Brex’s Michael Tannenbaum dives into FinTech partnerships and more

Michael Tannenbaum of Brex - Podcast Transcript

Singer:	So, when your troubles are mounting in tax or accounting, you go to Kruze from Founders and Friends. It’s Kruze Consulting. It’s Founders and Friends with your host, Scotty Orn.
Scott:	Welcome to founders and friends podcast with Scott Orn at Kruze Consulting and we have an awesome podcast with Michael Tannenbaum of Brex. But first, quick shout out to Rippling. We are huge fans of Rippling at Kruze Consulting. They make payroll super easy, they make benefits super easy to manage, and they also integrate into your IT stack so they make it really easy to spin up new employees or spin down former employees. And we actually did a study at Kruze and every time we have to set up someone’s computer and web services, it costs us $420, which is totally nuts, but it’s true. And so, with Rippling you can avoid almost all of that cost. It’s pretty powerful. Check out Rippling, rippling.com. You can check out Parker Conrad’s podcast on this podcast a while back and just check them out, they’re a great service. And Michael, you have some good things to say about Rippling, don’t you?
Michael:	I do. We actually use Rippling at Brex and-
Scott:	That was not a coincidence. That’s amazing.
Michael:	And we integrate with it as well.
Scott:	That’s a big appointment for them. That’s really huge.
Michael:	Yeah, our card integrates with it as well.
Scott:	Cool. Now you heard Michael and let’s get into it. Michael Tannenbaum, Brex and he is a friend. He’s a partner. We are huge fans of Brex at Kruze Consulting and so we want to have Michael on again and maybe start just by kind of retracing your career again and how you got the Brex.
Michael:	Sure. Thanks for having me. I started my career in investment banking and I worked in private equity after that and then I worked at a company called SoFi, which is an online lender mainly in the student loan space, although does a bunch of things for early career professionals. And I started there relatively junior and kind of worked my way up through the company and ultimately became the chief revenue officer. And then I met Henrique and Pedro who are the cofounders of Brex back in the spring of 2017. And they talked to me about what they wanted to do with corporate cards and because I had been the VP of finance for some time at SoFi, I really understood the need. And I decided to leave and join them in the summer of 2017 and from there we built Brex. I started as the CFO, but had been in charge of a number of different functions throughout the time. And it’s been a really interesting ride as we’ve added new products and services and really grown tremendously.
Scott:	What an amazing ride. And you kind of had this ride at SoFi and you accelerated through SoFi really, really fast to be running finance there. And I’ll always remember when the first time we ever met, you’re like, “I had this corporate card problem at SoFi and it drove me crazy.” And that’s part of what made you attracted to Brex, right?
Michael:	Yeah. I think, at least my philosophy on starting companies, is that it’s easiest to do if you really understand the need. I think I meet a lot of different entrepreneurs in Silicon Valley and elsewhere and some of them take this approach of kind of sitting in a room, much like the room I’m sitting in here to record the podcast and they’re trying to figure out what company can I start or what problem can I solve? But it’s I think a lot more powerful if you’ve seen the problem yourself and there is a problem that you’re trying to fix and you know it’s real. And that’s how I felt about Brex. We just didn’t have at SoFi. There were always people trying to get corporate cards. It was a pain to issue them. It was a pain to control them. It was a pain to reconcile them. Everything was just kind of a mess. And they seemed totally undifferentiated, whether we got one from American Express or from Silicon Valley Bank or from Chase, they were all the same. And then this idea that we could have something that’s totally differentiated with software that helps with expense management and also integrates into accounting work streams, I thought was really powerful.
Scott:	Yeah, you lived that problem. And you made it a point about controlling the credit card or controlling the spend, which I think is a really underrated thing. But that’s one of the key kind of reasons that our clients love Brex is that you can spin up a card really easy virtually through the website and you can use limit control and so you can make sure that the VP of marketing doesn’t go crazy on Google AdWords or the normal kind of software developer office employee doesn’t go crazy spending a ton of money on snacks on Amazon. And that’s actually so valuable because I feel like you’re taking cognitive overhead and offloading it from the VP of finance or the controller or the CEO or whoever’s trying to manage that spend and make sure it doesn’t get crazy. It’s really valuable.
Michael:	Yeah, for sure. I think that the setting limits is something that is, it seems obvious and basic, but it’s really important. You open the podcast talking about Rippling, which is an HR software. But when you think about different employees, you want to have different limits. Prior to Brex, I think there’s a lot of hesitation from companies don’t necessarily want to give out a credit card to every employee, but with Brex, the way that you can set limits and controls and have visibility into the spend, there’s no reason why every employee can’t have one, if that’s the program you want to offer.
Scott:	I totally agree. And we encourage that. And the other thing is you can just bounce it up and down. Like sometimes we’re doing a bunch of tax filings and we need to raise those limits for our team internally that’s using Brex and it’s super easy to do. I think the other thing is it’s just I think people outside of the accounting profession maybe don’t appreciate this, but we love it because it makes us as accountants so much more efficient and allows us to do our job so much faster. And you and I have had, how many times have I told you about like our Amex problems of getting the Amex portal just is not built like with modern software like console software. It’s really hard for us to go back and forth between different clients in the Amex console and we’re constantly getting locked out. And I can’t tell you how frustrating that is and it’s frustrating for our clients to have to be like, “Hey, I need you to unlock our Amex account again. We got locked out again.” And they can’t help but think that we’re like somehow incompetent, but really, it’s the portal software that’s just killing us. And so Brex solves that for us. It makes it so easy and we’re eternally grateful for the ease of use of your product.
Michael:	Yeah. I think in 2019 we made a big effort to partner more with accounting firms, Kruze included, and create a lot of features that help them close the month and reconcile Brex data better, particularly in terms of the way we interact with the ERP is like QuickBooks and NetSuite.
Scott:	That’s been super powerful. And we’ll talk about NetSuite a little later, but maybe just kind of like Brex has had… You’ve been there for two and a half years now. Just do a quick recap of the year. What jumps out in your mind and some of your successes and maybe also just some learning. There’re so many founders that listen to this podcast. I’m sure they would love to pick up a couple of lessons from you at Brex.
Michael:	Sure. I think to recap, we started the year, in February we launched our second kind of vertical, which is for eCommerce. And I think what we did there is offer a card with 60-day payment terms and no interest, which really serves as a working capital solution for businesses that are selling online. I think if you think about the broader banking landscape as retail’s moved online, there haven’t been the same payment solutions and working capital solutions from banks to evolve with them. And so, our thought was we could provide the 60 day float to these businesses that are selling goods and services online and they can use that to finance their ads, software, shipping. And so that’s been a really popular product with customers like the UNTUCKit or the Amour Vert. All the brands that people know, a lot of those that have started online are using Brex, which is kind of cool because that’s kind of a new dimension for us.
Scott:	People don’t think about like a credit card product as a working capital kind of solution. But actually, it’s amazing what you guys have done there at that 60-day window.
Michael:	Yep. For sure. And then we also moved to a more premium Mastercard early in the winter. We were on Visa previously. We actually had Mastercard. We’ve announced a couple of different partnerships with them, moved to the World Elite tier, which just gives our cardholders more benefits and I think helped on our technology side, improve the acceptance rates of Brex across a number of merchants just as we migrated to a more premium card. And then a couple of other things that we did throughout the year. One is we announced a partnership with JetBlue. We offered mosaic status for cardholders earlier in the year and we announced a mile transfer program into their True-Blue miles. And we also announced international miles transfer with about six major international airlines. We really increased our rewards program, which for a company of our age being only having publicly launched in June, 2018 to be able to partner with both international airlines and an airline like JetBlue, I think is extremely exciting and impressive for us to pull that off so quickly. I think from what I guess a lesson I might offer for people listening is just that we call it kind of dream big. But for us we did a lot of work on that partnership and just did the effort to convince JetBlue that our brands had a lot of alignment as two challenger brands and also that we could drive the high spending business travel that a lot of airlines seek. And so, we spent a lot of time that was, I probably myself met at JetBlue’s offices over maybe five different times and including directly after my honeymoon in the summer of ‘18 so it was like a lot of pound paving, which is what you have to do to win these things.
Scott:	I’m sure your wife was glad it was after the honeymoon and not during the honeymoon.
Michael:	Yes.
Scott:	To just kind of talk about the reward stuff, that is one of the things that startup founders make their decision on. It was a really powerful moment when… Because you guys have really excellent rewards like ride sharing and Amazon web services and things like that, but when you started getting airline stuff that was a real game changer. As we communicate with your… We share so many clients together that we could tell that was something that they really wanted and were happy you had.
Michael:	I think rewards for us are one of the [inaudible 00:11:18], it’s one of the reasons why you stay with Brex. And so, it’s been important to us as we look to continue to increase the value for our cardholders is to increase the rewards program and also specifically, the different redemption options that you have for points. And I think airline miles are consistently the most requested. And so that’s why we made it a big focus for us in 2019.
Scott:	That’s fantastic. And rewards, better partnerships, you also did that, it felt like, a really big systems upgrade this year. There were times where like a year ago or 18 months ago, the system worked, but now it’s like it hums along. It’s really nice.
Michael:	We’ve definitely made a lot of investments. Thank you for noticing.
Scott:	No, seriously, that matters maybe more than anything to us.
Michael:	Yeah, no, we’ve made a lot of investment in the search functionality. You talk about, for example, competitors like American Express where it’s difficult to search transaction history, it’s all through PDF statements. We made a lot of effort in our statement and a lot of things, the integrations, the exporting of the data, all these things that you don’t specifically sign up for. No one’s going to sign up for credit card and say, “Oh, I love the search functionality,” but I think it’s these things that over time, as finance teams use them each month to close the month, they shave hours off the monthly close and that’s a huge differentiator.
Scott:	It really is. Maybe the biggest announcement you guys made this year was Brex Cash and that’s something we’re excited about. Do you want to spend a few minutes just talking about Brex Cash?
Michael:	Yeah, so Brex Cash is a corporate bank account replacement product that allows you to pay for all goods and services within one login for Brex. More specifically, previously with Brex Card you could use Brex to pay for anything that accepts cards, but that’s only a subset of merchants. Whereas with Brex Cash you can now use Brex to pay for any service or vendor, ACH, online bill pays, check, wire, all of those are now supported by Brex in addition to the card. And so Brex Cash is a place where you can make these payments, but also store money and we’re offering a very competitive interest rates as well, which I think is another differentiator. And then I think we’re also offering rewards, which I think there were just highlighting how differentiated the software behind Brex is and how integrated both the card and the cash management account are that we can have one unified rewards program that rewards customers for payments anyway they pay. So, you actually earn rewards when you make payments.
Scott:	I’ve spent a lot of time thinking about Brex Cash and I didn’t know there was a rewards component to like the contractor payments or ACH payments or wires, that’s really phenomenal.
Michael:	It’s not necessarily as high on card because our business model we earn more transaction fees on card than we do on the other payment methods, but we wanted to really drive the value of using both products together and using an integrated rewards program. And the reason I mentioned on the software side is just that if you think about the way that rewards programs for most financial institutions work, they’re always sort of a clunky login that you have to go into and they’re never integrated directly with the bank account, maybe with a card, usually has a separate rewards portal. I think it’s those little things on the product that as you use it, you can become very impressed with and it makes a big difference because rewards, as you mentioned, add a lot of value back to the users.
Scott:	There’s a lot of ways to pay people, non-card stuff, like contractor payments via wire, and one of the core tools we use quite a bit as Bill.com. But I got to say and Bill.com was like a revolutionary product eight years ago, and they’re still doing well.
Michael:	Yeah, it just went public.
Scott:	Oh, yeah. They just did their IPO. But there’s some things that are left to be desired in their interface and we find that there’s a decent amount of training costs that are involved when we put founders on it. And so, I kind of look at Brex Cash as like this beautiful, merger of PayPal ease and bill.com responsibility and audit trail and redundancy and kind of enterprise grade. We’re super excited for Brex Cash to come out for those functions, for paying contractors, for having an audit trail, for all that stuff.
Michael:	No, for sure. I think you probably said it better than I did. If you think about cards, what we’re trying to do there is a link card with expense management software. And then on cash on those procurement payments like you mentioned, we’re trying to use both the vendor payments as well as procurement software to link the two. We think about cards as being typically more associated with what’s known as T$E spend, travel and entertainment and there you need expense management software and that’s the value we add. And then on the procurement side where you’re paying larger vendors often by ACH, although sometimes by card, we’re adding procurement like you mentioned, features that may be a bill.com has historically offered where you can control spend and get it approved before it goes out the door. Card is typically not approved before incurred whereas vendor spend on bill pay typically is.
Scott:	And you know what the other cool thing about Brex Cash is that typically companies, they’ll have kind of a money market account and then they’ll have an operating account. And the operating account at their bank typically doesn’t pay interest or it’s like embarrassingly small, but you guys are actually kind of combining that and you’re, you’re doing a very healthy interest rate effectively on the operating account that people are going to use to pay bills and things like that. The company’s actually, I don’t know if people did the math, but I’ve done the math and you’re picking up a couple thousand dollars on like a hundred-thousand-dollar balance. You’re picking up a couple thousand dollars a year just on interest that you would have foregone if you weren’t using Brex Cash and you’re using just a bank operating account. It’s pretty powerful, actually.
Michael:	Yeah, for sure.
Scott:	It’s funny how these little things add up. It’s amazing the bundle you guys are building. You’ve had a fantastic year and maybe just spend a couple minutes talking about how you position the company and the company’s services versus like alternatives in the market because there’s a pretty big education that happens when we’re talking to founders about Brex and there’s other venture capital funded companies in the space. There’s no one really doing exactly what you guys are doing, but what are some of the tradeoffs or some of the benefits of a Brex versus like just a pure expense management tool or a peer bill pay tool?
Michael:	Yeah, I think that with Brex I think the two together are probably more powerful than either, separately. As I kind of talked about in my experience at SoFi, credit cards for businesses are relatively undifferentiated. I think even without expense management, Brex is particularly differentiated in the verticals it serves like tech, e-commerce and life sciences. We offer a card that doesn’t require a personal guarantee and underwrites based on the bank account. That usually results in higher limits. And then we also offer rewards that are specifically tailored to those verticals. Tech as a good example, we offer a multiplier on SAS software as well as things like rideshare, travel and dining. But then when you add expense management, what we do is, because we’re both the card and the expense management software, we know exactly when the transaction happened. And so, we make things like receipt capture and integrations with accounting software really simple because we have that much more data on both ends of the transaction. We know the user generated data from expense management as well as the car generated data from our own systems.
Scott:	It is really powerful and because you have all that data, the flow into QuickBooks, like the QuickBooks feed and the reconciliation and transaction labeling and categorization is so much smoother. That’s when I talk about why accountants love Brex. You’re nailing it right there. That’s exactly why we love Brex. There’s this one other thing you guys did this year, which we didn’t talk about, which was a full-blown NetSuite integration. It’s really cool. I told you before I turned the mics on, I was telling my friend who just transitioned his entire company over to NetSuite about you guys and that integration. Maybe talk about the NetSuite partnership a little bit.
Michael:	NetSuite and integrating with NetSuite is not like integrating with QuickBooks. It’s a much more sophisticated and powerful ERP. I’ve been a NetSuite user both at SoFi and now at Brex. Although I’d be lying if I said I frequently login to NetSuite, I think I still have a log in, although they’re expensive so they might’ve kicked me out. But we as a company migrated to NetSuite earlier in January and the reasons why people typically use NetSuite are threefold. One is international currency, two is multi-entity support and three is like approval flows for journal entries for, I won’t get too accounting if people don’t want to hear about that. And I’m just posing, I don’t have an accounting degree anyway, but my parents do. It’s in my blood. But NetSuite, because it’s a more sophisticated software, it’s a harder integration to get approved. It’s harder to build. There’s actually no other credit card that integrates with NetSuite besides Brex. We were the first to do so.
Scott:	I didn’t know that.
Michael:	We announced that in September. We obviously use our own products, so we use it on the Brex finance team. And I think that it saves just a ton of time because NetSuite in general is a software that’s built to save people lots of time. It’s frustrating that while the software itself saves a lot of time because of its workflows, usually when you migrate to NetSuite, you do lose a lot of the vendors that typically integrate with something like QuickBooks or Zero. They don’t integrate with NetSuite because that’s a harder integration to build. But for us, because we serve companies that get big so quickly, especially being in tech, it was really important to have this feature. That’s something that we’re really proud that we launched as I mentioned back in September.
Scott:	You touch on the integration or the transition for a startup. Usually we see it around $10 or $15 million in revenue and we help our companies do that transition. It is a lot of work and kind of maintaining that vendor log and all that is actually really, really helpful because it is like migrating to NetSuite is like a six-month process. If you can shorten that by a month, it’s actually really powerful for the finance team and you’re spending a lot of money on contractors. That’s fantastic. And not to mention the continuity in your card program, it’s not like you have to get a new credit card or things like that. You just stay on Brex, nothing really changed.
Michael:	Yeah, no, I think it’s definitely a very big differentiator for us and it’s actually… So, I spoke at this SuiteWorld West conference, which is kind of like the West Coast user conference for NetSuite, and I had a ton of people come up to me afterwards asking about the integration, people blasting me on LinkedIn. For me being the CFO in my network naturally being more finance oriented, I think that that was probably the most inbound or attention of anything that we’ve done. And most people who follow Brex are like, “Wow, you guys announce something every week, it seems.” Which is sort of true. But this was definitely like a big thing.
Scott:	Yeah, that’s huge. Well, you’ve had just a tremendous year, tremendous two and a half years and we’re very thankful for the partnership. You’ve really enabled our team and our accounting team loves you because you make us so much more efficient and make it easy. Thank you for everything. And just a shout out to all the great engineers and salespeople at Brex, the team. It’s amazing in such a short time you have assembled like the complete package. It’s pretty cool.
Michael:	Thank you. One thing I’ll say having been part of two successful startups is we only announce the good things. Each day that I come into work, it doesn’t always feel like it’s so great, but I think when you look at it in retrospect it’s been really fun.
Scott:	It is. One thing I’ve learned, because this is my first kind of startup, is it really compounds and each year you start doing bigger and bigger things and even where you guys are two and a half years in, I’m sure 2020 is just going to be humongous for you.
Michael:	Well thank you, Scott. And I would also definitely like to mention on behalf of Brex that we really are proud partners of Kruze and really value the relationship there. One of the things we did during the year is announce an accounting portal where we provide a lot of information to our customers and also help match them and partnered them with accounting firms. And Kruze has been a big part of that.
Scott:	Thanks man. Appreciate it. Well, Michael, maybe you can tell everyone where they can find Brex and how to reach out if they want to be a customer or even want to be a partner. There’s probably a lot of accounting firms that listen to this and probably are interested in Brex.
Michael:	Sure. We’re lucky in that we own the domain that our name is so it’s just brex.com, B-R-E-X. It was actually when we were looking for the name, we started with a different one. Being able to get a four-letter pronounceable domain with dot com was a key criteria for us so that was one of the ways we came to the name Brex.
Scott:	Awesome. Check out brex.com, B-R-E-X.com and again, we love the service. It’s made us more efficient and our customers love it. Thanks, Michael, for everything you’ve done and thanks to the Brex team and appreciate your time.
Michael:	Thank you, Scott.
Scott:	All right, man.
Michael:	All right, talk to you soon.
Singer:	So, when your troubles are mounting in tax or accounting, you go to the Kruze from Founders and Friends. It’s Kruze Consulting. It’s Founders and Friends with your host, Scotty Orn.

Brex’s Michael Tannenbaum dives into FinTech partnerships and more

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