How the 22-year-old founders of Brex built a billion-dollar business in less than 2 years

When Brazilian-born Henrique Dubugras and Pedro Franceschi met at 16 years old, they bonded over a love of coding and mutual frustrations with their strict mothers, who didn’t understand their Mark Zuckerberg-esque ambitions. 

To be fair, their moms’ fear of their hacking habits only escalated after their pre-teen sons received legal notices of patent infringements in the mail. A legal threat from Apple, which Franceschi received after discovering the first jailbreak to the iPhone, is enough to warrant a grounding, at the very least.

Their parents implored them to quit the hacking and stop messing around online.

They didn’t listen.

Today, the now 22-year-olds are announcing a $125 million Series C for their second successful payments business, called Brex, at a $1.1 billion valuation. Greenoaks Capital, DST Global and IVP led the round, which brings their total raised to date to about $200 million.

San Francisco-based Brex provides startup founders access to corporate credit cards without a personal guarantee or deposit. It’s also supported by the likes of PayPal founders Peter Thiel and Max Levchin, the former chief executive officer of Visa Carl Pascarella and a handful of leading venture capital firms. 

Brex is off to one of the most exciting starts we’ve ever seen,” IVP’s Somesh Dash said in a statement.

The financing makes them some of the youngest unicorn founders in history and puts them in a rare class of startups that have galloped into unicorn territory at such a fast clip. Brex was founded in the winter of 2017. It only launched publicly in June 2018.

How’d they do it?

“I’ve had two failed attempts, one successful attempt and one on the way to being a successful attempt,” Brex CEO Dubugras told TechCrunch while reciting a lengthy resume.

At 14, when most of us were worrying about what the first year of high school would bring us, Dubugras was more concerned about what his next business attempt would be. He had already built a successful online game but was forced to shut it down after receiving those patent infringement notices.

Naturally, he used the cash he earned from the game to start a company — an education startup meant to help Brazilian students apply to American schools. He himself was hoping to get into Stanford and had learned quickly how little Brazilian students understood of the U.S. college application process.

In some respects, the company was a success. It garnered 800,000 users but failed to make any money. His small fortune wasn’t enough to scale the business.

“There aren’t a lot of VCs in Brazil that are willing to fund 15-year-olds,” Dubugras told TechCrunch.

Shortly after folding the edtech, he met Franceschi, a Brazilian teen from Rio — Dubugras is from São Paulo — who understood his appetite for innovation and was just as hungry for success. The pair got to talking and because of Franceschi’s interest in payments, they started Pagar.me, the “Stripe of Brazil.”

Pagar.me raised $30 million, amassed a staff of 100 and was processing up to $1.5 billion in transactions when it sold. Finally, they had a real success under their belt. Now it was time to relocate. 

“We wanted to come to Silicon Valley to build stuff because everything here seemed so big and so cool,” Dubugras said.

And come to Silicon Valley they did. In the fall of 2016, the pair enrolled at Stanford. Shortly after that, they entered Y Combinator with big dreams for a virtual reality startup called Beyond. 

“I think three weeks in we gave it up,” Dubugras said. “We realized we aren’t the right founders to start this business.”

He credits Y Combinator with helping him realize what they were good at — payments.

As founders themselves, Dubugras and Franceschi were hyper-aware of a huge problem entrepreneurs face: access to credit. Big banks see small businesses as a risk they aren’t willing to take, so founders are often left at a dead-end. Dubugras and Franceschi not only had a big network of startup entrepreneurs in their Rolodex, but they had the fintech acumen necessary to build a credit card business designed specifically for founders.

So, they scrapped Beyond and in April 2017, Brex was born. The startup picked up momentum quickly, so much so that the pair decided to drop out of Stanford and pursue the business full time.

Simplifying financial access

Brex doesn’t require any kind of personal guarantee or security deposit and it doesn’t use third-party legacy technology; its software platform is built from scratch.

It simplifies a lot of the frustrating parts of corporate expenses by providing companies with a consolidated look at their spending. At the end of each month, for example, a CEO can easily see how much the entire company spent on Uber or Amazon. 

Plus, Brex can give entrepreneurs a credit limit that’s as much as 10 times higher than what they’d receive elsewhere and they can issue cards, virtual cards at least, moments after the online application is complete.

“We have a very similar effect of what Stripe had in the beginning, but much faster because Silicon Valley companies are very good at spending money but making money is harder,” Dubugras explained.

As part of their funding announcement, Brex said it will launch a rewards program built with the needs and spending patterns of founders in mind. Beyond that, they plan to use the capital to hire engineers and figure out how to grow the business’s client base beyond only tech startups.

“We want to dominate corporate credit cards,” Dubugras said. “We want every single company in the world, whenever they do businesses expenses, to do it on a Brex card.”

DoorDash customers say their accounts have been hacked

Food delivery startup DoorDash has received dozens of complaints from customers who say their accounts have been hacked.

Dozens of people have tweeted at @DoorDash with complaints that their accounts had been improperly accessed and had fraudulent food deliveries charged to their account. In many cases, the hackers changed their email addresses so that the user could not regain access to their account until they contacted customer services. Yet, many said that they never got a response from DoorDash, or if they did, there was no resolution.

Several Reddit threads also point to similar complaints.

DoorDash is now a $4 billion company after raising $250 million last month, and serves more than 1,000 cities across the U.S. and Canada.

After receiving a tip, TechCrunch contacted some of the affected customers.

Four people we spoke to who had tweeted or commented that their accounts had been hacked said that they had used their DoorDash password on other sites. Three people said they weren’t sure if they used their DoorDash password elsewhere.

But six people we spoke to said that their password was unique to DoorDash, and three confirmed they used a complicated password generated by a password manager.

DoorDash said that there has been no data breach and that the likely culprit was credential stuffing, in which hackers take lists of stolen usernames and passwords and try them on other sites that may use the same credentials.

Yet, when asked, DoorDash could not explain how six accounts with unique passwords were breached.

“We do not have any information to suggest that DoorDash has suffered a data breach,” said spokesperson Becky Sosnov in an email to TechCrunch. “To the contrary, based on the information available to us, including internal investigations, we have determined that the fraudulent activity reported by consumers resulted from credential stuffing.”

The victims that we spoke to said they used either the app or the website, or in some cases both. Some were only alerted when their credit cards contacted them about possible fraud.

“Simply makes no sense that so many people randomly had their accounts infiltrated for so much money at the same time,” said one victim.

If, as DoorDash claims, credential stuffing is the culprit, we asked if the company would improve its password policy, which currently only requires a minimum of eight characters. We found in our testing that a new user could enter “password” or “12345678” as their password — which have for years ranked in the top five worst passwords.

The company also would not say if it plans to roll out countermeasures to prevent credential stuffing, like two-factor authentication.

Apple and Google Pay are finally coming to 7-Eleven this month

Sure, 7-Eleven’s never been particularly well-known for being on the bleeding edge — expect, perhaps, in its quest to push the boundaries of human beverage consumption. Still, the Japanese-owned convenience mega-chain has been notably slow on the uptake of mobile payment technology.

The company announced today that it will finally be bringing Apple Pay and Google Pay to “most” of its U.S. stores, starting this month. Interestingly, Samsung beat its two major competitors to the Slurpee slinger — likely the two companies reached some sort of mutually beneficial exclusivity agreement to help push the Galaxy maker’s payment system.

CEO Tim Cook announced earlier this summer that arrival at 7-Elevens was imminent, along with the CVS pharmacy chain. The addition of the payment options should go a ways toward helping mainstream this manner of mobile payment among many users. The company has more than 66,000 locations in 17 countries. The U.S. currently makes up about 14 percent of that market.

But where mobile payments have been associated with higher-scale retail outlets, the addition of a chain like 7-Eleven represents a more populous outreach among the more than three-quarters of Americans who currently own smartphones.

Chat app Line to raise $1.33BN via convertible bonds to double down on financial services

Move over stickers and games: Japanese messaging app firm Line has announced it’s raising around 148.1 billion yen ($1.33BN) through convertible bonds to fund aggressive expansion into the financial services business, Reuters reports. 

Line said it plans to spend most of the money on promoting its Line Pay service and for other new financial services by the end of 2021.

The messaging platform has been involved in payment offerings for some years, launching Line Pay at the end of 2014 — to let users make payments through the app at affiliated online and offline stores by registering their credit cards.

Line Pay also supports p2p payments between users of the platform, which has some 164M monthly active users in Japan, Taiwan, Thailand and Indonesia.

While popular in parts of Asia, the messaging platform has failed to grow usage beyond its core regions — unsurprisingly given how fiercely competitive the space is — with the likes of China’s WeChat and Facebook owned WhatsApp standing in its way. But while user growth has stalled, Line has managed to grow revenue from its existing user base. And doubling down on financial services looks to be its growth strategy going forward.

It has recently started experimenting with crypto — announcing the forthcoming launch of a cryptocurrency token (called Link) late last month, and developing its own blockchain to power it, in what looks to be a bid to drive user engagement on its platform. Though it has long used a digital currency (Line Coins) on its platform.

Earlier this year Line also announced the launch of a Singapore-based crypto exchange, called BitBox.

It’s not doing an Initial Coin Offering (ICO) for the Link token launch, presumably to side-step the legal questions around token sales. So the convertible bond sale looks to be its alternative (traditional) route for raise funds for the push to grow its financial services business.

In a statement today Line said it would issue zero coupon convertible bonds maturing in 2023 and 2025.

Reuters reports that a portion of the bonds will be issued to its South Korea-based parent Naver Corp to maintain its ownership above a certain level.

It added that Naver’s stake would fall to 70.42 percent from the current 72.86 percent when all the bonds are converted into stock.

Google is supercharging its Tez payment service in India ahead of global expansion

Google launched its Tez paymen app in India a year ago, and now the company is giving the service major push into retail as it prepares to expand it to other parts of Asia and beyond.

The app itself is being rebranded to Google Pay — bringing it in line with Google’s global payment service, which is available in 20 countries — but there are more tangible updates on their way. Most notably, Google is plotting to turn Tez Google Pay into an all-encompassing payment app for India.

The service started out in bank-based payments before adding bill and utility payments and messaging, but now Google is planning an extended push into retail, both online and offline. Economic Times recently reported on the rebrand and expansion.

The service already supports payments with some 2,000 apps and websites, including Goibibo and RedBus, but it is adding to that number and planning ‘deep’ integration with partners such as Uber and ticketing service BookMyshow. Google is also focusing on offline, and it said it is in the process of adding in-store payment support with a range of retail brands that will include Big Bazaar, e-Zone, and FBB.

Tez competes with dedicated payment services like Paytm and Mobikwik, and also WhatsApp — the Facebook-owned service that is India’s top messaging app but has struggled to win approval to launch an upcoming payment service due to concerns around its lack of a local office.

Already, Google’s service has made progress. The Tez app has pulled in 55 million downloads, and Google said it has racked up 750 million transactions with an annual run rate of over $30 billion. That, it said, has motivated it to look at overseas expansion opportunities.

Google’s India-based Tez service has been rebranded to Google Pay

Beyond the retail push, the service formerly known as Tez will also expand to cover micro-loans, bringing it into direct competition with startups like ZestMoney — which just closed an investment from Xiaomi this week.

Google said it has partnered with a number of India-based banks — including HDFC Bank, ICICI Bank, Federal Bank, and Kotak Mahindra Bank — to offer “pre-approved” loans to customers “in a matter of seconds” through the Google app.

These will be smaller than typical loans, especially those in the West. Loans on services like ZestMoney typically cover one-off purchases like electronics, education fees and more, CEO Lizzie Chapman told TechCrunch in a recent interview.

Finally, Google also plans to expand Tez Google Pay overseas. That means both adding Tez features to the Google Pay service worldwide, and taking the India-based service into new parts of Asia. That’ll require plenty of localization since the Indian version is heavily based around the country’s UPI payment system — which doesn’t translate overseas — but it’s a step in the right direction.

Google isn’t saying too much about which markets it might move into but you’d imagine Southeast Asia, which as plenty of similarities with India, will be top of mind.

Note: The original version of this story was updated to correct that the integration with banks doesn’t use Tez payment data to assess user creditworthiness. 

Japanese fintech startup Paidy lands strategic investment from Visa

A month after announcing its $55 million Series C, Japanese fintech startup Paidy has snagged a strategic investment from payment giant Visa.

Paidy didn’t disclose how much Visa put into its business, which has raised over $80 million to date, but it did say that it will work with the credit card giant to develop “new digital payment experiences” in Japan.

For those in need of a refresher, the Paidy service is aimed at making it easier to shop online in Japan, where credit card penetration is high but many consumers still opt for cash on delivery.

The startup asserts that cash accounts for some 40 percent of the country’s 16.5 trillion yen ($15 billion) annual e-commerce spend because credit card payments are cumbersome and cash is just more simple. It’s certainly true that whipping out your card and keying in digits is a pain, while Japanese systems layer on other security checks that make the process more tedious.

Paidy’s answer is an account tied to a customer’s phone number or email address that sits as a payment option at e-commerce checkouts. Payment itself requires entry of a confirmation code, and that’s it. Added to the simplicity, Paidy also offers various payback options to effectively give users the features of a credit card.

The company claims there are 1.5 million active Paidy accounts and it is aiming to grow that figure to 11 million by 2020. The main rocket for reaching that ambitious target is onboarding large retailers who integrate the service into their online sales process. That’s a tactic that has worked well for Paidy so far, but it’s also clearly an area where Visa’s network can be massively beneficial, especially if they are joint products on offer.

With Paidy operating like a virtual credit card system that rivals plastic cards, Visa has seen enough to warrant coming on board the project, according to Chris Clark, Visa’s Asia Pacific regional president.

“We have been following Paidy’s progress and the enhanced shopping experience they provide at the time of purchase. In Japan there is enormous opportunity to bring consumers more options to pay, whether all at once or in instalments, especially when shopping across multiple channels,” Clark said in a statement.

Paidy counts Itochu Corporation, Goldman Sachs, Eight Roads — the investment arm of Fidelity — SBI Holdings, SBI’s FinTech Business Innovation LPS, Arbor Ventures and SIG Asia as existing investors.

Lolli launches to give you free Bitcoin while you shop

Bitcoin has had tremendous success as a cryptocurrency, with millions of people around the world having traded the currency through command lines and wallets like Coinbase. Yet, for all of the excitement in the space, BTC remains largely the province of technically-sophisticated finance and software junkies and their Uber drivers. How can everyone in the world use crypto?

For Alex Adelman, that challenge proved an enigma. Partnering with Matt Senter, he had previously founded Cosmic Cart, a “universal shopping cart” that would allow companies to sell their goods anywhere online. The company was eventually acquired by POPSUGAR, and acquired a second time by Ebates, a Rakuten-owned affiliate marketing platform. Adelman wanted to get into the blockchain world, but didn’t want to leave behind his network in the retail world.

After reconnecting and exploring, Adelman and Senter realized that scaling consumer demand for Bitcoin is the critical challenge for widespread adoption of the technology, and that retail rewards and loyalty could represent a port of entry for consumers new to cryptocurrencies.

Out of that thinking was born Lolli. Lolli is a rewards platform that offers users BTC when they shop at participating online retailers. Consumers install a browser extension or start from Lolli’s website to discover retailers offering crypto rewards (smartphone and tablet apps are “coming soon”). Each retailer sets their own “cashback” (cryptoback?) rate, and that BTC reward is then moved into a Lolli wallet.

Lolli allows users to receive Bitcoin for their online purchases

The company’s name is inspired by the lollipops that Adelman received as a kid when visiting his bank. The dream is to massively expand the number of consumers who have Bitcoin wallets, while also educating them on what cryptocurrency is and how to use it.

What makes Lolli compelling though isn’t the concept — loyalty in the crypto space isn’t particularly unknown nor are airdrops — but rather the deep bench of online retailers that are included right from the startup’s launch. Adelman told me that users can already shop at more than 500 retailers, including Jet, Forever21, Bloomingdales, and ClassPass, avoiding the chicken and egg problem endemic to many rewards startups.

As with all rewards and loyalty programs, there is a two-sided marketplace component that can make these challenging to scale. One interesting dynamic though is that retailers are increasingly looking for ways to engage with cryptocurrencies. Adelman explained to me that the retailers he has been talking to have been surprised at the wide excitement among consumers around crypto and what it means, and they want to use that excitement to engage with potential new customers.

Lolli’s browser extension allows users to find retailers who offer free Bitcoin for purchases

While many retailers have flitted back and forth about whether to accept Bitcoin and other cryptocurrencies as a valid payment method, there is less concern on the rewards side about the volatility of cryptocurrencies. Plus, connecting with consumers around the technology can give retailers an early look into how consumers think about their wallets, and how they might change their online shopping behaviors in the future.

In many ways, Lolli is symmetrical to another recently launched loyalty app called Bumped. Bumped partners with retailers to drive loyalty, but instead of handing out BTC, it hands out free shares (or microshares) of the stock of the company a consumer just shopped at. The idea there, as with Lolli, is that few consumers own stock these days, and rewards and loyalty can be a mechanism to drive shopping behavior while also providing an initial financial portfolio for consumers.

While gross transaction volume and user engagement are valuable themselves, what really drives the valuations of these companies is the wallet or brokerage accounts behind them. Investors highly value these sorts of gateway financial products, which is one reason why Robinhood is valued at $5.6 billion with just more than 4 million accounts. Lolli’s bet is that it can become the de facto wallet for millions of consumers.

Lolli only supports Bitcoin at launch, and Adelman is certainly a strong proponent of the view that Bitcoin is likely the one cryptocurrency to rule them all. With many more consumers potentially getting their first satoshis though, Lollis’ dream, and the dream of many crypto investors, may well have a chance to come to pass.

Costco now supports Apple Pay across all of its US stores

Apple has landed a big new partner for Apple Pay in the U.S. after Costco began accepting the mobile payment service across 750 stores. The retailer plans to include support at its gas stations, but that isn’t yet complete.

The rollout — first reported by MacRumors — follows limited trials at selected Costco outlets, including a warehouse near its corporate headquarters in Washington.

This new partnership comes hot on the heels of Apple’s landing similar deals with CVS and 7-Eleven. The deal with CVS is particularly notable since the retailer had held off on supporting the Apple service, to the point that it even developed its own alternative that is based on barcodes. Apple also secured a deal this summer to add Apple Pay support to eBay which gives it more breath among online retailers, too.

The service is operational in 30 international markets and, in the U.S., it is tipped to account for half of all contactless payments operated by an OEM by 2020, according to a recent analyst report.

The market for such services — which includes Samsung Pay, Google Pay and others — is tipped to reach 450 million consumers. Apple, though, is already seeing the benefits. Apple Pay is part of the company’s ‘services’ division which recorded revenue of $9.6 billion in the last quarter, that’s up 31 percent year-over-year.

Square can now process chip cards in two seconds

If you’ve made any payments with a chip card, you’ve probably had awkward moments — those long seconds after you’ve inserted the card and everyone behind you is (literally or metaphorically) tapping their foot, waiting for the card to be processed.

Well, Square has been working on this problem for a while now. Last fall, for example, CEO Jack Dorsey said the company had gotten the processing time down to under three seconds.

Today, the company is announcing that it’s shaved even more time off, and that Square Readers can now process chip cards in two seconds. To achieve this, it says it’s worked closely with payment partners — and it’s also streamlined the process so that you can remove your card as soon as it’s read, without waiting for the response from the card issuer.

In contrast, when the Wall Street Journal timed chip cards in over 50 transactions a couple years ago, it found that the average processing time was 13 seconds. Those extra seconds might not sound like much in theory, but again, if you’re in a hurry or you’ve got a line of people behind you, the wait can be painful.

Plus, it sounds like this can make a real difference for businesses. In the announcement, Regan Long, co-founder and brewmaster at Local Brewing Co., said that with his brewery’s location near the Giants’ AT&T Park in San Francisco, there’s usually “a rush of customers all ready to close out their open beer tabs at the same time.”

“With Square’s chip card reader update, we’ve cut processing time in half — helping us keep customers happy and on their way to catch the first pitch,” he added.

In addition to faster chip card processing, Square is making another speed-related announcement: With the latest update, Square’s free point-of-sale app will allow sellers to skip collecting signatures if they choose.

Apple Pay is finally coming to CVS and 7-Eleven, and will soon expand to Germany

Longtime Apple Pay holdout CVS will finally be adding support for Apple’s mobile payments platform this fall, along with 7-Eleven, Apple CEO Tim Cook said this afternoon on the company’s earnings call. The news is particularly notable because CVS was one of the first major retailers to snub Apple Pay, choosing instead to launch its own barcode-based mobile payments solution “CVS Pay” back in 2016, following the failure of the retailer-backed Apple Pay rival CurrentC.

CVS Pay had become the first mobile payments solution the pharmacy chain adopted, after having purposefully avoided support for Apple Pay or any other rival NFC (tap to pay) technologies at its register. The company believed there was value in offering its own end-to-end solution to customers that combined both payments and loyalty, it had said.

In addition, CVS had earlier backed an Apple Pay alternative called CurrentC, which was developed by the merchant consortium MCX, led by major retailers like Walmart, Best Buy, Rite Aid and others. The QR code-based payments solution was designed to challenge Apple’s potential dominance in mobile payments. Many of the retailers even blocked Apple Pay at their stores in advance of bringing CurrentC to market.

However, CurrentC eventually failed and the technology was sold off to JPMorgan Chase in 2017. Some of its backers — like Best Buy and Rite Aid — had also relented, by allowing Apple Pay into their stores. But CVS did not. It instead moved forward with its own solution.

That it has now decided to also support Apple Pay is a major win for Apple, as is the addition of 7-Eleven to the list of retailers that will soon offer Apple Pay at checkout.

The retail expansions weren’t the only big Apple Pay news announced on the call.

Cook also said that Apple Pay would launch in Germany — but didn’t offer a timeframe for this launch beyond “later this year.” And he noted that Apple Pay saw more than 1 billion transactions in the third quarter of 2018. That’s triple the number from a year ago, and more mobile transactions than Square and PayPal, he noted.

The news follows a new forecast released by Juniper Research which now estimates Apple’s Pay will account for 1 in 2 contactless mobile wallet users (in OEM-provided wallets) by 2020.

With its expansions, Apple Pay’s global traction is growing. The service is now live in 24 markets worldwide, with more than 4,900 bank partners. Apple Pay will also go live on eBay in the U.S., Cook said, as previously announced by eBay last week.