Brex goes on a shopping spree and luckily the startups are targeting a discount.
The lively $ 2.6 billion credit card startup announced Tuesday that it has acquired blockchain startup Neji, web publishing startup Compose Labs, and internal database company Landria. The deal amounts were not released, but Brex co-founder and co-CEO Henrique Dubugras told Business Insider that it was not an "exorbitant" amount.
"Even if the environment goes crazy, we want to continue making acquisitions," said Dubugras. "We are still open to business."
In fact, it's a crazy environment, especially for startups in Silicon Valley. Investors are looking at the downturn in public markets and holding on to their reserves as they warn startups of all sizes to track combustion rates and earnings metrics for survival. There is no guarantee that risk finance will come after three, six or even twelve months, investors said. Many startups looking for a cash infusion had to consider massive layoffs before they could completely close their doors.
That makes a particularly attractive buyer's market.
"Because of the markets, there will be opportunities that were not possible before," said Dubugras. "The ratings are correcting and many startups are currently unable to collect [funds] so it is better for them to work together on things. We are in a position with a lot of money and a strong business model, so we are in one position with many of them To help businesses. "
This is part of what makes Brex a prudent buyer – but also a strong runaway among startups. The three-year-old company is younger than most other potential buyers, but has also amassed risk finance, debt finance, and a valuation that is more common among much older companies. And with just over 400 employees, Brex must grow strategically like a much larger company, said Dubugras.
The startup is now investigating three different types of acquisitions, two of which are represented by the group of acquired companies, although Dubugras was unable to go into details. There are Acqui-Hires where the acquiring company tries to hire the people behind the company without worrying about what exactly they have been working on. Then there are product acquisitions where the main goal is technology and intellectual property. Last is a full corporate acquisition where the acquiring company tracks everything from a company's customers to market share to key stakeholders. Tuesday's announcement included the first two types, Dubugras said.
The deals were of different lengths, he said, but all were closed between October and January, while the founders were optimistic and the bull market was at full steam ahead. Now it looks very different. The only 24-year-old Dubugras faces his first major test as a young founder and has so far remained optimistic.
"It is impossible to know how the rest of 2020 will go," he said. "There is what Warren Buffet said that you should be afraid when people are greedy and greedy when people are afraid. Acquisitions are the way to be greedy when people are afraid, you know."