Charge card startup Brex aims for decacorn success

By now, Brex, the young startup that is trying to reinvent corporate credit and charge cards, is well-known in Silicon Valley. The tender age of the company’s co-founders, Henrique Dubugras and Pedro Franceschi, the big-name backers, the $125 million Series C announced last month, the aggressive billboard advertising in San Francisco, and the company’s torrid growth have all contributed to the swirl of attention. But, of course, it was the valuation at the last round —which placed Brex into the fintech unicorn club — that tops the list.

Recently, Brex offered up a new reason for chatter as it unveiled its new, generous rewards program that was purpose-built for the kind of entrepreneurs who aspire to match Brex’s success. But lost in the buzz are the specifics of how Dubugras and Franceschi have approached the arcane challenge of building a payments start-up.

To better understand that, chief executive Dubugras opened up about his and Fraceshi’s previous start-up,, which was acquired by newly public Brazilian credit card processor StoneCo, the challenges of scaling quickly, how a Brex card compares to traditional corporate card products and the company’s plan to navigate the ups and downs of business cycles. Finally, Dubugras spoken candidly but confidently about the considerable pressures facing the company now that everyone is watching.

Gregg Schoenberg: It’s good to connect again, Henrique. As you know, Brex has gotten a lot of press for having gone from from zero to fabulous in a short time. But for those who have missed the Brex story, what problems are you solving for start-ups?

Henrique Dubugras: One is a case where the founder can’t get a credit card because they don’t have a FICO score or can’t provide a personal guarantee. Another case is when a founder can get a card, but doesn’t want to provide a personal guarantee.

GS: Which is understandable.

HD: Yes, I think it’s not a very smart idea. Brex can solve that because we can issue them a card now without a personal guarantee. Finally, there’s the founder who doesn’t care about the personal guarantee, but there are other things related to the experience of having a credit card that could be much better, and we‘ve solved for that.

GS: The first two speak to a differentiated underwriting approach, but that third issue seems especially challenging.

HD: Yes. On the underwriting side, we take into consideration your cash balances, and the VCs that invested in you. It’s a Silicon Valley way of underwriting that allows you to go from zero to a working card in like five minutes. But in terms of the third use case, yes, we had all of these people telling us, “Hey, it’s impossible to rebuild credit card systems from scratch. No one has done it in the last 20 years.” Success

GS: That’s why I want to discuss, because I think it provides insight as to how you were able to disprove doubters.

HD: Well, we had built a payments company before, so we kind of knew how to do it and just decided to rebuild everything from scratch. You saw the Stone IPO, right?

GS: I did, and buried deep in the footnotes of the S-1, it points out how much it spent on the remaining amount of for in 2016. So while you and Pedro built something that was a success, it wasn’t like you were able to buy an island with your proceeds.

HD: There’s another part that wasn’t part of the IPO, but no, we still can’t buy an island.

GS: And this narrative that you and Pedro were able to come here from Brazil and in short order wave in all of this amazing funding because you had a huge exit is not accurate. Instead, I see two guys who navigated a very bureaucratic financial system—

HD: Yes.

We had this experience that was pretty unique compared to US payment companies or ones from any other place.

GS: —and figured out a way to build something that was successful.

HD: Correct, but keep in mind that we built more than a product. We built an organization. It had over 100 people, was profitable, had substantial market share, and it got acquired.

GS: To me, a big aspect is that you did it in a Brazilian fintech bootcamp of sorts, because building a payments company there, that achieved scale, when you did it, was hard.

HD: It was really hard. And volume-wise, is a big part of Stone today.

GS: You also had to deal with the regulators quite a bit?

HD: Yes. The Central Bank decided to start regulating financial businesses around the time we started

GS: provided the short-term financing to all of those merchants doing business online, right?

HD: Correct. We had to raise debt in Brazil in order to factor the receivables to merchants, because prepayments are a big part of the market. We also rented an acquiring license instead of having one ourselves. So, yes, we had this experience that was pretty unique compared to US payment companies or ones from any other place.

GS: I think it would’ve been very hard for someone in the US payments ecosystem to have been confronted with that kind of diverse challenge and come out on top. It seems like a big part of how you hooked those early investors, people like Max [Levchin] saying, “I want to invest in you no matter what you build. I really like your talent.”

HD: Correct. And because Max understood payments so well, he could tell that we knew what we were doing in our area. The same is true for Ribbit Capital, which knew about

GS Seeing Max invest in a payments company is different than Max investing in a bunny rabbit start-up. In a space like payments, I think it matters a lot that he was behind you early.

HD: True.

GS: So returning to Brex, I’m interested in the rewards program you just announced, which is paradigm-shifting. Your rewards are designed to be used on an ongoing basis as opposed to being accumulated, right?

HD: Exactly. We want you to use all of the rewards, so that every single day you can have the best experience. Also, credit cards have these footnotes saying, “Hey, you can get up to these caps, restrictions and limits,” etc.

GS: Trying to prevent people from optimizing.

HD: Yes. We take a very different approach, where we’re like, “Hey, we’re not going to limit and punish good users and people who want to just use one credit card by adding all these limits and restrictions.”

GS: What’s the Brex Exclusive concept?

HD: The concept is that if Brex is your only card, you get all these benefits. But if it’s not your only card, you can still use Brex, but then you just get reduced benefits.

GS: Couldn’t you argue that right now, Amex, or Chase, or Capital One doesn’t care about your rewards offering? It’s akin to the early days of the roboadvisor space. But as you get bigger, wider in scope and peskier, what’s to stop Chase from introducing the unicorn card with a bounty of rewards?

HD: One is the effect on their legacy technology. You can say, “Why don’t they just change their technology,” right? Well, they have all these regulatory bodies that would say “No, you can’t change your entire technology system, because if you mess up, the whole US financial system might be impacted.”

GS: Can you give a specific example of how this would play out?

HD: Take the credit limit side. All these companies are built to have these static credit limits in which they set their credit limit today and they don’t look at it for two months, three months, six months, etc…

We don’t want to be the stupid company that raises a bunch of money and then starts doing all these stupid things.

GS: Right. But are you comparing a charge card versus a charge card, or a charge card versus a credit card?

HD: Brex is a charge card, but it doesn’t really matter for this concept, because my point is the technology of changing the limit every single day based on real-time data versus the system they have. Implementing a real-time system would be a fundamental shift for them.

GS: What about this idea that you have credit limits that are ten times the amount versus a traditional card? It’s cool, but you guys have access to lots of analytics and data, so you’re not really taking a huge amount of risk.

HD: That’s correct, which is why we have zero losses today.

GS: Today?

HD: To date.

GS: Impressive. Let’s talk about Sutton Bank, which is your issuer bank that you needed to access the Visa Network. What would you do if you got approached by another issuer bank that said, “I love what you’re doing, can we be an issuer bank too?”

HD: It would be something we would consider, but it’s not something we’re focused on right now. We use their license to issue, but we basically do everything. We do the underwriting. We do the technology and everything.
Growth Plans

GS: You’ve been public about wanting to grow out of the start-up world. Where’s next?

HD: We do want to go to a more traditional businesses, a little bit more mature and outside of technology. That’s something that we’re going to probably do sometime next year, but we have to adapt our underwriting model and our product.

GS: Rewards too, right? I can’t see a lot of traditional businesses caring as much about AWS credits.

HD: There’s nothing besides cash back that matters to these companies. We’re going to adapt because that’s what they care more about.

GS: What do you think of this whole blitzscaling ethos?

HD: I’m reading the book right now, actually, but I haven’t reached a conclusion yet. All the examples in the book seem like two-side marketplaces with a lot of network effects and a winner-take-all. That’s not us.

GS: Regardless of model, to say that you’re going to let some fires burn and ignore them… I don’t know if that flies in fintech or in financial services in 2018.

HD: Yes, fintech has this other aspect of it because it’s people’s money. You can’t let buyers burn. But I think there are other aspects to it. Are we going to reach a plan for success or hedge for failure? Are we going to hire faster or hire slower?

GS: Everybody who has raised a big round like you is in hiring mode. Have you encountered recruitment challenges given your youth?

HD: Not in the US. In Brazil, we’ve felt it. There’s so many examples of successful companies founded by very young people. I mean, maybe we’re one year younger than the other guy who did something really good.

GS: What about the idea of building a common culture, because the ink on your business cards is still sort of wet and you’re hiring all these people so quickly?

HD: The question of what kind of culture we want to build is something we think about a lot. Some companies are on the Google or Airbnb side, like, “Hey, we’re a family.” Some are more like Netflix or Apple, which is more like a professional sports team. We’re definitely more towards Netflix or Apple than we are towards Google or Airbnb.

Building a 10- to 20-billion-dollar business is hard. It’s really, really hard.

GS: What do you mean by more professional?

HD: More work-driven, and we’re not into the whole perks thing. Plus, we really like to pay people higher salaries and give them smaller stock grants, because a lot of people in Silicon Valley don’t believe in stock. We’ve said, “Yes, we’ll give you more cash,” and then we save the stock, not for the people who negotiate the best, but for the people who are performing the best over time.

GS: What’s your thinking?

HD: There’s this super premium given to risk, right? It’s for the people who joined when we were nothing and nobody believed in us. That premium is too big, I think, compared to people who will work in this company for a long period of time. I think a lot more of the premiums should be for someone who has spent six, seven, eight years busting their ass and growing this company.

GS: Let’s touch on where you going to put these people: Brazil or “Transaction Alley” in Atlanta?

HD: We’re thinking about it. I think Vancouver is the main candidate for now.

GS: Why there?

HD: You can get visas really quickly.

GS: Given your need for speed, are you worried about controlling your spending while you look to grow quickly?

HD: Honestly, we have the opposite problem. Keep in mind that was built with $300,000. It was the only money we raised for that company.

GS: Really?

HD: Yes. For us, not spending money is the default. But now we have a lot of money, and we need to invest it to grow faster, so we are constantly actively thinking of ways of spending more.

GS: It sounds like you’re struggling with this.

HD: It’s just hard because we don’t want to be the stupid company that raises a bunch of money and then starts doing all these stupid things. But we also need to invest to grow faster, so finding that balance—

GS: —Acquiring customers can be expensive.

HD: Yes, but for us, that’s not even the thing because our market is so niche, I can’t just put a couple hundred grand on Google. It just doesn’t work because we’re so niche.

GS: Right.

HS: But we definitely have an issue of how to deploy capital more than we have and how not to do it.

GS: Well, I suppose you could just advertise on more billboards.

HS: Actually, that’s cheap! There was an article about this. We spent $300,000 for three months for all of San Francisco.

GS: I’d like to close by talking about what it means to be one the hottest young start-ups in the Bay Area. And the fact that at some point, a recession is coming. To the first issue, are you concerned that given your rapid ascent, you can’t make mistakes quietly because everyone is watching you?

HD: Yes. I definitely feel that pressure. But I feel more confident because we’re doing this for a second time, in a market that we know. And I really like our executive team. Plus, there’s a lot of stuff we’ve already figured out with in terms of management and culture and what the scale problems will look like.

I think that anyone who says they know how to deal with a recession, it’s not true.

GS: Still, it’s a lot of pressure given your valuation and the expectations that come with it.

HD: Yes. I’m definitely scared because it’s a lot of responsibility, and I won’t consider Brex a success unless I give my investors a ten- to twenty-X return. Building a 10- to 20-billion-dollar business is hard. It’s really, really hard.
Business Cycle

GS: You have to become the next Stripe… Let’s conclude by talking business cycles. When I talk to many CEOs, they will feed me a line like, “Actually, we’re going to be great in a recession — even better under a recession,” right? While true in some cases, it’s mostly false.

HD: Yes.

GS: So what happens when the business cycle changes, there isn’t as much VC activity, and you still have to figure out how to grow?

HD: I think that anyone who says they know how to deal with a recession, it’s not true. Because every single recession is very different than the other. 2008 was completely different than 2001. There’s no one person who knows how to deal with all of them because they’re all very different.

GS: I agree.

HD: The only thing we can do is the big-picture playing, by one, raising more money than you need — which we did — and two, having levers of spending that you can cut very quickly.

GS: Perhaps this is where your Brazilian lineage helps, because you grew up in a country that had a lot of volatility.

HD: 100 percent.

GS: With prices changing on the store shelves from the morning to the evening.

HD: Well, we weren’t born in that time, but we heard our parents talk about it.

GS: Oh that’s right. I forgot.

HD: The thing we learned most from that is that nothing’s done until it’s done. Coming from Brazil, this fact-oriented culture was ingrained in us. We didn’t even celebrate closing the round here before the wires hit.

GS: Last question: If you ultimately face a worthy competitor focused squarely in your space, will it be from another Henrique and Pedro, or will it be from a big player?

HD: It would be a fintech company that adds this product. I don’t think it’ll be Amex or Chase. I think it will be a PayPal or a Square or an Adyen or a CyberSource. They are not the legacy guys, so they don’t have the problems that banks have.

GS: Gotcha.

HD: But I don’t think it’ll be another Henrique and Pedro, honestly. So…

GS: Well, I wish you luck on that.

This interview has been edited for content, length and clarity.

Convene uses landlord partnership model to outclass WeWork

Recent reports that Softbank may take a majority stake in WeWork has added fuel to the already hot market for start-ups in the workspace and property tech sectors. One of the more compelling companies that stands to benefit from this trend is New York-based Convene. Started by co-founders Ryan Simonetti (CEO) and Chris Kelly (President), 500-person strong Convene has distinguished itself as a top-tier provider of meeting, event and flexible workspace offerings in its 21 locations. But unlike freelance-heavy WeWork and other co-working companies who cater to 1-10 person companies, Convene puts owners of Class A office buildings at the center of its business model. The goal is to help these landlords provide tenants with the high-end of amenities of, say a unicorn tech startup.

On the back of the company’s recent $152 million Series D, Simonetti and Kelly were eager to discuss new initiatives including a co-branded turnkey workplace and amenity solution and their plans to launch additional Convene locations, including London. They also elaborate on how they plan to benefit during the next recession and open up on their differences with category giant WeWork. Finally, they explain why paintings by renowned artists including Picasso and Calder are tucked into corners of the company’s first, soon-to-be-opened members club at Rockefeller Center.

Gregg Schoenberg: Ryan and Chris. It’s great to see you both. To kick things off, I want to establish that Convene is not a typical startup in that you’ve been around for about nine years.

Ryan Simonetti: Yes, is that called being washed-up in the start-up world?

GS: Not necessarily. Tell me about where the idea for Convene came from?

RS: Chris and I met during our freshman year orientation at Villanova University, ended-up pledging the same fraternity and spent a lot of time getting to know each other. From the beginning, we were probably two of the more entrepreneurial guys at Villanova. We sold used textbooks, spring break trips, parties into Philadelphia. If there was a way to monetize something in college, we were the two guys that were trying do it.

GS: Two scrappy guys from Villanova.

RS: Yes, we’ve always joked that we were probably the only kids at Villanova who didn’t have our parents’ credit cards.

GS: So years later, what was that catalyzing moment where you said, “Okay, here’s the idea for Convene”?

Chris Kelly: I remember two phone calls from Ryan that represent the earliest seeds of Convene. The first phone call was in the middle of the financial collapse, and in that phone call, Ryan said, “We’re about to witness the largest shift of wealth that the world has ever seen and we have to figure out how to be on the winning end of that.” Then a few weeks later, Ryan called me up and introduced the crazy idea for Convene.

GS: And what was that specific pitch?

CS: He walked me through the Grand Hyatt in Midtown Manhattan and said, “Look at the way these guys are doing business. This is a $60 million a year catering and meetings operation that was in essence being outsourced to hotels.”

“Just like Airbnb would tell you that their primary stakeholder is the homeowner, or OpenTable would tell you the primary stakeholder is a restaurateur, we view the building owner as our primary stakeholder.”

GS: And you’re saying hotels weren’t doing a great job?

CS: Hotels simply didn’t have the sensibility about what people really need in a business environment. They treated a shareholder meeting like a wedding with a projector. And we saw a huge opportunity to create spaces that met enterprise workplace requirements.

GS: So fast forward to today and tell me exactly what Convene is, because I think sometimes people struggle and just say, “Well you’re a WeWork competitor on the premium end.”

RS: We partner with Class A building owners to design places where people can meet, work and be inspired. It’s not any more complicated than that.

CS: To build on that, you could say that we’re essentially allowing landlords to offer Googleplex-style workplace experiences.

RS: That’s a big challenge for even large organizations. Look at Google, Facebook or JP Morgan. These companies can deliver an amazing experience at their corporate headquarters location. But in their smaller offices, it’s really tough to deliver a corporate HQ experience if you only have five, ten, or 15,000 square feet. You can’t build the kitchen infrastructure, or the gym, or all of those other things. So to Chris’s point, we’re democratizing access to that experience, and doing it with the landlord as the key partner.

GS: So the landlords are the core client?

RS: Just like Airbnb would tell you that their primary stakeholder is the homeowner, or OpenTable would tell you the primary stakeholder is a restaurateur, we view the building owner as our primary stakeholder. And what we’re helping them do is respond to the changing demands of today’s tenant, who want increased flexibility and better agility to adapt to change.

GS: I take it marrying technology infrastructure to the physical spaces is key to that, which is why you recently bought Beco. What exactly do they do?

RS: Beco is a workplace analytics platform that’s using sensor-based technology to help us, our landlord partners and our corporate clients better understand the way that people are actually interacting with space and services.

“But what really differentiates us strategically is that we’re not trying to build our own supply chain or our own inventories.”

GS: As you contemplated that acquisition, were you worried that it might be perceived to some of your traditional clients as Big Brothery?

RS: Look, everyone today is concerned about data privacy, and rightfully so. The way that the technology actually operates is that the actual users are anonymous to us.

GS: So is that data anonymous, or anonymous anonymous?

RS: Anonymous anonymous, meaning all we’re capturing is a random ID assigned to a phone, and that ties back to the sensor and data analytics platform.

GS: Do you have to opt in?

RS: It’s all opt in.

GS: Okay, I want to turn to the big gorilla in the broader flexible workspace category, because right or wrong, everyone, including Convene, gets compared to WeWork.

RS:Look, if we think about the macro trends that are shaping and changing not just the way that we work, but also the way that we live and travel, I would argue that WeWork and us have a similar view of the world and the future. But from a business model perspective, the quality of the product that we’ve built, the level of service that we deliver, the strategic nature of our partnerships with building owners, I don’t view us as directly competitive.

GS: I appreciate that WeWork ultimately caters to smaller sized end-users than Convene, so in that way you’re different. But it’s also true that even though Red Bull and Coca Cola are different drinks, you’re not going to drink a Coke and a Red Bull at the same time.

RS: From an analogy perspective, there’s a difference between Planet Fitness and Equinox, right? Would you argue that they’re competitive? Maybe. But the way I think about office real estate is Class C, Class B, Class A. Convene is a Class A partner to landlords.

GS: Right, but WeWork, with all that current and possibly future cash from Softbank, is moving upmarket.

RS: Sure, as they move more into enterprise and upmarket, of course, they’ll be competitive. But what really differentiates us strategically is that we’re not trying to build our own supply chain or our own inventories. We’re partnering with the existing supply chain to create a new category of supply that speaks to the collective demand from our customer demographic.

GS: As a service provider, I get that. But what happens when the next recession comes —

RS: — Yes, by the way, we’re excited for the next one.

GS: Because the knock on WeWork and other companies in the broader sector is that when the recession hits, the blood will hit the fan because of those short-term tenant leases.

RS: Well, right now, you see a lot of capital flowing into the sector and you have platforms that probably shouldn’t be here as well.

GS: Let’s take Brookfield. WeWork has a relationship with Brookfield. You guys have a relationship with Brookfield. But I think the difference is this: if bad things happen in the economy, they have to hope that WeWork is going to effectively manage those short-term lease obligations. From my outsider’s perspective, that looks to me like a counterparty relationship. But in Convene’s case, it looks more like an aligned partnership. After all, Brookfield, as well as Durst and RXR, are on your cap table.

RS: Every deal structure is aligned and even the leases we have are aligned. And when the recession hits, we will use it as an opportunity to deepen our landlord partnerships and take market share.

GS: With whose balance sheet?

RS: We’re using the landlord’s balance sheet to grow our business.

CS: And WeWork is using the Softbank balance sheet to grow their business.

GS: Could you elaborate?

RS: WeWork did us the greatest favor in the world, because our strategy since day one has been to make the landlord a key partner and stakeholder. Do you want to know who has the cheapest cost of capital? Cheaper than Softbank’s? It’s the landlord’s balance sheet. Their cost of equity capital is like six to eight percent.

GS: Really?

RS: Yes. If you think about the investor-anticipated yield in asset classes, real estate sits between a fixed income expectation and an equity capital markets expectation.

GS: Okay, but how does using the landlord’s balance sheet enhance your approach strategically?

CS: Because there are elements of the way we structure our deals that allow our performance to be variable. And by using the landlord’s balance sheet to grow our business, it aligns us and the landlord to be able to ride through a recession together.

“Do you want to know who has the cheapest cost of capital? Cheaper than Softbank’s? It’s the landlord’s balance sheet.”

GS: Have many of the nation’s Class A landlords have bought into your model?

RS: If you look at our current partners that we’re actively working with, I think they globally control over 250 million square feet of Class A office space. So if 10% of that moves to flexible consumption, that means Convene could have an addressable market of 25 million square feet of inventory.

GS: So given the way you’re talking, would it be fair to say that your landlord partners have recognized that the flexible workspace trend is here for the long-term?

CS: How we consume real estate is undergoing a fundamental shift. This is the same conversation that was happening in the transportation industry 15 years ago. It’s the same thing that was happening in the travel industry when Airbnb was starting. That same conversation is happening today within the existing supply chain. So, yes, It’s a buy, build, partner decision that is being made in every landlord’s office around the country today.

GS: It still sounds odd to hear the phrase, “consume real estate.” Maybe I’m old-school, but you guys are down to earth. Do you find that language odd?

CS: Actually, what we’re seeing is the consumerization of real estate. Real estate was historically very B2B, very financially driven. Today, it’s being driven by human experience, So yes, brands matter, the customer experience matters. And that consumerization of real estate actually is happening.

GS: I take it that’s why you launched this new managed workplace solution that features the services you bring, but enables a client to use its own name?

CS: What makes that platform unique is that it’s co-branded. It’s an endorsed brand model by Convene, which means that the Convene brand standards, the Convene operating model, the Convene staffing model and the Convene university training program comes with it.

GS: So Intel inside?

CK: Yes, which gives clients the best of both worlds. It gives them the brand and reach and expertise of Convene. At the same time, they can now have something that feels more authentic and unique to them as a landlord.

GS: I want to shift to the future of work, which is something you both have spoken about in pretty bold terms. We’re at this amazing Convene members club, which sort of feels like a SoHo House except we’re in midtown. And you’ve talked about how an experiential personal life will be closer to a work life. Where is all this going?

RS: From a trend perspective, we believe fundamentally in what we call work/life integration. It used to be that you go to work and at the end of the day that stops and then you move to the rest of your life. That’s not really the way it works anymore. And when we think about some of the services that we’ve launched over the last couple years, it’s been with that idea in mind.

GS: Are you creating future offerings in-house or partnering?

RS: Actually, we’re about to announce a partnership on the wellness side, where we’re taking some of the wellness elements and starting to incorporate them into the broader Convene ecosystem.

GS: Do either of you guys have children?

RS: Yes, we both do.

GS: Because if you want to talk about quality of life and the war for talent, it seems like a natural extension to see if your plan to help the workforce addresses the challenges of working while raising young kids. Are such extensions on your whiteboard?

RS: Yes, they’re definitely on the whiteboard and some of those things are already in process. The difference is partnership. When I think about the way that we’re building our platform and the way that WeWork is building theirs, I think about us as being an open-source platform, Do you think you need to do everything yourself because you’re the best in the world at everything, or do you want to work with best-in-class partners?

GS: So for something like childcare, you’d bring in a partner?

RS: If we decide, which I’m not saying we are, to get into childcare, we’re going to do that with a proven partner that has a track record of delivering that experience and doing it really well.

GS: How does Convene fare in a world where remote work becomes an even bigger trend?

CS: Actually, there’s a difference between remote work and mobility. Remote work is the traditional concept of working from home, and we’re actually seeing some backlash now of companies who are really trying to drive culture, and want more face-to-face interaction.

GS: Does that show up in the design of your spaces?

CK: Yes, the built environments of our offices are changing from looking like cubicle farms where everybody reports to their desk and their computer to operating a lot more like a digitally-enabled campus. And the decoupling of people and their work from their desk is opening up an opportunity to build what’s called an activity-based workplace, where there are different types of spaces that are specialized and built for specific uses.

GS: You guys don’t even have offices, right?

CK: Right. None of us have offices.

RS: Also, people used to talk about remote work in magical terms. They’d say, I’m not going to need an office. We don’t believe that this is the case. We think that there a few things that will continue to matter to organizations. One is brand, two is culture, three is collaboration. And until technology can somehow magically replicate that experience, we think that the best ideas will come from face-to-face interaction.

GS: I have two important last topics to cover. First-off, why on earth, nestled into a semi-remote corner of this club, do you have a Picasso painting hanging on the wall? Because in my experience, usually people like to show off the Picasso if they have one.

RS: Ha, well, the Picasso, as well as all of the other amazing art that you’ve seen at Club 75, is part of the partnership here with the landlord.

GS: Well, it speaks to the confidence they have in you.

RS: Yes, but it also speaks to the experience we’re creating. We think about space as the body language of an organization. Space has the ability to move people and we think that art is a big part of that.

CK: It also demonstrates the extent to which landlords are committed to delivering a great experience.

RS: Right. Having a coffee next to a Calder or a Picasso can put you in a totally different headspace.

“There’s no amount of money in the world that can buy you a partnership with Brookfield or a half a dozen landlords that we’ll be powering next year.”

GS: Well, I’m glad you didn’t use shareholder money to buy these works, which brings me to my last topic. At this point, are you concerned about profitability?

CS: Yes, we are and that’s another one of the differences between us and others. In fact, we’ve been cashflow positive since Day one. And as an organization, profitability has always been something that we think is very important.

GS: It’s because you don’t have enough VCs on your cap table. Speaking of which, you’re obviously aware of the fact that Softbank and other megafunds may helicopter drop a lot more money into this space, which could change the competitive dynamics.

RS: First of all, the last time I checked, we were the second most capitalized platform in the category, by dollars raised. And if you look at our partnership-driven approach, where the landlord’s balance sheet is funding a lot of our growth, the actual capital that’s being invested in the platform is multiples of the $260 million we’ve raised.

But to your point, our concern isn’t so much about the capital that’s flooding in, There’s no amount of money in the world that can buy you a partnership with Brookfield or a half a dozen landlords that we’ll be powering next year. And money, whether its from Softbank or anyone else, can’t give an organization its corporate culture. And I think one of the reasons we’ve been selected as the partner to some of the most discerning customers in the world is because of the fact that everyday, we deliver consistently against a premium experience.

GS: Well, on that note, Chris and Ryan, I’d like to thank you for your kind hospitality.

RS: It’s been our pleasure and thank you.