Blog: Lending Briefing: The SMB Brexit, and digital lending VC funding – Tearsheet – Tearsheet

With Brex out, how do its competitors plan to serve SMBs? 

Brex took over the headlines these past few days after its announcement that it will stop serving traditional small businesses, focusing only on tech startups with capital backing. 

This news triggered many conversations and opinions in the industry, giving us all a break from talking about crypto and layoffs – the spotlight is now on corporate expense fintechs, which were industry darlings not too long ago. 

Long story short – the fintech realized SMBs were more complicated than anticipated. It was spreading itself too thin, according to founder and co-CEO Pedro Franceschi, and it couldn’t serve either small businesses or startups well. 

“Over time, we realized that our startup customers – the very customers we started with – were growing very fast, and needed Brex to scale with them. Scale AI went from 5 people when we started serving them, to almost 1,000. Brex didn’t work as well for larger companies,” the executive explained in a Twitter thread

Brex started out around five years ago as an expense management solution for startups and SMBs, expanding in the latter segment in 2020. Revenues mostly came from interchange fees, as the main product was corporate cards. 

Meanwhile, competitor Ramp also started with offering free services and corporate cards, but its approach is now centered around building software designed to help SMBs save money. Most corporate card companies were incentivizing spending, offering lots of rewards schemes, as this fuels interchange revenues. But small businesses actually want savings, according to Colin Kennedy, chief business officer at Ramp.


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