Pedro Franceschi: What Brex Needs to do to be a Public Company | E1178

If I were to write a book about how to build a company there would be two parts 50% importance of each part one takes 6 months part two takes 10 years and the part one is just finding what you're going to do and and with who you're going to do it with I think the initial conditions are like highly underestimated there's this belief that I can just pivot my way around into an idea that works it's really hard to Pivot away into something else and I think people just don't anticipate how much of just finding

a good idea is still really damn important ready to go [Music] Pedro I am so excited for this dude I have heard so many good things especially from Neil Mater so first thank you so much for joining me of course thanks for having me so Pedra I know this is an unorthodox way to start the show but I want to start with the Question of what do you think many people underestimate or don't think enough about that they should maybe spend more time on I think people underestimate the importance of mental health to a very

high degree um that's a very big learning over the past seven years did you underestimate the importance of mental oh yeah I mean it's the 50% of the challenge is in here it's not outside was there ever a time when you were really depressed not depressed I think my issue was more anxiety um like paralyzing anxiety yeah in 2021 many times how does that manifest itself for you it's this like feeling where it's like I remember this feeling vividly you know in 2021 uh where I was there's a lot of things happening in my life

outside of work too um but at work was pretty pretty intense and I remember being in my house in La during the pandemic and Feeling so anxious and so stressed and I was like I'm like 25 years old or 24 25 years older than remember I I'm perfectly healthy and I can't work because I'm so stressed that I just I just can't function like a human being right now um and uh and it's not great it's uh it's paralyzing just sit in front of your computer start to you know cold SWAT and and it's not

fun not fun at all what are you so stressed about I mean this in the nicest way You're in the one most wonderful American term you're post economic you know Investments work some don't life is long I always say this to people that you know I think when people are harsh us externally I'm like it doesn't affect me that much because like I'm way harsher internally uh with myself and with the company I think there's a degree to which you have to learn how to be kind to yourself and Um you know again the battle's

on here and and I think I wasn't uh and I think I'm it's a journey I don't think I'm like there yet but I'm definitely better than what I used to be do you think Founders can be this open with investors with the right ones yes I think so because I think I think there's something about like it's not about hiding these things because these things are true and most Founders go through them I think it's about enduring them And I think that's the point which is you know bre's been through a lot the past

three years and the reality is it takes a level of fortitude and and sort of a uh you know like you have to design your life in many ways especially outside of work to endure the things that you go through at work and I think you know you just hear the stories of how the great companies are built there are moments that are Hard and and they're not ideal and you know the thing that matters is like people are not quitting and and I think you know I look at a lot of Founders that are

really successful and and probably the second or third largest reason why startups don't work after product Market theit of course is um Founders just burning out uh so so I think the question is like how do you design your life in a way where you can compound the thing we're doing for 10 20 Years because it's not going to be all up to the right and and I think if you believe that then you will burn out because the moment that hits the fan and you are in a tough situation with no support systems around

you and uh and you feel alone and you're anxious and stressed um life's going to suck and you're going to leave in terms of that going long you know you and enri K I think quite reportedly took out a decent chunk of secondary I'm always in favor Of it for the long-term mindset how do you think and advise others when you get asked about second I I I think we're very Pro uh doing it we do it for our team whenever we have an opportunity um and the reason is because I think if if money

is going to take someone out of the game it just better do it early like because the reality is um I think I have there's a saying in Portuguese which is you only learn who people truly are when they Make money right because before then it's all shits and giggles right it's like oh yeah like everyone can say what what what they're excited about what they're interested in um and and and they can they can very well be but the moment they make money and the moment you see how their life changes after they made

money then you know who they really are um and I think there's some something to that which is um I you know we've made we' made Probably three tender offers since we started a company and like nothing changed like the people are the same they're working as hard as they did before um and and I think you have to treat liquidity as a part of life and not as this like point in time in an IPO where you know there's this one day where everything changes and people get rich and then before that day people

were poor after that day they're rich and they're going to change how they see The world in change of company because we don't see an IPO as like as like the goal we see it a milestone in the journey um and and I think as you like remove the taboo around liquidity I think people start to conceptualize and incorporate it into their lives earlier and and I think very little has changed as we've done that I mean speaking of very little changing I think it's so important to never forget where you came from I think

family is just really Helpful and really rooting us in our past and the relationship ship we have with our family are some of the most important that we could have and I've heard from many of your friends and investors Pedro how close you are to your mother I think the best are always mother's boys so it makes me very happy to hear but also what an important role she's played in your obviously early life but also your upbringing how you think I'd love to start with that and What are your biggest lessons from being so

close to your mother seeing her work multiple jobs and how that instilled a work ethic and a mindset on you so it's funny because um I I grew in Brazil and you know bornn and raised there and um I started coding as a kid uh when I was eight or nine originally hacking iPhones uh back in the day where they were not sold in Brazil and uh and as you can imagine um I spent a lot of time in the computer I remember there was this Article that came out probably in like I don't know

2007 2008 or something uh saying that like Bill Gates's daughter could only spend 45 minutes a day in the computer and then my mom read that and she was like well you're spending like 12 hours in front of the computer every day and uh and and there and there was this point in time where she was like well I can either ignore what you're doing and say you know what this is not healthy it like you're not going to Spend that much time or I can understand what's happening and I think she she was wise

to see that I was actually trying to build something productive and and build something right and learning how to code took a lot of time uh so she let me do that and and you know I think there's these like decisions that you know your parents make early on that you know they sound small but they completely change the course of your life and uh and that was one of them and Then I think over the years you know I started working when I was 12 and I told that to my mom and she was

like you're not going to work there's no way you're going to to go do that and then she came interviewing with me uh into this company back in 2008 um and uh you know I think overall she's just been very supportive of the journey since the beginning so I have this weird thesis where I literally don't back Founders who haven't made money early I find the Greatest entrepreneurs always make money early whether it's Daniel making websites or Toby with Shopify the best start early do you agree with me I think so I think there's something

about um and it's funny because I think there's been two experiences for me that were uh similar to what you're describing first one is I build this thing online um and the first thing I actually made like real money I guess was there was this I was selling this app on the cyia store City store was the the the that the jailbreak The Unofficial app store for for the iOS back in the day and uh and I made like I don't know like 200k in like when I was 14 and my mom was looking at

that and she was like oh what is this money like what are you doing online and then I explained to her I think she got it but it wasn't her tax return because I couldn't like file tax returns on my own when you're 14 you can only file them I think when you're 16 and above in Brazil uh so that was a fun one I guess the other one that was interesting for us is we build our first company in Brazil um to probably probably the first you know four or five years of the company

we went from zero to you know processing you know a few billion dollars a year in gmv and all the money we raised was 300K so we had to make the company work with 300K and the interesting thing is you just build this wiring in your brain around how do I Create value on everything you do right because you you can't for for to ship a feature if it's not going to drive you know more value to the customer and you can capture a percentage of that value back to you so I think you're wiring

in your brain changes in this sense of like you know at the end of the day you know yeah everyone can have Maus everyone can have all these metrics and numbers and growth and fuzzy numbers but where is the money where's the revenue and it can Only get Revenue if you generate value for someone so I think it wires your brain around value in a really interesting way do you think that approach would have been possible with bre not at at all brex took a lot brex took a lot of different permutations of of and

and and you know just honestly a lot of different things falling in place in a very specific way to exist and uh and you know a lot of funding was one of them so do you regret raising as much as You did I chatted to mood before the show and he mentioned this wonderful hustle and scrappiness in the company and then mentioned I can't remember I think end of 2122 he was like it got really corporate like do you regret that and was money the reason behind that in in hindsight as we look back I

think as time passed like we you know in some ways I think uh BRX had this like interesting journey of like we we thought we were a big company and then You start behaving like a big company and you do like a lot of things that big companies do um and I think like probably the biggest learning over the past six or seven years is the sort of way of scaling a company is you have to become a larger business but keep the mentality of a small company right so how do you keep a lot

of the leaders closer to the ground how do you keep a lot of the ears close to the customer and understand exactly what's happening How do you understand how they make decisions and and why they choose to go with brex over over over others there's something about like scale that like scale naturally pulls you away from thinking like a small company right because you have all these layers these people these management systems and all that in place and and I think you know a lot of the the work especially for the past like 18 months

was like how do we just unlearn a lot of that and go back To the basics and and and I think like fundraising was was like you know one of the one of the offenders but there's definitely you know hiring a lot of people is also another one and perhaps some of those are enabled by the fundraising but but I think it's more the mindset of like you know like like what is what is the core and then like what is the thing that you're actually you know scaling and and and and and I think

at the end of the day it's like The mentality has to be this very Scrappy and very early especially as you get bigger because it's like harder you have a moment with Enrique recently where you decide that you're going to be the CEO can you take me to that moment I think for us was was was two things uh one is like I think you know we we made a pretty big change uh early this year called bra 3.0 where we really we basically changed the operating you know Rhythm of the company Uh in pretty

material way um and and I think one of the big principles is like we're just going to simplify how we run the company at every layer and the first thing was like we we should if we're clarifying how roles and how people operate at every level we should do this at our level too um so that that's like the sort of the impetus and the second thing is you know as a company matures more uh as we start thinking about you know an IPO uh eventually um you know Public markets it's an easier transition if

you have like a traditional C structure that every company has which is a chairman and CEO structure so you know we looked at both and we were like you know we're not going to go public anytime in the next year uh it's something coming in the future but getting ready for this uh and having the structure in place sooner um probably just acclimates everyone to the way we actually run The Confident dayto day um And so it felt like a very natural point to make the transition okay so a natural point to make the transition

uh I think one of your investors I can't remember who it was I'm not deliberately shying but they said about many of your brilliant skills but they said one of your weaknesses you struggled to find your voice do you think that's fair I heard this thing from Brian chesy ones that really stuck with me which is like you know for many Years um I think Founders become like apologetic in the way they went around the company because the company starts scaling right you have something that's working and then the business starts growing and then you

have like all these people from the outside that have seen a version of Something working but not your version of Something working right so and then they start telling you like oh like the CEO is supposed to do this right like your product team is supposed To operate this way like your sales team is supposed to sell in that way and then and then I think there was this moment last year that that we just said hey like I there's just a way in which I believe you should run the company and it's not very

traditional and I think a lot of people will probably you know it doesn't follow all the playbooks of Silicon Valley and and how people have done it and and that's okay that's just authentic to to what I believe and and And the way I think we should do it and and I think as you stop being apologetic and and you Embrace something that feels authentic to you I think a lot more things fall into place because just the company becomes a reflection of the way you think I think a lot of the people around you

naturally gravitate and think similarly because there's a reason why they got hired in the first place what do you think of the most BS elements of traditional thinking around great CEO Ship I I think like I think there's this belief which like oh the job of the CEO is like you know you you hire a team and they manage that team and the team do does everything and I think that's true to some degree but but I think the job of the CEO is to make the company successful and and I think there's very few

things that matter and I think there's just what I seen the best CEOs that I I was fortunate to spend a lot of Time with is they just have this like unbelievably High degree of understanding of what matters like there's very few things that make a business work and and there's a lot of things that you can be average there's a lot of things that you can suck at but if you're really good at these very few things like amazing things happen and and they take care of everything else and and I think there's just

this degree of like how do You understand like what are the bottlenecks in the business right and and and and what are these like structural points of Leverage that if you make those very few things better the whole outcome becomes just bigger larger with less friction faster so I spoke to Anu before the show and she said a very specific quote which was find the one bottleneck that's throttling speed and unlock it yeah how would you advise other Founders When it comes to this statement yeah so so I think it's like very simple um I

think it all starts by asking hey what's limiting your rate of growth by now and people say oh there's many things there's not like there by definition there's only there's one thing like in any system like Thro you know limits the rate of progress for the whole system it's called the bottleneck uh and and and by the way like um people should read Toyota production systems is like The best book on all this like lean manufacturing I love these these things um and and once you find that bottle an the highest leverage thing you can

do is increas the throw put of the bottleneck more than anything else in the system you could change if you could change only one thing is change ing the rate of progress in the bottleneck what does that what does that mean the rate of progress in the bottleneck just so so for example like you can ask yourself Well like hey what is what is my bottleneck right now my bottleneck could be well I don't have for example Brad in 2021 our bottleneck was we didn't have an Enterprise product right so so we were limited in

the kinds of customers we could serve because the reality is as customers matured and got a certain scale brex the product that we had back then didn't scale for them anymore so so when you look into the numbers and you look into where the growth of the Business would come from and you look at like how we retain customers throughout their whole lifetime um that was like a really big pain Point As Time passed um you're like what is that one thing that can change the trajectory of the business and the one thing is building

uh a an Enterprise product because if you don't have an Enterprise product there's nothing you can do you can have the best sales team you can have the best uh marketing you can have the best Everything but if the product is not truly great you can't uh unlock the next growth phases of the company so what I did back then is I just said hey I'm going to spend 70% of my time building that product and I just like delegated everything else of like dayto date management of the company to my team and I just

spend like you know 60 70% of my time writing apis of the engineers on like how would the Enterprise product work how would the platform that were Building would work uh how would all that come to place and it took us you know eight a year to to get something that that worked and and that's how you know ultimately we Clos customers like door Dash like coinbase like Robin Hood you know like all these large Enterprise customers that would not have traditionally come to brecks but because we were so obsessed over like making the bottleneck

faster and making the bottleneck like just not be a bottleneck Anymore and and I think the the the reason this is Meaningful is because as you do that you can allocate and Marshall this proportionate amount of resources into that bottleneck so I can say well I know that the highest leverage use of my time as the founder and the CEO is to spend time making that one thing go faster and and I think there's this thing where a lot of anxiety building a company comes from like what truly matters like what is the One thing

that if I spend time on and not hedging not like spreading across like four or five different priorities what is the one thing that really really Mo will move the needle and I think when you identify this thing and you just put a lot of time there um there's this almost Zen State very liberating where you can just focus entirely on one thing have you ever identified a bottleneck and it not been the right bottleneck I spoke about other Founders of this which is like I think when you're deep in the weeds in a problem

you're in this state which I call like high stress low anxiety which is like you know you're working on a problem it's really complicated you don't know quite know the solution but there's no anxiety because like you know that this is the thing that matters right the flip side is when you don't really know what is you're in a state where it's like it's relatively low Stress because you're not deeping any problem like you know 24 hours a day but you're like higher anxiety because like you don't know what the highest leverage point is um

and and I think I I think you have to learn how to be in both ends of the spectrum what is the rate limiting bottleneck today overall it's probably demand generation uh in the midm market if I had to guess and actually no not guessing this is the bottleneck Right now the best podcasts honestly dude are when people will talk about mistakes and talk about Lessons Learned fewer things better what did you not do that with the benefit of hindsight you wish you done and on the flip side what did you do that with the

benefit of hindsite you wish you hadn't done I think there was this point in 2019 2020 where we thought we could do it all like we thought we could be we're going to be great at Serving small businesses we're going to be great at serving Enterprise customers great at serving startups and all these different customers are going to come to brex and be like totally happy with uh with what we're offering and and I think we we try to build it all like we we had a small business offering we had like a startup offering

we had a midmarket offering and Enterprise offering and I think the learning is the the the the the limiting Factor in how many things you can do is not the headcount not the team is the leadership band riff it's like how much time your best people spend you know doing building things that are really high quality and really high craft that's just really hard to scale like you can't it's not just a matter of adding more folks it's like their attention being divided um and you don't trust that many people around you know a completely

new business or or or a new Thing off the ground and and I think that just took us we just completely underestimated how much headcount is not the bottleneck uh for for just doing more things um and and I think you know a lot of the themes and mistakes that we've made over the years were around that I would say like just like believing that we could do more than we could actually do um so so I think Focus was like a a forced learning that we had to do over the years that I think

uh um The degree to which is true and the degree to which needs to continue being true as the company grows is something that you know you always think oh I have a 100 people I'm G to have a thousand people and do two 10 next more it's like no you're going to do maybe 30% more uh because now you have a lot more scale and you have problems with scale and you have a lot more you can't just like build something and ship it you have to like you know measure roll it out you

Know over time you have to have like AB testing in a lot of things like so so all these things when you when you look at the complexities of doing it at larger scales where your leadership bandwith goes I think it's more way more of a Bott act Than People anticipate did you hire a good leadership team oh yeah I mean absolutely I mean we've made a lot of mistakes at brex uh one thing we didn't get get wrong and we got pretty right in my opinion was was the People and you know and I

think honestly like it's it's I think it's not an accident uh we just spent a lot of time on it like a ridiculous amount of time that most people would find like borderline obsessive what did you not do that with the benefit of hindsight you're like we should have done that we spent a lot of time early on focus on the founder um and and I think the founder is absolutely important to Brax and that's Been like the the the Cornerstone in which we build a company right we started the companies to serve Founders and

and and we still serve Founders exceptionally well uh we launched a new banking product today just focus on Founders but but I think over time it probably took us longer than it should have to focus on the finance team which is like once you start scaling you hire a finance leader and that Finance leader comes in and they have their own Priorities and um and and I think probably I wish we were doing more for them in 2019 and 2020 and I think we in 2021 we basically said we're going to do that really well

so we're going to go to the most complex use case which is like how do we serve a 10,000 person company and they financing and scaled that down which uh which was an interesting pivot I would say from from where we were but but I I just I just wish we had done more of that earlier I think one of the Reasons the show has been successful more recently is because I've kind of got more Direct in my question asking when you look at ramp's product marketing it's always been tailored towards the finance teams and

towards saving and I think people will criticize you as saying it's more towards free uh things coupons vouchers incentive mechanisms and not saving do you think that's a fair criticism I think it is and I actually like and I actually love The contrast because I I just don't think any great company was built on savings if you go ask like a CFO if you go talk to like any great CEOs and you say like hey what moves a needo in your business like what truly made a difference in the financing and what they're going to

tell you is that what made the difference was this ability of making sure every dollar counted like how do you make sure the dollars are going to the right place and that in These places that really make a difference that you're truly doubling down right you're saying I I want to understand what are the levers of growth what are the levers of cost savings what are the levers of where to hire where are the levers of vendors that make a difference in your business and and it's less about cutting it's more about shifting that insight

for us has been really remarkable because when we go talk to our customers they and and we Start to show them the product how that happens on the ground especially a comp complex use cases right um and and you know we go to like an Enterprise company and we just show how they operate with brex how they would operate with brex and for example have this feature called live budgets right and and what it allows you to do is to have a realtime view into where your budget will land at the end of the quarter

and surprisingly enough you'd be surprised but if you go To any large public company and you go to the CMO and you say hey CMO where are you on your budget right now they don't have an answer right and the reality is if they knew that information what they would do is they would say well I'm actually you know I'm a little bit ahead on this campaign I'm spending a little bit more than I thought but there's other place that I'm not not and I probably should spend more here so this ability to reallocate funds

and say well I'm actually going to put dollars where they convert the most um is truly it truly changes the way this person thinks and operates because at the end of the day you don't want to be under budget because you're leaving money on the table as a CMO but if you go over budgeted is also horrible so when you see the the sort of the degree to attribute the product around this idea of how to make sure the dollars are going to the place where they have the Highest impact and highest Roi versus just

thinking about cutting uh that's just a very different design decision that would build the whole company around and the whole product around and I think customers should see the difference why does it resonate so well then I think it's an easy pitch right who who doesn't like savings but I think like reality is more complicated than that when you go down on the ground with customers and you ask them and you Go to CFO and you say no one says no to savings but when you say hey hey let me just tell you what we

think actually matters let me show you when let's talk to like a few customers here like call them and ask them how they run their business differently based on the kinds of things that you can do like when you bring all your Global Span in one place and you start to see the difference of you know having this level of control in the software that allows you to push the Dollars to the places that it matters the most uh and and and and do this globally right and and you start to add in the the

layers in which we do that and and I think the answers just become different in savings and and and you know don't get me wrong I think there is a place for that and and and I think you know offering free software and offering uh um you know a product that helps you save money I think you know I I can see why that works and I would be really Surprised if we didn't see competitors in a$3 billion Market to be quite honest but I just I see a different reality speaking to customers can I

stretch your thinking on marketing and ask you a question that I asked myself every day what would Mr Beast do if he were running bra I I love that question uh you know I I I think I think the thing that I believe about Brands is talk a lot about this idea of like left side of the brain And right side of the brain right and and I think you know a lot of the times like you know I I I was I was talking to the team and I actually wrote an essay about this

to the team where you know we had this campaign and you know we ran the metrics and we were like hey what is the value to breast generates for a customer and and we learned a few things that were really interesting so uh we learned that you know over $50 billion um uh went through brex and that was Automatically on budget and in policy which is 99.9% of the spend we also learned um 11 million hours were saved by our customer using brecks so when you look into the data and you understand you know what

were they doing before what they were doing after and I think the thing is like how do you how do you like so what like what like what what does that mean right well that that's my point it's like you know what the brght campaign should be then it should be a Mother picking up her child at 400 p.m. why because she has that time because saved her the time I don't about no I'm being so blunt here P maybe my pain killers but I didn't care about those big numbers about hours but my point

do how do you make it relatable right how do you make how do you make it touch people how do you how do you tell a story and and I think the story is like obviously we're appealing ultimately to the finance team and you know with this Campaign which is like Finance got the day off right which is like exactly what it just said is like you know you got a day off and because bra automated a lot of the work that you were doing manually before and and you know another one that we were

we're learning about during this during this work is you know it took s million hours to go to Empire State Building uh BR saved 11 million hours like what are you going to do with that time uh and and what our customers going To do is they're going to build something great they're going to use that time to put back into their missions into serving their customers better and I think there's something profound about you telling the story you know it is relatable and people are like wow like and you know it's not just about

the story right you have to also deliver it and I think a lot of what we've done wrong in the past is you know we did a very very inspirational Campaign two or three years ago the problem was when you used the product it was very hard to connect that to that broader story and I think the power comes when the whole thing is one right when you have when you're using the product you're seeing the way the product gets designed the way you use the features the way you get the benefit from it the

way we say say Hey you know we realize you're doing this by hand 10 times we're going to create a rule and Automator for you because RI detected that this is something you do every day like and when you see those things together I think that's how the brand gets gets built do you know what I'd do I think you focus on two things I think you focus on impact and I think you focus on investing for tomorrow and what does that mean I would have a competition every year where people have to submit the

most impactful purchase they make with their brex card I love That and then wait for it if they get over a certain percentage of the company submit something on a social platform you will pay the college tuition fees for 10 employees for their whole children it'll probably cost you $2 and a half million dollars a year and it ties into impact and investing in the future of tomorrow which is this college tuition I love that love that are you looking for a job in marketing you know I I I actually love Marketing so much much

so yeah but that would be really impactful and then that's a New York Times headline brex the company that pays for 10 unbelievably talented children who would love the idea it's free uh um sorry that was totally random and unfair of me to impark on you you said there about the best quality product winning so many of your investors told me what a brilliant product mind you are As bluntly as possible and as graner as possible how do you do road maps and what have been the biggest lessons here on what works and what doesn't

we got a lot of pages from the from Brian's Playbook at Airbnb so so the the realization here is so there was this feeling that I had probably in like I had this over the years many times in 2020 2021 even 2022 I think with all this to some degree where you know we're investing almost $100 million a year in Product and then you go use the product every year right and the experience is like not that much better like it's like it's like it's getting like marginally better but there's nothing like tremendously different and

that feeling bothered me because I was like what are we doing here right like why why isn't this yielding to you know big things changing that actually you know makes the experience dramatically better and and one of the things that we Did uh as SP of Brax 3.0 is that we said we have a single road map now for the whole company uh there's no more pro teams don't have their own road maps we have a single road map I choose what the road map is and there's a single editor and and most importantly um

we do very few things in that road map and and typically the way it it works today is we ship three times a year um and each release has three to four big themes uh I I choose what they Are and there's a process in which which people inside a company and product teams can pitch what it gets added to the road map and and the interesting thing is as we we we cast the road map and we understand exactly what it's going to be for the next release we the resources and the and the

engineers and the designers and and the PMS that work on things they're not married to the or structure so what it allows you to do is to Marshall a lot of resources on doing Very few things really well and and the interesting thing is a lot of these like dramas that you get as the company grows and like oh I have all these cross functional dependencies I have all these other Orcs that I need to align to get something done they all go away because everyone works for the road map everyone works in service of

the road map and every manager Works in service of the road map so things like oh I need to shift resources from my team to this Other initiative are very natural because the goal is one for everyone and and I think what it does is you know from a from a more like quality standpoint is it creates a very clear rubric of what you're trying to accomplish and most importantly what is the story for the customer right not just internally but you ultimately you start by saying what are we actually shipping on this release what

is The Narrative of this release how do we tell That story to customers and then you rewind that back and you work backwards into what do we have to go and build today and how do we align everyone to do that so so the degree of cohesion on like like you as an entire company are working towards a single thing in a single Milestone uh creates a much higher quality and focused output in my opinion do you agree with the notion of disagree and commit I don't think that it's possible for people to disagree and

Commit fully I I I agree when you truly change the way people think and you really put one brecks and like the collective of the company above their teams and you build a mechanism which is really important you build a mechanism that Mak that happen every day I I think people in fullness of time they converge and and and and they start seeing well I didn't get funded today but my this next idea or this next big thing will get Funded in the next release or the release after what was the hardest thing you said

no to in the service of focus gosh um I mean there there's a lot of like new products that we could build right I mean and and and that was one thing so like specifically say 20 sport some of the world's largest athletes wanted to do a fund with me super $25 million fund I'd have a lot of fun with loads of famous sports stars fun but a distraction and we said not to a lot of Customers that came to us saying hey no solution in the market works for us um no one can solve

this problem besides what you all have done but I need is three or four things and and we said no to them uh and a few pretty painful ones what do you think needs to change within the BR business for you to be a public company people always say there's no such thing as an IPO window great companies can go out at any time like being public compan is very easy Like it's remarkably easy you like you hire a banker you fund raise and you're done the question is how to be a low volatility public

company that's the hard part and and I think you know the only way that you can do that is having a very high degree of predictability in the business model and I think for us um that has been the hardest part so like last year we were behind plan uh in two quarters this year we're way ahead of the plan and and the point is like you Know we did our best to forecast it and there's a lot of Leverage in what happened in terms of customer spending in terms of where where a lot of

these things come to mind but I think we're not yet at a level that we can say oh we know for sure where Revenue where you know where income is going to be in two or three quarters and I think it's really hard to go public unless you have that um and and that's probably the biggest bottleneck for us in into doing Is just the level of predictability that we want to have do you think you have good enough Unity con go public for sure I mean one thing about us that we do very differently

than most people in our space is uh we I I have this belief that we need to look at metrics the most punitive way possible so a lot of times like for example cacs I love this topic because a lot of people come like well like what is in your CAC and people like well it's like sales and marketing cost And I'm like well is like the office overhead in your C is the brand Span in your CAC is the management overhead in your CAC and and and and people can like you know you can

dance around these numbers and say you know no they're not and and you know uh but who cares about that no one does that right and I think one of the things that I learned from from Neil and Green Oaks and and you know a lot of our investors but I think Neil was very adamant on that is like Like understanding the economic engine of the business uh in a very deliberate way and and and and from the perspective of like ultimately you want it to be a great business not like you know investors will

look at the CAC and the unit economics that way and and I think for us a lot of what we did over the years is how do we become very sort of Ruthless in looking at the numbers in a way that's like where is the cash flow coming from at the end traditionally Your business is viewed as a beautiful business for many reasons but one reason is ltvs long people don't churn or change much when they're in you know with such a a vendor um is that changing in the face of increasing competition more options

better products when you look at the card at face value like just the actual card I I think cards are like not that sticky right because the reality is like you can just start swiping another card you can say hey I Got more cash back uh you know we talked about some of our competitors that offer the same product for cheaper right essentially higher cashback and you see that Dynamic playing out a lot in the market of like someone comes in and and I we always we have a channel that we talk about like uh

new competitors and a new competitor comes in and they say hey I'm launching a card to hire cash back and and if you think about it like conceptually right as like the sort of Like U uh economic book economy book view of the world like the the rational thing is oh customers are all switching away because they're getting more dollars back but but I think something different plays out in practice which is a lot of the value they get from the platform and the software and the automation starts to play a bigger role where you

know customers like actually run my whole closing process on top of this so the cost is higher than what I Gain as cash back is that why Eric comes on my show and says we're like a workflow platform uh brex is not I don't think brex is a workflow platform I I think that's a part of brex but I I I think the the very the very misconceived notion that I think people there is this way of looking at this business that says oh all that matters is software and financial services are commoditized I I

strongly disagree with that because I think when you're serving Small companies uh and you're serving you know even some mid-market companies that that is true for sure I think you can say most of the values in the software but when you go into the really complex Enterprise use cases that's not true at all um so for example you know we go to like a lot of public companies and the way we pitch in a public company is we show them the software they get value from it that's great but what really moves the needo is

our Global Card customers come in and they say hey I have this problem in 25 countries and I need to call card that works locally in all these countries that I can spend in local currency like if the card was issued by a local bank I need to settle in local currency I need to not pay FX fees I need to not book interc company transfers across all these different entities uh and I need to move the money locally in all these different markets and brex can do that and today there's Three companies in the

planet that can do that number one is brex number two is City Bank number three is American Express that's it and that's how we pit in all these customers so I think the degree to which financial service underlies a lot of what we do is like highly underestimated and undervalued um which is why we spent so much time in the early years building our whole financial infrastructure from the ground up like down to the way we talk to MasterCard down to the way we move money on a down to the way we do you know

Global money movements settlements fxs we build all of that in house but using vendors for any of time uh and and and for a good reason because it just gives us all the degrees of freedom to build all the way to the metal is this a Uber and lift Market is this a market where you have companies of comparable size how does the market play out in a 10year perspective look this business is not New right banks have been around for a long time building cards um and card companies if you even look at the

ones that were the banks that were you know before 2008 more card heavy it's not a winner takes all market and and again I think it's too big and Dynamics are too different from a marketplace where there's a benefit of like the incremental unit making the product inherently better I always seen the best businesses have pricing power which is Why I'm bold in saying I don't think stripe is a good business because you compete against Aden and checkout and your biggest customers will compete 100% do you have pricing power I mean I think I think

just the reality today is like if you think about our product right we don't win on cash back we don't win on rebates we don't win on credit limits we win on customers look at everything we do together collectively and they say I'm getting more value from this than These other Solutions in the market so in some ways I think that's the definition of pricing power where is we're offering the same product more expensive and customers are coming and staying and being happy with it the other thing is when you go into an Enterprise customer

and they say they come to Brax and they say hey like I like I am paying a lot of our competitors come and say oh we don't charge for the software and our Customers come in and say how are not charging for the software like you know I want to pay for the software because I want a level of support I want like a premium a premium solution that someone I can pick up the phone call someone someone can come in here and help make me successful I think pricing is is kind of an advantage

for us and has been for many years where uh the way the way we position brex is like we want to be the best solution not the cheapest and that Just creates a different a different mentality in the company in the servicing model in the way you sell and the way customers engage and and ultimately find Value in in the solution Beyond you know the initial use case they have because they know there's there's a servicing mod that will deliver more value for them over time Pedro I I want to ask one final question then

I want to move into a quick fire Over a company life culture gets hit when was the culture the worst I would probably say um in 2021 when we pivoted very aggressively towards the Enterprise because we were serving small businesses and it was like a full almost a 180 um that was pretty hard and and I think the learning was as you prioritize um focus on serving your own customer really well before like trying to like you know serve the whole planet and we had our own customers that were startups That were growing they were

becoming bigger and they had these needs um off larger companies because they became larger companies themselves we didn't have something that could serve them as well as we wanted and then we just had to make this really aggressive pivot to to solve for that and and in some ways the most customer Focus thing we could do was to serve Enterprise customers well because our own customers were becoming that and startups that are Successful become that um so so in some ways it was like this very um sobering and and and in hindsight special moment of

like learning how to really focus on your customer and uh it was really painful but totally worth it I want to move into a quick fly so I say a short statement you give me your immediate thoughts does that sound okay yeah so what you believe today that most around you disbelieve that you should look for individual contributor skills in very Senior levels of leadership what board member would you most like to have that you don't have gosh I don't know Elon would be cool why just this just pushing us more to be really really

aggressive and really intense what's the most memorable first investor meeting I think when we met the YC guys back in in like 2017 they were like hey we like you guys but we hate your idea because we were Doing VR before uh that was sort of funny and they they still invested in us but thank God but uh it was sort of funny so like I don't like what you're doing but I like you guys what's the most contrarian or unorthodox advice that You' have for Founders listening don't be apologetic in how you went around

the company because all the people around you don't have the same visibility and the same context as you have so if you believe in Running the company a certain way do it what have you changed your mind on most in the last 12 months how much more similar to founder role is when you are big or small than I anticipated does it get easier no I think you have more help right there's more people helping you do stuff you're like I think in the beginning you're playing two dimensional chest as you get a little larger

you're playing three dimensional chest and Probably at some point it starts to be four-dimensional chess and there's just like a lot more pieces of the puzzle to keep in your head do you really want to be a public company CEO it looks like an awful life I definitely want to go through the Journey uh and I think to to to realize the potential of bre uh I think that's the best path uh it's uh I think it there's pros and cons for sure um but um I'm just excited about how do we take What we're

building to the next level I think that's part of the Journey so which capacitor do you most respect American Express I you're pretty good and they' build a very impressive franchise over decades and they're hard to be very big and have the degree of customer focus they have um I think they have a lot of issues don't get me wrong as you look into the history and how the company endured for that long um the way They've done I think is really really impressive what's the single biggest issue AMX have I I think the product

is is pretty outdated to be quite honest um and uh I mean it's just literally a card um they have a a great point system but um but it's just a card there's no software there's no controls there's no nothing especially as it get larger but I think the franchise the brand and and just the way the company was designed I think uh Uh over the past 30 40 years I love studying business history and MX as a company I studied quite a bit um I think it's it's pretty fascinating if you were to advise

me to study another company if you study business history as you say which should I study I love it too I I think there's still a lot more to be disrupted in fch than people give credit to it because I think people looked at all the sexy things in fintech but if you look at the underlying Plumbing of How money moves in the world and you look into like there's a lot of things that haven't been touched yet and maybe bra is the there's there's this investor that you know didn't invest in Brax but I

I actually know quite well that says that Brax is the last good fintech idea and I'm like I don't think that's true I think it's the last sexy good one but but uh but I think there's a lot there but but I I think one thing I changed my mind a lot about company building I Think like if I were to write a book about how to build a company um there'll be two parts um part one takes six months part two takes 10 years and they 50% 50% importance of each and the part one

is just finding what you're going to do and and with who we going to do it with and and I think the initial conditions are like highly underestimated there's this belief that I can just pivot my way around into an idea that Works and sure that's true to some degree but once you start something that has a little bit of traction it's really hard to Pivot away into something else um and I think people just don't anticipate how much of just finding a good idea is still really damn important and bra was a really good

idea I mean a lot of the credit is just the idea like we yes I think we execut it well in some ways but but but I think the idea was just that good um and and if I were to Start something again I would certainly spend a lot of time getting that part right and if that is in a good place then the other 50% is the the 10year journey uh of like leveraging those like Tailwinds so to speak Pedro final one what question are you never asked that you really think you should be

asked the battle inside you not they want it outside you like how do you how do you how do you stay motivated and energized and excited when things get harder and I Don't see people talking enough about that because do you feel you can show that level of vulnerability when you have a thousand people I do I mean I I talk about this a lot with my team um and and I wrote about it I mean we did this mental health series called catharsis where we have like Founders talking about their own mental health Journeys

which is really hard to convince people to do by the way most people don't like talking about it Openly but I just I just talk to Founders you know day in and day out uh and customers day in and day out and that's the same thing everyone's going through you need to find ways um of how do you frame your mind and how do you frame the work you're doing around something that gives you purpose and gives you Joy because if you are focused on the outcome if you're just focused on and you you don't

enjoy the process the math doesn't add up like it just does Not make any sense and I think a lot of the point about like not being apologetic and how you run the company honestly 50% of the value is just doing it in a way that you get energy from the process because if you don't get energy from the process uh and the process is not rewarding on its own and you're just focus on the outcome it's going to it's going to suck uh it's going to take a lot of time and a lot of

energy and more energy than you think because you need The energy that comes from the actual process being enjoyable Pedro I've love doing this I know I send you schedules and your team goes through them diligently and I just don't stick to them but thank you so much for being so open and I've really so enjoyed having you on likewise really appreciate it Harry great having great being here and and really appreciate the time you're a great interviewer