Capital One acquires Brex because of the price cut, but the early believers are laughing all the way to the bank.

There is a feeling of schadenfreude in Silicon Valley when a unicorn stumbles. So when the WSJ broke story Thursday afternoon that Capital One will acquire Brex for $5.15 billion in assets and properties (Capital One released official release to confirm details after 30 minutes), you can hear people sniffing from Sand Hill Road to San Francisco’s South Park. This figure represents less than half of Brex’s last private market valuation $12.3 billion from the 2022 Series D-2 around.

Before everyone sharpens their knives, consider that for the VCs who backed Brex in its early days, the sale is a win.

Micky Malka’s Ribbit Capital, which led Brex’s $7 million Series A just after it was launched in 2017, should be looking at a very attractive return. Reached by phone this afternoon, Malka refused to give specifics, but as a member of the Brex board from the beginning and the main shareholder of the company, he was very happy with the agreement: “We are very happy for the group, which was one of the smaller groups of YC at the time. I have known (the founder) since he was 16 to join a good bank, it is a great opportunity for the bank, as a large part of the bank, it is a great opportunity for the bank. America.”

Indeed, that initial bet — Ribbit was joined by Y Combinator, Kleiner Perkins, DST Global, and private investors including Peter Thiel and Max Levchin — has multiplied somewhere in the neighborhood of 700-fold. Even accounting for more money in the following stages, the original participants are walking away with profits that have made the business seem like an attractive group to outsiders.

However, the damage to the tree’s hair is even greater when you consider what happened to Brex’s archenemy, Ramp, at the same time. As Brex lost his power a few years ago, Ramp was left in tears. The competitive fintech investment fund has currently raised $2.3 billion in total funding and its value has risen from $13 billion in March last year to. $32 billion by November pass through respectively money around.

You could argue that if these types of papers make more money that means more (which isn’t always the case). However, considering that Ramp is presenting a true picture to the world, it is easy. The company announced last October that it surpassed $1 billion in annual revenue and acquired more than 50,000 customers. The contrast is perhaps the most painful for Brex’s later investors, who have seen their competitor pick them up several times as they wait for the exit.

Capital One’s deal comes at a lower rate than Brex. Five months ago, the company announced that it had obtained a license work in the European Union. As CEO Pedro Franceschi wrote in a post at the time, the move enabled Brex to “directly issue cards and credit cards and offer its financial products to any business in all 30 EU countries without any formalities.” Previously, the company only worked with EU companies that maintained a presence in the US, a major obstacle for international players.

For Capital One, timing is as good as it gets. The bank, which previously swallowed Discover Financial in a A $35 billion deal Last May, it acquired Brex’s technology platform and list of clients – including, TikTok, Robinhood, and Intel – as well as access to European banking clients through its new EU license. (TechCrunch has reached out to Brex for more information.)

The $13 billion in deposits Brex says he manages at partner banks and money market funds should also sweeten the pot.

The founders, Brazilian entrepreneurs Pedro Franceschi and Henrique Dubugras, left Stanford as freshmen to set up Brex in 2017 after being accepted in YC’s fifth “batch” of 2017, initially pitching a real idea. But he had to return to the salary he sold – at the age of 16 – a Brazilian payment startup that raised $ 30 million and was later bought for more than $ 1 billion by one of the investors.

Dubugras stepped down from day-to-day operations in 2024 to become chairman of the board; Franceschi will remain CEO after the acquisition.

As with almost any startup, Brex’s path was not without stumbling blocks. There was a questionable method in 2019, when the 23-year-old CEO, who had never owned a restaurant before, bought San Francisco’s beloved South Park Cafe. The two watched Brex cards eat before heading upstairs to the lounge, a timely decision that seemed particularly ill-advised, as COVID-19 shut down much of San Francisco for more than a year.

Then, in 2022, when the macroeconomic picture darkened and VCs began to demand real profits from their companies, Brex made the decision that made it. great intention; it abandoned tens of thousands of small and medium-sized clients, informing them that their accounts would be closed unless they had “professional” funding from VCs, angels, or accelerators.

The move, which was designed to streamline requirements for high-end customers and the nascent SaaS business, struck many as deafening. A company that made its reputation serving unbanked startups is suddenly showing its experts the door (that’s how the move seemed at the time).

This process may have been what set Brex up for release. Focusing on corporate clients with deep pockets and predictable revenue streams, the company remained focused on its core businesses, even as Ramp expanded its investment. (Mercury, another competitor, also increased its valuation to $3.5 billion with a $300 million raise last March. $650 million in the amount that is repeated annually.)

Capital One said it expects to close the deal in the second quarter. For Brex’s later investors, including TCV, GIC, Baillie Gifford, Madrone Capital Partners, Durable Capital Partners, Valiant Capital Management, and Base10, all of which invested in the equity. A valuation of $7.4 billion or on land, the outflow may not be as expected, but it is still water, which, in today’s climate, counts for something.

Pictured above: Brex co-founder and CEO Pedro Franceschi