Founders & Friends
with Scott Orn
Startup Podcast by Kruze Consulting

Michael Tannenbaum of Brex on Startup Corporate Credit Cards

Posted on: 11/14/2018

Michael Tannenbaum
Chief Financial Officer at Brex

Podcast Summary

Michael Tannenbaum of Brex comes by to discuss startup corporate credit cards. Michael ran finance at SOFI before joining Brex and he learned first hand how painful and inefficient corporate credit cards can be. Brex has streamlined the process, made founder personal guarantees unnecessary and made integration with Quickbooks really easy. It’s a great credit card solution that Kruze Consulting recommends!

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Podcast Transcript

Scott: Hey, welcome to Founders and Friends podcast, this is Scott Orn, and today my very special guest is Michael Tannenbaum at Brex. Welcome, Michael.
Michael: Thank you for having me.
Scott: So Brex is a virtual credit card company. I think that’s the right way to say that.
Michael: Yeah. I would just say we’re a credit card company because we do have physical cards and virtual cards.
Scott: Oh, that’s a good point. So we’ve actually been seeing Brex really come into our client base at Kruze Consulting over the last year, but it’s really accelerated in the last three or four months.
Michael: Good.
Scott: Yeah, it’s good for you. You guys are doing really well. And, we actually really like the service, so we wanted to have you on. This is something that’s made our life easier, our client’s life easier, it’s really great. Maybe you could start off just by telling the story, how did you-
Michael: Sure.
Scott: How did you identify the problem? How’d you join the company? What’s the background there?
Michael: Yeah, so my background is, before Brex, I worked at a company called SoFi, which was … That’s a LaCroix.
Scott: We’re drinking LaCroix.
Michael: Which is [crosstalk].
Scott: Don’t get too excited.
Michael: Although, I saw that they maybe have cockroaches or something recently I read.
Scott: We’ve been giving it to our baby, so I hope not.
Michael: I think it’s fine. Really? I used to say-
Scott: She loves it.
Michael: I used to say I could have an IV of it, you could just … But anyway.
Scott: I drink about an 8-pack a day, or whatever.
Michael: Yeah, me too. But anyway, I worked at a company called SoFi. I started, actually, in the capital markets group, I became the VP of finance, and there I managed the corporate card and then later I ran the mortgage business and then was the chief revenue officer. So I saw a bunch of different jobs, and I never thought too much about corporate cards, I thought most about it when I was the VP of finance because I was the actual owner of the cards. And, for people who’ve worked at a startup, especially fast-growing one before, they know that cards are frequently the way that people use to get around finance. So, people love to, if they need to do something quickly, they just, “Oh I’ll just put it on the card and I’ll let accounting deal with it later.”
Scott: And they forget about it, and they didn’t have to, maybe, do an expense report or something like that.
Michael: Right.
Scott: And, no one can remember what that 500 dollars were later, and it just kinda goes into the ether.
Michael: Right, and so, we saw this at SoFi for sure, where we’d say, “There’s a budget for, especially, marketing,” which is funny, now I actually manage marketing as well, and so I’m on both sides of the table. Whereas people would just, particularly marketing, they would go around finance and do what they did on spending on ad words whatever, and then sort of say, “Oh sorry, we put it on the card.” So you’d kinda get around the approval flow.
Scott: Yeah.
Michael: And then so when I met Enrique, who is the CEO and founder of Brex, and he told me about this idea, I was really attracted to the business. One, because I understood the use case. I knew that managing a cooperate card was a little bit of a mess, ‘cause I had been that decision maker. And, I also knew that with cooperate cards, you have … It’s not something … It, in some ways, reminded me of what we did with student loans at SoFi. Student loans we all the same for everyone. It’s, sort of, how I felt about cooperate cards, they’re all the same. You could use SBB, you could use American Express, whatever, you’re not getting anything out of them. We didn’t care about the rewards, really, ‘cause we’re big.
Scott: I have some very strong opinions on this. So, keep going. This is great.
Michael: Okay. Good. So, it was just like they were all the same and when SoFi came out with student loans, ours was different, and then, when we came with this cooperate card, it’s actually different. And so, when he talked to me about that, it really resonated.
Scott: You see, I think financial products especially, they all look … People tend to compare them on price, or things like that, and they don’t like the credit cards or student loans. But, when something comes to market that’s so much easier for you guys, I cannot even tell you how many times we get locked out of American Express, or Chase, or whatever.
Michael: Limits. Yeah.
Scott: Yeah. And, just from an accounting perspective, we can’t even do the freaking books, because we can’t get access to the freaking credit card. And their customer support’s terrible. And, you guys came to market with something that’s so much easier to provision, and get it going, and get into Quick Books, that I was like, “That’s amazing.” I think your accounting channel is, actually, probably one of your strongest advocates.
Michael: It is.
Scott: We love it. We’re telling people to use you guys, now.
Michael: Well, thank you for doing that.
Scott: Yeah. Yeah.
Michael: And, I think the other things that interesting about the business model, and why I was interested, is because credit cards can make money and give the product away for free because of the interchange. And so, we don’t for example -
Scott: Maybe explain want interchange is.
Michael: Yeah. So, when you charge $100 at Starbucks on a Brex card, Starbucks actually only gets $97. And, of that $3, it’s split between us, Visa network, and the acquirer that accepts the payments on behalf of Starbucks. And so, because of that, we don’t actually have to charge to make money on our product. Which, I think when you can give away a product for free and still make money, relatively unique, and I like that about Brex. And, you can also use software, which has no marginal cost, to sort of, as you just talked about, provide all this value. And, it doesn’t cost anything for us to do that.
Scott: It’s amazing. It is a very friendly business model. It’s actually why credit card companies have always been able to give really great rewards. Right? Because the gross margin on the interchange is super high.
Michael: Right.
Scott: And so, that’s always been the case.
Michael: Yeah. And rewards are interesting and it’s an area that we spend a lot of time on. When I think, we’re going to be launching rewards formally later this month, in late October. We’re kind of in Beta right now. And I think with rewards, it’s the only way that credit cards have ever competed. Everything else is just, all the same, it’s a total commodity, and so rewards have, sort of, morphed into this version of the price. And so, Brex actually took a different approach on that one, as well.
Scott: Maybe talk about your rewards, ‘cause-
Michael: Yeah. There are two components.
Scott: -‘cause we’ve talked about this before. ‘Cause, what we kind of see is, that’s probably still the biggest barrier to using you guys, amongst our client base, because a lot of CEO’s, they’re the ones who are benefiting from the points that are racked up by the credit cards, and most of the CEO’s are taking under salaries and things like that. And so, being able to stay in a nice hotel, or get a point flight is actually very helpful for them, and they like that. You guys have a pretty cool reward program.
Michael: Right, and it’s about to get cooler. But, to your first point, I think that’s totally … As you know, being here, first of all, being a startup yourself at some point, and being in and around startups, we just went through this, but when you’re starting a company, it’s actually not that sexy. And, it’s quite grim. And, there’s a lot of cheap hotels and flying to meetings and not even sure if the people are going to take the meeting ‘cause you’re nothing. And so, the little small luxuries that rewards can offer, I think do matter.
Scott: It’s a little psychological.
Michael: Right. It’s like, well wouldn’t it be nice to just use my point and actually do something nice for a change? Yeah, I definitely have been there. And so, I think what we had … Our rewards program has two components. One that we’re adding is this concept of accrual-based rewards that, based on what you spend, you get a multiplier. You get actual points that are based multipliers. We actually spent a lot of time going through all the detail on what our companies spend, and tracked to make sure that startups, in particular, would get the most value. So, we have big multipliers on rideshare, multipliers on software, multipliers on travel and dining. And then, you can redeem those points for both cash back, and, sort of erase a transaction from your statement so you can use on a nicer hotel or for travel. And, you also can redeem them … But, what we also have is what you’re probably more familiar with, is the sign-up offers. And so, we have probably 10 to 15 really top vendors to tech companies. We have AWS, WeWork, now Google Ads. So, we have all these products that startups use and we offer a lot of software, also Caviar, though, Instacart so food, everyone like food. So, we have offers on those companies as well, and that’s basically our version of a signup offer.
Scott: We have a CEO who called us after signing up with you guys ‘cause he was so excited because he got to use it against Amazon web services, and they’re a big, very software processing Centric company, and so they have a ton of AWS spend. And so, he actually reached out … We told him to do it, and he reached out to us, he’s like, “This is amazing. The AWS credits, oh my God.”
Michael: Yeah, I love that. Good.
Scott: And so, that was the clincher for him.
Michael: Well, I mean look, AWS, we give five thousand of AWS credits when you sign up for Brex. That is equivalent to five hundred thousand dollars of spending. Right? So, if you think about-
Scott: Oh, spend it on a credit card. Yeah.
Michael: Right, on a credit card. What you would have to spend on a normal credit card to get five thousand dollars of value. So, in your standard, sort of, 1%, which is what most credit cards offer on that, sort of, rewards.
Scott: I think it was financial, but also the fact that you understood what he was going to spend money on.
Michael: Exactly.
Scott: I think that was gold.
Michael: That’s the thing. And so, one interesting thing about that related to rewards, for example, is that when you get your credit card statement, one of the things that Brex does differently is we actually categorize the transactions correctly. So, software is a good example of that. Most, if you use American Express, or Chase, or whatever, and you go and buy Dropbox, for example, that’s gonna show up as electronics. ‘Cause there’s no distinction in the card network initially between electronics and software. We made that distinction ourselves since we rebuilt all the technology.
Scott: Talk about that, ‘cause that was part of the pitch I liked. ‘Cause, I always think in terms of what I see in QuickBooks and how we characterize in QuickBooks, and so we would just see Dropbox come in and do Dropbox, but you’re talking about how it shows up on the statement, and even the network, and even the network.
Michael: And the mapping in QuickBooks too, because the way the networks work is you have these merchant category codes and those are, kind of, every merchant is categorized according to a code. But, this was before ride share existed before you bought software online before servers were a category because you weren’t paying for computing and storage online. So, that’s all changed, and so we changed the categories and by doing that we can offer multipliers on them because we actually have them. To your clients’ point-
Scott: Do you know exactly what the …
Michael: Right. So, we understand the customer, and one accounting implication, without getting too much down the road, is that electronics are usually capitalized like computer software isn’t.
Scott: And to translate that for the audiences, something capitalized, like if you bought an Apple computer, you’d put that on the balance sheet [inaudible] if it was above $2500 and depreciate it over time. So, that’s the difference. You guys know that Dropbox shouldn’t be capitalized, shouldn’t go-
Michael: We’re drawing that distinction.
Scott: -on an income statement.
Michael: So, we make your job and help easier.
Scott: That’s actually it. I think you guys can actually cut our time spent reconciling credit cards pretty dramatically.
Michael: Yeah. So, at SoFi when I was running credit card and finance, we used to do this routing that was unbelievable. We’d email all the people who had credit cards at the end of the month, hound them, say, “Give us your receipts-
Scott: Oh my God.
Michael: -categorize these transactions,” and nobody would. And then, they would ignore my AP team, and I’d have to get involved, go hound all the people with cards, say we’re gonna cut them off, it was like this whole song and dance every month. I kind of like the drama.
Scott: Everyone waited for the cut it off.
Michael: Yeah, I liked it a little bit, ‘cause it’s like one of those small pleasures you have power. But, it was also a waste of time.
Scott: Totally. Totally. Wow, so they didn’t have a centralized statement thing or anything, or they couldn’t … Or was it people’s personal cards?
Michael: No, it wasn’t. I think we were using American Express at the time. It was personally guaranteed by our CO, which is another big difference with Brex. Our card is not personally guaranteed. So, you don’t need to use your FICO score or your credit score, or your social security number, and you don’t need to be personally liable with our credit card. Whereas, at SoFi for example, my old company, it was the CEO’s personal credit that was backing our card program. Yeah. And we had like a bunch of statements that weren’t even split out by the user. It was a lot of PDF’s and we were reconciling.
Scott: The user says, oh God.
Michael: It’s a pain.
Scott: So, the point about personally guaranteeing is a really important one, and I’m glad you brought that up. So, like I and Vanessa still personally guarantee Kruze Consulting’s credit cards. Like, out Amex program is all on our credit. You’re exactly right. Now, we have the advantage of being a cash flow, profitable company, but most startups are losing money and depending on VC money, and so we literally do the same conversation every time a company’s gonna get a credit card, and this is before you guys. You would pick your poison. You’d either say, look CEO, you can personally guarantee this credit card with Amex or Chase, and get points, but you’re personally guaranteeing it, so if the company goes out of business with a balance, you’re responsible for it. Or, you can do a cash secured credit card-
Michael: Which is terrible.
Scott: -like SVB or something like that. Right? Which, basically mean, put twenty or thirty thousand dollars in the bank in a different account that you can never touch, and SVB will give you two-thirds of that as a credit limit.
Michael: Which also sucks.
Scott: It sucks. So, neither was good. And, that’s why it’s so exciting. You guys are doing it, and maybe explain how you do it. You guys use a lot of analytics to underwrite the card.
Michael: Right. So what we do that’s is we … Most people have a credit card, and if you have a credit card, you’re probably familiar, it’s, sort of, a static limit. So they’ll say, “Okay, Scott, you know, you’re approved for this Bank of America card and you have a ten thousand dollar limit, and use that limit and check back with us if you need more, or we’ll check in with you in a year.”
Scott: If you get a raise, we’ll give you some more.
Michael: Right. And so, that doesn’t work for startups because they grow super quickly. They’re spending money, they’re raising money, they’re losing money, then they’re gaining it. And so, you need to be able to adapt dynamically. So, we built a dynamic limit. And so, the technology we have, we look at your bank account balance, and say, “We’re gonna underwrite based on your bank account, and as long as we believe, based on the data and analytics that we view, that you’re gonna pay back in 30 days,” then we can give you the credit. So, that means that we offer higher limits, usually, it’s like 10, 20 times higher, and we also can do it without a personal guarantee.
Scott: As I’m smiling, you guys can’t see me on camera, or I’m not on camera, but one of our CEO’s had Amex, and I swear to God, he would effectively prepay the credit card every two weeks, just so that all their web service spend wouldn’t get rejected. So, he was constantly putting 10 or 15 thousand dollars. So, it was weird ‘cause you’d look at the balance sheet and see a negative balance for the credit cards like it would be a minus in the payables. Which, any accountant would look at that and be like, weird, this doesn’t look right. But, what was happening is the CEO is just prepaying his credit card, constantly. Just to be able to handle the transactions.
Michael: Right, because of startups … Today, it is not possible to run a company without a credit card. Everything online. All the software, the ads, the servers, and then, not to mention travel and entertainment, all is on a card. And so, like having limits to run your business is super important. And, if you’re a new company with no operating history, no credit history, no established-
Scott: Or, maybe, like foreign founders too. It’s even worse.
Michael: Right. Foreign, you’re young, you just graduated from school. All those people can’t get a card, or they can get a card with a very low limit that’s meant for a person, not a business.
Scott: That’s it. So, you guys cracked that nut.
Michael: We cracked that, and then we built it as … That’s, sort of, why people sign up for Brex, and then they stay for the features that you talked about. It’s one thing, and we were having a conversation earlier, and it’s something when I put the marketing hat on that we’ve tried to be careful about. And, you know this because I don’t have an accounting background, but I have a-
Scott: Finance question.
Michael: -finance background and my parents are both accountants, and so I grew up with that.
Scott: I forgot about that.
Michael: Yeah.
Scott: They must be so proud.
Michael: I hope they are, I don’t know. I hope they are. But, they don’t let me know. We don’t really use accounting or expense management to sell our card. We use this no personal guarantee, instant signup, higher limits because people don’t get excited about tracking expenses.
Scott: I know, I mean, yeah. Yeah. Well, I think you kind of tapping into a problem we have as a business in that, often times, some of the founders are very conversational in accounting and finance, and know how to read everything they can do their own stuff if they had more time. But, there’s another segment, it’s almost like witchcraft what we’re doing. I would say it’s kind of like going to the doctor. When I go to the doctor, I am really relying on that doctor to tell me what’s wrong with me and how to get better. And I don’t have the training to know how to do it. And so, it’s hard for them to get excited about the nuts and bolts-
Michael: It’s something they don’t understand.
Scott: -of accounting, or how it makes their life easier or keeps their bill down. That’s something they do, when we articulate that to them, they do get that. But, they understand rewards, they understand no personal guarantee, they understand the ease of setting it up. And, I think there’s another feature that you guys provide, or maybe it’s a use case which is managing, you were kind of talking about this, but like managing the departmental spend.
Michael: Right, the limits.
Scott: So, allocating a certain amount of money to marketing, or R and D, or whoever is in that, and like using software to provision that. I think, to me, it’s like a killer app. I love that about you guys.
Michael: Yeah, I think there’s definitely two points, there’s a segment of people, and there’s a stage of a business, and I think that’s one of the nice things about Brex, is that our features, sort of, scale as you grow. If you’re four people in a room, which we were about two years ago, we weren’t too worried about what marketing was doing. We were all everything.
Scott: You overheard what marketing was doing.
Michael: Yeah. Yeah. Exactly. We were marketing, we were tech, we were everything. And then, as you grow, you sort of want these things. And so, we try not to be so prescriptive to say, like if you use Brex, this is how you have to live your life. For example, be integrated with Expensify, or you can use just us the way you want, we work with third-party accounting firms like yourself, and we support user to access that way. Or, if you’re, as you said, a highly detail oriented founder and you happen to have an accounting background, we integrate directly with QuickBooks, and you can do it yourself. And so, we don’t try to change behavior, but if you are the type of company that wants to set a lot of limits on your card and gives lots of people cards, we definitely support that. There’s a ton of use cases, not just department spending, but the one I have always been sensitive to as a manager, is when you have younger people or people with less money that need to travel, and if you’re asking them to reimburse everything on their personal card, it’s a little bit awkward, and people sometimes don’t want to say, well hey, I don’t really know-
Scott: I have a $500 limit.
Michael: Yeah. I don’t really want to go to New York City and then put it on my flight, and my hotel, and my Uber and all this on my card, and then float the cash.
Scott: So, you guys can … It’s all just …
Michael: So, you can just give someone a card with a limit just for that trip, and then say, sure go to New York, and we put two thousand dollars, or a thousand dollars whatever it is.
Scott: And you also make a great point, earlier, was you actually produce physical cards, so it has the same use case as a normal Amex. You can get a physical card if you’re going to New York and you’re not going to have to memorize some number or something like that.
Michael: We’re on the Visa network. I think it’s one of the reasons why we’ve had a lot of adoption is that we’re doing something new, but it’s not so new that people don’t know what it is. And I think, in America, you’ll understand this as a consumer, people are very accustomed to having a credit card that’s different than there bank.
Scott: No one cares.
Michael: I remember when I was in high school, I worked at Starbucks, and people, I was kind of weird kid, so I would always focus on what credit cards people had. I’m from Massachusetts, people would be using banks, like Citi for example, didn’t exist. They’d have Citi cards, but we had no Citi branches. So, people are used to having a credit card that’s different from there bank, and people, when they see Visa, they know it’s going to be accepted everywhere. So, taking a leap if Brex is not this huge leap. For example, ‘cause you guys were pretty big QuickBooks-
Scott: Yeah. Yeah. Yeah.
Michael: Trying to tell people to use a different ARP, that’s quite different.
Scott: No, you guys did it really well. You let the product’s advantages really shine and didn’t ask for people to change too much behavior.
Michael: Exactly. That’s right.
Scott: So, you guys built something amazing. It’s awesome. I forgot I didn’t even get the chance to say that I proudly invested in SoFi-
Michael: Oh you did?
Scott: -in one of the preferred rounds.
Michael: Oh, good.
Scott: But, Christina [Kramlick], I should have invested in the 80 million dollars round. Christina Kramlick is a friend of mine. She’s awesome. I met her through SoFi.
Michael: Oh, got it.
Scott: Was too chicken to invest at that, so I think I paid up like 6X or something or 8X on evaluation. But, I’ve watched the SoFi story. It’s an amazing company.
Michael: It was definitely a special experience.
Scott: I remember her saying the lone volume growth was breathtaking. She just couldn’t believe it.
Michael: Yeah. I’m very grateful at my experience at SoFi, for sure.
Scott: And it’s cool that you were running something, ‘cause you’re a pretty young guy to be running all finance at SoFi. That’s great that you got that experience.
Michael: It was a battlefield promotion. And it was an accounting … Honestly, it was true … I was in and around helping out with the audit, and we needed to get this audit done. And, I basically just said … I just sort of -
Scott: I’ll do it.
Michael: -raised my hand and said I’ll do it. I’ll claim this one. So, I sort of became VP of finance during the audit. From there, I kept raising my hand, I guess.
Scott: That’s the way it is. We use the term battlefield promotion sometimes here.
Michael: It’s a funny one, isn’t it?
Scott: It’s good. It means things are hard but going in the right direction. Sometimes, before we turn the mics on, we brainstorm for ideas. So, you talked about this a little bit, CFO running marketing, and I said to you, “Well, guess what, our head of FPNA runs marketing at Kruze.” So, we speak the same language here. So, how did that fall under your guidance, and what’s it like, and do people think you’re crazy?
Michael: So, yes, they do think I’m crazy. Just knowing me, not necessarily because I’m doing both of those jobs. It happened because we actually had someone who was going to come run marketing who was moving to New York and then decided that they were not going to actually move.
Scott: Ah, that sucks.
Michael: Yeah, and we were very close to launching, which is really a marketing activity.
Scott: From the marketing activity.
Michael: Right. So, we have this word for battlefield promotion, I guess, at Brex. It’s called being a fixer. It’s this idea that you just do what you need to do. So, I said, alright, I kind of had something to do with this at SoFi, so I’ll do it. So, that’s where … So, since then, I’ve just been doing it. The thing that I’ve heard is that, if you’re good at marketing, you want to balance between just ROI drove stuff and then just crazy brand. And obviously my orientation being CFO, is going to be more towards ROI, and so we do try, you’ve probably seen, we certainly spend money on outdoor. Which, doesn’t necessarily have a highly trackable [inaudible].
Scott: Well, I think you guys cleared the funding hurdle where you have enough money. I’m speculating because I’ve seen the announcements. But, you now have enough money to do brand awareness campaigns, like the outdoor advertising. But, I think that probably worked.
Michael: It did.
Scott: A lot of people in San Francisco knew who you guys were all of a sudden.
Michael: It actually was shockingly … It worked because … We know it worked because we asked people how they find us, which, they don’t have to answer, but they do. So, we know how many people sign up form billboards. And, we also do some mobile phone based tracking to know were you in the presence of a billboard…
Scott: Oh.
Michael: Yeah.
Scott: That’s amazing.
Michael: We have some sophisticated data. Our marketing team is really a data team, almost, so we could use some people who actually have marketing experience as my boss and CO likes to remind me. He said, “No one on your team has actually ever done marketing.” So, there’s that. But, yeah.
Scott: You don’t know the rules that you can’t break.
Michael: Correct.
Scott: That was a big buy, spending all that money on the billboards. Did you have a moment where you were like, “Is this the right thing?”
Michael: Yeah, we did it as SoFi. I don’t know if you’ve ever seen SoFi’s got a lot of billboards and we used to buy [inaudible] -
Scott: You did have a great billboard on 101.
Michael: Yeah. So, I’ve seen it work, and honestly, it always worked at SoFi. And also, our head of sales, he actually had done a lot of outdoor buying too and really was a believer, so I think there was a lot of belief in our team that it would work, and then we saw it work.
Scott: Did you tiptoe into it with a couple and then …
Michael: We didn’t. We went all out. No, we didn’t think.
Scott: You have a very sheepish smile right now.
Michael: Yeah, we bought, I would say …
Scott: You told me the number last time you were here.
Michael: I think it was …
Scott: You bought 17 billboards, or something like that, right.
Michael: Yeah. It was crazy and then we bought all these bus shelters, so …
Scott: Oh, I always think of those as billboards. Those are different?
Michael: Oh, no. No. No. Those are different.
Scott: Holy shit.
Michael: So, we bought 17 of the big ones.
Scott: I thought that was part of the presentation.
Michael: We probably bought every bus shelter between … Certainly in certain quadrants of the city we bought.
Scott: There’s a couple of shelters I walk by every day that I know you guys get.
Michael: Yeah. We just did something really funny down in, it’ll probably come out shortly, down in the peninsula, where we took over the bus shelters near Stanford campus. And, we did a takeover, so it’s not just like the billboard, but it’s like the build-out is Brex. It’s almost like you’re at a car dealership for Brex. You wouldn’t even know that you’re in San Mateo county transport. I think it’s funny.
Scott: That kind of stuff works, though. I remember being in New York and Just Works had bought our a subway station, and it totally…
Michael: The subway stuff is cool, for sure.
Scott: So, you just like we’re doing it.
Michael: We went all in. Yeah. I think to do outdoor well, you have to go big.
Scott: I believe it. It’s also like you guys are a consumer application, so it probably works really well.
Michael: Yes. I call us, this is kind of stupid, and I stole this word from someone but I don’t remember who, ensumer, which is we’re an enterprise product of the consumer decision process. So, kind of … Not anyone can sign up for us, but if you are the person who can sign up, it’s like a consumer decision, a very easy and simple.
Scott: It’s kind of the same trend that’s happening in all software, it’s the consumerization of software. Well, that was pretty awesome and it worked. I mean, we saw in our client base, when you guys started spending money on that stuff, like start shooting up.
Michael: It really did.
Scott: So, you probably get a network effect there too, where people start talking about it.
Michael: Right. So, referrals about 35, 40% of our funnel. So, naturally that scales if people to continue to refer, and we saw that it’s something we also saw at SoFi, which is, if you graduate from school and you have student loans, you’re likely to know other people. And just here, if you’re the decision maker on a startup, you probably were in an accelerator, or you hang out, or you talk to, or you go to events with other people that are like you. So, referrals really effective.
Scott: I just got asked that question today, and I’d say 90% of our new clients are all word of mouth, refers. Founders tend to hang out together, or they hang out together virtually. So, they’ll ask each other, “Hey do you use?”
Michael: Right. Our founders, for example, met on Twitter arguing over which text editor to use.
Scott: They were doing what?
Michael: They were arguing over which text editor to use over Twitter and that’s how they met in Brazil.
Scott: They were meant for each other.
Michael: Evidently people do hang out virtually.
Scott: That’s awesome. Where are you guys going? What’s the future? You’ve got the new rewards thing.
Michael: I think for us-
Scott: You might be breaking some news here.
Michael: Yeah, I probably-
Scott: The podcast comes out in 10 days.
Michael: Someone’s gonna smack me.
Scott: So, yeah.
Michael: But, I would be me smacking me, because I’m supposed to be marketing.
Scott: That’s true. You can do whatever you want. You can break all the rules.
Michael: I won’t hit myself. But, I think that … Yeah, so the rewards are our next big thing.
Scott: That’s smart too. That’s like the single biggest piece of what’s happening.
Michael: It’s the one thing that we didn’t quite have it perfect, and I think we’re for our core customer, and I think that’ll change after the 30th of October. And then, in the future, I think what we need to do it … It’s funny. The actual core problem that I was talking about that we had at SoFi, like this, sort of, card management for bigger companies, and the things a CFO would really want we’ve actually focused today, really, on early-stage companies, and what they need. So, personal guarantee, getting it online instantly, instantly issuing cards to new employees, all the things that those companies care. But, as you get bigger, and your organization relies more on approval flows and review processes for cards, that’s actually the stuff that we’re building. And so, you’ll see us launch that into 2019. And, I think that’s gonna be where we can actually focus on the reason I came to Brex, originally.
Scott: And probably, there’s probably some power curve where the big ones spend so much-
Michael: Oh, yeah. They do.
Scott: -money.
Michael: Yeah. When you’re doing, you can easily spend a million dollars, a bigger company can spend a million dollars a month just on Google and Facebook ads. Sometimes, each on Google and Facebook.
Scott: That’s awesome. What’s one thing you learned from SoFi, real quick? Like, one tidbit, ‘cause for people that don’t know, the valuation is probably like five million dollars, something crazy. I’d say bonafide financial institution that’s kind of made it, probably do an IPO at some point.
Michael: Right, and I started when it was small there. I think the biggest thing that I learned from SoFi was you need … It was more personal and kind of career oriented. Which is, it’s really important to have somebody senior to you, looking out for you. If you don’t have that, I think it’s so hard and I remember my dad in my job, before that asking me, “Who’s your mentor?” In today’s world, I was kind of like, “I don’t know.” And, when he said that, he said, Well that sounds like a problem.
Scott: That’s a no.
Michael: And at SoFi, I had two people at the very top always looking out for me, the CEO and the CFO, and it made all the difference.
Scott: That’s a really good advice. We actually found that out, ‘cause Vanessa’s 33 years old. She’s running a company that she’s been running for seven years. She started this when she, what’s the math, 26 years old? And then, I had never run anything, I had always been an investor. So, the reason I was attracted to Kruze and something was I got to run something and build something. But, neither of us knows, really. We’re all learning as we go.
Michael: I think everybody’s learning as they go.
Scott: Yeah. For sure.
Michael: As you find out. As you get more people who are …
Scott: Everyone’s faking it.
Michael: Everyone’s faking it till they make it.
Scott: We had a, especially your advice was really good, especially for younger people, this was heartbreaking. We had a staff accountant who he really likes one of the senior people in one of the remote offices. So, he wanted that person to be his mentor. And we were like, “Well, you’re not going to see that person on a daily basis. You might want to have someone who’s on a daily basis.” He’s like, “No, no, no.” And so, we went with it but that ended up being a huge mistake ‘cause he didn’t have the day to day mentorship, and six months later he was like, “Yeah, I haven’t learned that much, and my mentor doesn’t always talk to me.” And we’re like, aah. You can’t do an, I told you so, ‘cause you’re the boss, you’re the one who made the decision. So, that was a learning point for us. So now, all mentorship rolls through whatever office you’re in, and we have an actual formal mentorship program. When people start, they get a couple buddies-
Michael: That’s good, yeah.
Scott: -and they report up in a pod. But, we learned that lesson the hard way.
Michael: It gets lost in startups, ‘cause everybody has so many things to focus on.
Scott: That’s exactly it.
Michael: So, I am, because as you pointed out, I was young to be promoted into the top, I make it … It’s 80% of the reason why I come to work is making sure that that happens.
Scott: I think the flip side of that is, when you’re the CFO or VP of marketing or COO, it’s actually one of my favorite parts of the job is mentoring and watching people grow.
Michael: It’s the best.
Scott: I get so much satisfaction out of, and seeing people progress in their career. It’s amazing.
Michael: It is. Especially if they are working hard.
Scott: Yes.
Michael: If they deserve it. Which they normally do.
Scott: The nature of a startup is, if that’s not happening, it’s probably not gonna last for whatever reason. Okay, Michael, awesome, awesome job. Can you tell everyone where to find Brex?
Michael: Sure, so I think with Brex, just a reminder, we’re a cooperate card for startups. We’re at brex.com and the big advantages of Brex are that we offer an online card in five minutes or less with 10 to 20 times higher limits than standard cards. The best rule when it’s for startups. And, there’s a lot of information and more on Brex.com.
Scott: No personal guarantee, and it makes your account happy because it integrates [crosstalk]
Michael: It does make you account happy and given where we are today, it’s super important.
Scott: That’s very important. Number one on your list. Awesome.
Michael: Thank you, Scott.
Scott: Thank you for coming by.
Michael: Appreciate it.
 

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