Capital One bought Brex at a steep discount from its highest valuation, but early believers are still laughing all the way to the bank

In Silicon Valley, when a unicorn stumbles, there’s a sense of schadenfreude. So when the Journal broke the news Thursday afternoon that Capital One would acquire Brex for $5.15 billion in cash and stock (Capital One issued an official release confirming the details a half-hour later), you could almost hear the collective laughter from Sand Hill Road to San Francisco’s South Park. This figure represents less than half of the final private market valuation of Brex’s 2022 Series D-2 round of $12.3 billion.

Before anyone sharpens their knives, consider that this sale is a win for the VCs who originally backed Brex.

Micky Marca’s Rivit Capital, which led Brex’s $7 million Series A shortly after its founding in 2017, is likely looking for very big returns. Reached by phone this afternoon, Malka declined to provide further details, but as a member of Brex’s board of directors from the beginning and the company’s largest shareholder, he was understandably enthusiastic about the deal, saying: [the founders] Capital One is a great partner and their ability to scale will be great. [as part of the bank] That’s good for America. ”

In fact, that initial bet — Ribbit had participation from Y Combinator, Kleiner Perkins, DST Global, and retail investors including Peter Thiel and Max Levchin — has ballooned to roughly 700 times. Even accounting for dilution in subsequent rounds, early stakeholders are walking away with the kind of returns that have long made venture capital look like a very attractive asset class to outsiders.

Still, the pain of this valuation cut becomes even clearer when you consider what happened to Lamp, Brex’s biggest rival, during the same period. Just as Brex lost momentum a few years ago, Rump shed a tear. The rival expense management fintech has raised a total of $2.3 billion in equity funding to date, and through subsequent funding rounds its valuation has increased from $13 billion last March to $32 billion by November.

One might argue (though not necessarily) whether these kinds of paper profits mean all that much through a dizzying number of fundraising events. Still, assuming that the lamp is presenting the world with a true picture, its momentum is undeniable. Last October, the company announced that it had more than $1 billion in annual recurring revenue and had secured more than 50,000 customers. For investors in the later stages of brex, this contrast is likely more painful. They watched as their competitors circled Brex over and over again while waiting to retreat.

The Capital One deal comes at a bit of an inflection point for Brex. Just five months ago, the company announced that it had received a license to operate in the European Union. As CEO Pedro Franceschi wrote in a blog post at the time, the move enabled Brex to “issue credit and debit cards directly and offer spend management products to businesses across 30 EU countries without the need for workarounds.” Previously, the company could only partner with EU companies that maintained a presence in the U.S., a major limitation for companies aiming to become global players.

The timing couldn’t be better for Capital One. The bank had already absorbed Discover Financial in a $35 billion deal last May, gaining Brex’s technology platform and customer roster (which reportedly includes TikTok, Robinhood, and Intel), as well as immediate access to European corporate banking customers through a newly issued EU license. (TechCrunch has reached out to Brex for more information.)

Brex’s alleged $13 billion in deposits, which it oversees in affiliated banks and money market funds, was also likely a factor in its favor.

The founders, Brazilian entrepreneurs Pedro Franceschi and Enrique Dubugras, dropped out of Stanford University as freshmen after being accepted into YC’s winter 2017 “batch” and launched Brex in 2017, initially pitching the concept of virtual reality. But it was inevitable that they would return to payments, as they sold their Brazilian payments processor startup at the young age of 16, raised $30 million, and later acquired it for more than $1 billion by one of their strategic investors.

Mr. Dubugras retired from day-to-day operations in 2024 and became Chairman of the Board. Franceschi will remain CEO after the acquisition.

Like almost all startups, Brex’s journey hasn’t been without its bumps. There was a questionable detour in 2019 when the then-23-year-old co-CEOs, who had never run a restaurant before, bought the popular South Park Cafe in San Francisco. The pair envisioned Brex cardmembers dining and then heading upstairs to the upscale lounge, but with COVID-19 shutting down much of San Francisco for more than a year, that timing decision turned out to be a spectacular failure.

Then, in 2022, as the macroeconomic picture darkened and venture capitalists began demanding real profitability from their portfolio companies, Brex made a decision that generated considerable animosity. It abandoned tens of thousands of small business customers by telling them their accounts would be closed unless they received “professional” funding from VCs, angels, and accelerators.

The move, aimed at focusing resources on high-margin enterprise customers and nascent SaaS businesses, struck many as tone-deaf. The company, which had built its reputation serving underbanked startups, suddenly showed its advocates the door (as the move was perceived at the time).

This strategy may be what positioned Brex for this latest exit. By concentrating on corporate customers with deep pockets and predictable revenue streams, the company stabilized its business model even as Ramp ramped up financing. (Another competitor, Mercury, also raised $300 million in funding last March, doubling its valuation to $3.5 billion. In an effort to steal some of the attention focused on the ramp in 2025, Mercury just recently shared with Fortune that its annual recurring revenue hit $650 million.)

Capital One said it expects the transaction to close in the second quarter. For Brex’s later-stage investors, including TCV, GIC, Baillie Gifford, Madrone Capital Partners, Durable Capital Partners, Valiant Capital Management, and Base10, all of whom invested at valuations of more than $7.4 billion, the exit may not be as promising, but it’s still liquid, which makes sense in today’s climate.

Pictured above: Pedro Franceschi, Brex co-founder and CEO.