Exclusive: Brex’s $5.15B Capital One Acquisition | CEO Pedro Franceschi

**Molly O'Shea** (0:00)
Before we start, I just want you to sign something really quick.

**Pedro Franceschi** (0:02)
All right.

**Molly O'Shea** (0:05)
Now that you've signed the official document, you are now legally required to share everything about this M&A transaction.

**Pedro Franceschi** (0:11)
It happened incredibly fast. The whole thing from first serious meeting to sign definitive agreement was a little bit over 40 days. Rich started the company 30 years ago with that thesis. Time after time after time, Capital One has been very aggressive on investing technology ahead of a lot of their peers, and only bank, if you look at it in a massive scale, that doesn't run on the mainframe, it's actually on cloud. They've spent a lot of time positioning themselves in that direction. We had always assumed that it would be going public because that is what a lot of companies do. I started to go deep into what could this actually look like. It was so unique that it was impossible to unsee it, which is like, look, we can accelerate 5, 7, 10 years of growth. And then three is we jumpstart this entire industry by saying, not only we're going to do this across card banking, business management, bill pay, accounting, AI, but at the same time, we're going to do this as a bank at a country level scale. Nothing's happening to startups. We're just doubling down, accelerating growth by 50% next year on the team. A lot more dollars go into product development and we're accelerating our AI roadmap by two to three years compared to what we would do as a standalone company.

**Molly O'Shea** (1:15)
Sponsored by Brex.

**Pedro Franceschi** (1:16)
It doesn't feel like an exit. I think that's a thing that is so different for me.

**Molly O'Shea** (1:19)
So you're doubling down on war mode.

**Pedro Franceschi** (1:21)
100% doubling down. We never thought of selling the company and we did it because we thought it was fundamentally different than any other combination. I'm not going to lie, the last two and a half years were really hard. This allows me to go back and say all of this really hard work was worth it.

**Molly O'Shea** (1:35)
This is the most difficult question I'm going to ask you today. Are you happy? Adriel, welcome to Sourcery.

**Pedro Franceschi** (1:51)
Thanks for having me.

**Molly O'Shea** (1:52)
This is very dramatic, but I love the long table. Okay, so before we get in, I just want to, before we start, I just want you to sign something really quick.

**Pedro Franceschi** (2:10)
What is that?

**Molly O'Shea** (2:11)
Don't worry about it, just sign it.

**Pedro Franceschi** (2:12)
All right. There you go.
Okay. It is signed.

**Molly O'Shea** (2:31)
Now that you've signed the official document, you are now legally required to share everything about this M&A transaction. How did this happen?

**Pedro Franceschi** (2:40)
Oh, God. Okay, so maybe let's sort of recap.
So it happened very fast, that's the first thing. And then maybe sort of to recap, I think it's good to start on why Capital One did what they did, then why we did what we did, and then what we think this means for customers and the industry more broadly. So maybe starting with Capital One, I mean, a lot of folks that understand a lot about financial services have a lot of respect and admiration for them. But the reason is because they're really the first fintech. They sort of invented this idea of fintech. And what they did in the 90s, they realized that consumer card underwriting was dramatically inefficient. And when you brought in data and technology into the process, you could dramatically expand the number of customers you served and the customer experience and the amount of credit you could give to them. And Rich started the company 30 years ago with that thesis. And over time, after time, after time, Capital One has been very aggressive on investing technology ahead of a lot of their peers. And it's the only bank, if you look at a massive scale, that doesn't run on the mainframe, it's actually on cloud. So they've spent a lot of time sort of positioning themselves in that direction. And when they looked into this market, what they realized is that customer's expectations have completely changed. And in the past, you used to have financial services on one side, software companies on the other side. And these two worlds were totally separate. And what we created at Brex is a new category of company where you bring these two worlds into one. And they realized how much this changes the way a company meanders their money, because you can just move so much faster, you can make better decisions, and a company becomes what you spend on. So there's a very important role that a tool like Brex plays into a company. And when they saw that, and they realized the technology that we build, and the fact that we're the leaders in the market, we created the market, and especially in segments that are the hardest and most complex, like the enterprise. And then they looked into how we build it, which was from the model of the stack up, all of our financial infrastructure from scratch. They realized that there was a one plus one equals five scenario, right? And then when you combine as of the scale, the balance sheet, the brand distribution of Capital One, there'll be a pretty special combination for them. Then when you look into our side, like, really the reason we did it was very similar. Was, you know, at Brex we always had a very large ambition to build something at, you know, country level and sort of global scale. You know, I moved to the west from Brazil to build something really big. And then once, you know, spending time with Rich and the team, and I realized that the magnitude of what could be built, it was impossible to unsee it. So, you know, Capital One has millions of businesses today that they serve. They have, you know, a $6 billion marketing budget, a $6 billion R&D budget.