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About Last Week’s Announcement

About Last Week’s Announcement


·June 23, 2022


  Therefore, we feel confident in delivering a best-in-class service to customers who meet any of the following criteria:
    * Received an equity investment of any amount (accelerator, angel, VC or web3 token);
    * More than $1 million a year in revenue;
    * More than 50 employees;
    * More than $500k in cash;
This sounds like a panic mode statement from someone who never even bothered to do product/market/pricing research. If your service generates losses for 1-man freelancing shop customers, price it accordingly.

Make tiers: unsupported fully automated service => service with human support per email => service with phone support and customizations.

Price it so that the the first tier is somewhere near the breakeven point, and the next ones give you increased margins, since bigger customers tend to have larger budgets. Offer discounts based on the number of users/transaction volume.

This way you won't need to be unprofessional and pick which customers deserve the honor of using your services, as your pricing figures it out for you with no drama!

The only reason for this kind of announcement I see is that the company acquired lots of low-revenue customers at a loss hoping to fudge the growth numbers. Well, shame on them and shame on the investors that didn't see through the BS.


Their answer to that is: The answer is more complicated than costs – the needs of smaller businesses are fundamentally different. To serve smaller businesses well, we need a fully automated, one-size-fits-all product experience that doesn’t fully exist today. On the other hand, startups and scaled companies need a higher-touch experience with Brex tailored to the individual needs of their organizations.

Seems pretty reasonable to me?


I don’t think I understand, can you help make it click?

My thinking: They don’t need to build a fully automated one-size-fits-all product experience, they just need to charge for the cost of their existing “higher-touch experience”. Isn’t that exactly as complicated as “costs”?


I imagine it would require scaling the organization in a direction that is not aligned with their current goals and strategy.


>They don’t need to build a fully automated one-size-fits-all product experience

It comes down to number of customers. At some point, even if they are paying, you need the scale and you will need to channel those fees towards putting in place the kind of automation that they are not planning to build.


Raising funds through a web3 token to keep our Brex account. Starting price 1 cent.

Please help!


Hard to avoid the appearance that they:

* paid $1000+ per "small business" acquired in early 2021 (those were some sweet signup bonuses over on the travel blogs!)

* raised $700M+ cash in Apr + Oct 2021, and negotiated a higher price per share by adding a slide showing exponentially more "small businesses" on board

* got them all offboard once the accounts no longer had value

This feels a little conspiracy-theory'y. I guess you would want to validate this view by

* waiting until the recession has started and finished

* watching for them to pivot and re-onboard this customer base again with more sweet offers

* expecting them to be in the middle of another funding round when the deals come back


Wait $1k per? I bet half or more of those "small businesses" are just people getting the bonus.


The credit cards points blogs and forums are ruthless about abusing any signup bonuses and loopholes that can be found. The amount of outright fraud being encouraged on the forums (though not the front page of most blogs) is eye-opening to anyone who ever thought you could trust your users to do the right (or even legal) thing.

In cases like this, though, it seems clear that Brex was abusing the abusers: They knew the signup bonuses would create a signup frenzy and likely viewed it as buying their way to the numbers they needed for the next funding round.


Not only that, but the deal terms and conditions quite explicitly didn't include industry-standard rules limiting bonuses to one per person... many many many people got multiples.


THAT starts to sound suspiciously like intentionally encouraging multiple signups to juice numbers. Shades of the dollar coin fiasco again.


It almost sounds like brex took a page from Bre-X¹ !



> "Our decision wasn’t driven by financial constraints, but by how many things we can do well at once."

In other words - "our decision was driven by financial constraints; we can't do many things at once".


Long term, financial constraints are the biggest factor. But short and medium term you can be more constrained by the organizational capacity to make decisions, hire fast enough, onboard new people, receive timely feedback, etc. We all have the same amount of time in a day +/- a few nanoseconds.

I'm not in any way associated with Brex.


one might even say that confusing organizational/engineering constraints with financial constraints is what brooks's law is warning about


Gotta love internet snark. You really don't see a difference between multitasking and budget? They are not mutually exclusive or necessarilyeven related.


When somebody says "It's not about the money" it's usually about the money.


I am a Brex user, but not an affected user, but I thought this was an incredibly dumb decision.

Cut off future people that don't meet your criteria? Fine. If you need to cut people off, commit to servicing existing people for a really long time (like 3 years).

My trust in Brex is very low, and I already started looking at alternatives. They have proven that if their whims change they will cut you off and fast.

Contrast this with (for example) AWS. I at least believe that if they launch something they will support it for a long time.


AWS doesn't launch money-losing services (and if they do, they either raise the price or eat the cost).


It's always hilarious to see these blogs from companies who are trying to save face. Literally no one would be wise to use Brex at this point. What are you going to do next, change it to 750k in cash - because 500k isn't your definition of a startup or a scaled company anymore?

What happens if my annual revenue drops from 1 million to 990k, is there some leeway there? where does the leeway stop?

The more concerning one is this:

>Tech startups who are on a path to meeting the criteria above, and are referred by an existing customer or partner.

So - is this your way of saying, if we have a well established company and they recommend there company they invested in, you are going to hold onto them even if they are no where close to the "criteria" because you are scared you'll scare off your whale of a customer? .....i mean at least you very willingly admit to nepotism.


Don't forget that the CEO came onto HN and posted a comment talking about how difficult a decision it was.

Dude's a walking poster-child for why someone who is in their early twenties should not be worth hundreds of millions of dollars.


"which created confusion about which companies Brex would still serve."

Created confusion?? Brex literally sent out an email telling me my account was being closed. But yeah okay, let's call it "confusion". This is a non-admission of guilt.

Don't put it on your customers failure to understand what you mean when this is literally what you sent:


hahaha that's brutal

last week: "we've decided to close your account, you have one month to f off"

this week: "We didn’t clearly communicate who qualifies as a Brex customer moving forward, the truth is you're dead weight so f off (you have three weeks)"

edit: lol whoops deadline was aug 16, but i read it as july 16, which made the numbers sound a lot punchier.. still brutal tho


Yeah the fired customers had clarity. The confusion was among all the existing and future customers that Brex wants retain, but who now question whether their business is still supported and for how long.


> Last week we told some of our customers that Brex would no longer serve them. We did a poor job explaining this decision, which eroded some of the valuable trust we built over the years.

Brex is an intelligence-gathering machine that exists to gather data on the finances and operations of your business, masquerading as a credit card. I understand why Brex would want to build that machine. I don't understand why businesses would want to divulge their data to it.


Doesn’t make much sense; Brex has a very clear revenue stream of the insane interchange rates on business credit cards. I doubt they (like Moviepass…) will make much off of transaction data; the card networks are already selling it anyway.


Could you provide a bit more information on what information they gather (besides the merchants and amounts etc) and what they do with it? We're a Brex customer so would be great to hear more about this.


> Brex processes a lot of transactions for a wide variety of businesses including small businesses, venture-backed, ecommerce and larger mid-market clients. Here you can find a selection of insights from data we collect that offer a snapshot of where startups are spending their money. Check back often as we will continue to develop our insights with rich data-storytelling and interactive charts to let you dig into our data.


The issue is not at all transparency, if your company once creates a business emergency by firing a significant portion of your customers, there’s really no reason for anyone to trust you.

If you’re doing it for money, you’re either financially weak or just cheap and looking to save cash by making your fired customers reengineer to accommodate a new provider.

The only way you can fire a huge swath of customers like this is to provide them with an essentially unbounded offboarding runway and being willing to grandfather many in, perhaps raising rates after a generous grace period to encourage departure.


This point is very interesting. I was watching a PG interview on YC's resources for startups.

An audience member asked about how to get pricing right early. Part of PG's answer (from autogenerated CC):

you can always change your prices later though if you want to lower your prices no one's gonna complain and if you want to raise your prices you just grandfather your existing users which if you have exponential growth will always be a tiny subset of your total users and then no one will complain about that either


This is so obvious that I’m surprised more companies don’t do it - even Google falls into these blunders.


Brex was pretty rude to me in twitter DMs about two and a half months ago when I had had trouble trying to sign my startup up for their services. They said that my business wasn't appropriate for their service even though they had no information about what my business is or was, and when I asked for details they said that couldn't be shared with me.

Parts of my messages to them are pasted below, the responses were to say the least unhelpful.

> ...We tried to apply for a Brex account last night but our application was automatically declined with no explanation as to why. I have read your FAQ closely and believe this must be a mistake as your company claims to be essentially designed for scalable software start-up companies, even prior to incorporation and without so much as a website. We are incorporated, have a website, and have a significant codebase already. Please let me know if you can figure out whether this was a mistake or not, and if not by what criteria we were disqualified.

> Your team's response does not answer any of my questions. It's just a longer version of the automated response given by the website in the first place. Your marketing disagrees entirely with your company's actual behavior.

> I don't think you are [sorry]. You have no idea what my business is or how it operates. You have no way of knowing that information and therefore no way of making that determination now or at any time in the future. Your website is completely contradictory to your behavior. If I ever do manage to get ahold of anyone accountable in your organisation I will be sure to share screenshots of this completely user hostile customer service. If not, I'll be sure to publicize these interactions when my company has found someone more reasonable with whom to do business. I'm literally trying to give you money and being refused for reasons which cannot be shared with myself. This is absurd and exactly why people hate bankers. Isn't this exactly what you people set out to change?...


They have this great quote on their site:

> 95% of customers say switching to Brex is easy.

(1) apparently getting kicked out is easy too. a bit tonedeaf it is.

(2) those who thought it wasn't easy likely aren't your customers.

I don't know anything beyond what is written on their website, but everything I see sounds far too buzzwordy for my taste to really take seriously.


75% of people assembling a kit car said it was pretty easy!

Ignoring that 95% of people looked at the parts requirement list and instructions and ran away.


>Received an equity investment of any amount (accelerator, angel, VC or web3 token);

What I'm reading is that if you (inexplicably) wanted to keep your account from being closed, all you have to do is issue a single crypto token, and arrange for your friend to buy it for a dollar.




We switched to Ramp earlier this year because Brex couldn't get their banking integration to work, which impacted our credit limit. Fortunately, we moved everything to Ramp long before the recent email from Brex firing us as a customer. We like Ramp because the banking and Quickbooks integrations work.