dropped significantly and it's like okay how do we how do we get you uh to a place where you're able to execute on it going forward and that fitness class

00:25:09 meant everything to her and so giving their ability to actually go and do something like that um i think we doubled our sales just literally from being able to accomplish that and staying tight and having that good conversation and honest conversation uh with her so and it can be anything and it's going to be very individ into visualistic uh for each person on the team because everyone into different challenges i agree no so so let's talk about uh let's dive a little bit more uh specifically uh

00:25:44 into you uh first employee at the fastest unicorn ever it's a wild it's a uh it's a wild ride so from your perspective like what what made you gravitate uh gravitate towards brexit what was it that you're like okay like this is like i'm sticking with the team i'm jumping on like i'm super excited like like let's go on this ride because i know that for a lot of people finding those co-founders are very difficult but then finding those first employees are as equally difficult and just as or more important

00:26:22 for the company that you want to build going forward so from your perspective like what was it that really attracted you specifically to them yeah it was definitely enrique drew uh they created one of the top online payments processor in south america at 16 17 years old in a country where you know we say brazil is not for beginners in a country where things are very complicated and difficult to navigate especially in the fintech like in the the uh payment sphere and they just have this strong desire to fix a big

00:27:10 problem in the world and to dream really big just something that always resonated with me um i was always drawn to great people more so to the to specific ideas more so than to specific subjects even back in harvard i would choose most of my classes like the ones that were not requirements based on who were the very who are the best professors where the most inspiring professors i think that great people are key for you real to realize your full potential that has always been the case in my life

00:27:47 so i took random classes at harvard that weren't necessarily tied to economics shows my area of study because i was having the opportunity to work with the very best so i took a class called the cuban revolution a self-debate took one called castino capitalism the moral implications of gambling and speculation and things like that uh the joycian novel so james joyce in the novel because i just wanted to be around the the very best uh teachers i thought they would bring the very best in me and my decision on what to do after

00:28:26 college was very driven by i will have the chance to start something from scratch with two people that i admire incredibly so that was the that was my drive awesome yeah that's great um what uh let's uh let's dive into uh i guess kind of final points round break so uh you guys executed flawlessly uh throughout obviously to get where you are looking back and a little bit of hindsight what were some of the uh what were maybe some of the mistakes that you made that were avoidable that founders might end up running into that yeah

00:29:11 one that comes to mind that we almost made like a kind of a external advisor stopped us but those are important one is brex from it's from the ideation of brics it was supposed to solve a lot more problems than just access to a credit card you know the number one issue they stumbled upon was that well-funded startups needed a credit card not for the credit line but as a payment instrument for around 50 of their monthly expenses which required a credit card right so it's sad a little bit in the beginning travel

00:29:55 subscriptions software and banks because of the way that they have been underwriting companies for years and years and years they don't really they don't look at the main determinant of whether startup can pay their bills or not which is cash in the bank they look at credit like uh credit history which a company that just incorporated doesn't have um and other things like that and so the very first problem we solved was access to a card we're eliminating the need for a personal guarantee or a security deposit

00:30:33 um but looking into the credit card uh world we saw that there was a lot of other opportunities beyond that so nobody loved their credit card you know back when when we were first researching the the payments world in the credit card world it didn't really work well everyone hated receipts and receipt uploads and everyone hated the whole like drama around expense reporting at the end of each month and these were very tempting value props to come to market with when we when we first one uh were planning our launch

00:31:17 breaks wasn't stealth for one year working with friends and then friends of friends and some word of mouth until it officially launched in uh june of 2018 and it was really tempting as we were preparing that copy for the launch and preparing the even you know the what the billboards were going to say um to have multiple things we're like wow yes we solved the issue of no personal guarantee but we also solve the issue of large you know slightly later stage companies who have a lot of trouble and

00:31:55 waste a lot of time on expense reporting and then we were twisted that we were torn between which one do we go with can we go with both let's just say both yeah and a close like friend advisor told us no no like you're a new thing you have to be very clear on one wow factor one value prop uh and then from there you will dive into other stages of companies and etc and so we decided to go with the first corporate card for startups mostly focusing on a 10 minute onboarding and no personal guarantee required yeah

00:32:40 all of the rest came after which i think is also incredible advice because your messaging can i mean it can absolutely get lost when you're doing multiple lenses exactly having that kind of that beachhead market where you kind of land and expand uh is very very important so a lot of great pieces of advice that have come through this conversation already um awesome so where does uh where does brex go from here like what are what are the next uh uh what's the pie in the sky dream so we recently launched brex cash

00:33:19 uh you already know the brex credit card it was such a big hit amongst tech companies and startups that everyone started asking us for a substitute for a bank account as well uh startups typically have a terrible experience with traditional banks and now we're finally able to offer the bundle card in cash as well as like all of the um expense features that are saving founders and finance teams a lot of times so this this is something that we spent a long time building thinking about and now that

00:33:56 it's launched uh that's like our our big focus nice yeah a long long time to build and very exciting uh on the new features awesome uh well versa if people want to get in touch with you how would they go and accomplish that please feel free to email larissa brex.com and if uh you please mention that you're from the spark xyz community and i'll make sure to bump it to the top of my box i do get quite a few messages which i love but i not always able to to handle as fast as i wish very daring to give out the email so definitely

00:34:38 appreciate it um awesome larissa thank you so much for coming on the show and sharing the advice thank you lucas was a pleasure count on as always and great to have you guys as partners [Music] bye