Hot Take: Brex drops SMBs!
In our summer edition we cover Sydney's big news, what's happening in the ecosystem and the jaw-dropping news from Brex.
👋🏾 Welcome Back! What to Expect in This Month's Newsletter
Happy summer from The SMB Syndicate! This month we’ll be covering the usual as well as giving our own hot takes on the decision by Brex to discontinue their SMB products.
📜 What's New With the Crew?
Sydney officially launched a new fund and her launch announcement was covered by TechCrunch!
Tessa was selected to become a member of the board of directors of Chicago:Blend, an organization focused on promoting and increasing diversity in Chicago’s tech ecosystem. She also spoke on a fireside chat during Tech Chicago on her journey to launch Capitalize VC.
Jen participated in Hello Alice’s fundraising series focused on SMB founders! The event had over 500 attendees. Check out the recordings and follow the series here.
📰 SMB News Roundup
LA-based venture firm Slauson & Co. talks about SMB tech being the key to economic inclusion
Obvious Ventures writes about their investment in Tandym, a company that offers retailers of any size a white-label branded credit payment option.
Guava, a banking and networking platform targeting Black, raises $2.4M in pre-seed funding to provide banking services to Black entrepreneurs.
Small business loan platform Funding Circle has teamed with DreamSpring, a nonprofit community development financial institution (CDFI), to increase funding access for small businesses in underserved communities.
Google is forcing legacy SMB G Suite users to pay up.
SumUp raises $624M at $8.5B valuation, with its payments and business tech now used by 4M SMBs.
Congrats to Capitalize VC portfolio company, Airpals, on being selected by Google for Startups Latino Founders Fund as 1 of 50 recipients of $100k in non-dilutive capital.
✍🏾 Deep Diligence
This month’s Deep Diligence is all about Brex. What do we think about their decision to ditch SMBs?
From Tessa:
Brex‘s core customer profile has always been the high growth, venture-backed tech company. Focusing on these scaling tech company customers from day 1 enabled Brex to achieve success by creating a product to solve the needs of these types of customers and building its reputation as a lender to its venture-backed customer profile. It appears to me that Brex was exploring SMBs as a new area of growth (non-core) during the bull market over the last few years. They likely felt they could afford to do this when investment dollars were flowing freely, supporting new segment experimentation. In late 2021 as early market indications began to signal a market downturn, Brex decided to take a more conservative position and focus on their bread and butter, venture backed customers. While I hate to see SMBs dropped from the platform, it makes sense because SMBs have never been core for Brex. Experimental business units are the first to go when markets turn and Brex, just like most companies today, is cutting costs by focusing on their core customer offerings and bracing for a rough few years ahead. In some ways this may actually be positive for SMBs in the long run as it creates a market opening for companies whose core focus is SMB lending with offerings dedicated specifically for the needs of SMBs.
From Sydney:
Tessa, I completely agree! While SMBs seemed to be a newer strategy for Brex, their core strategy was always to focus on startups. In order to serve SMBs well, you need to build that focus into the company DNA. A great example of a company that does this well is Guava, who was featured in the news this week. They recently announced their pre-seed round (#proudinvestor) and their G2M strategy is built from the ground up to cater to SMBs. This is a unique moat that requires time, attention and dedication, but once done right can be a competitive advantage.
From Jen:
Tessa and Sydney made such great points and I have to echo all of them. Ultimately, I don’t think this is any kind of negative indicator for companies that want to serve SMBs. Brex decided to do some experimentation and ultimately decided that their go-to-market is best served towards other customer segments, which is fine (and something we see within our own portfolios all the time). Luckily, there are plenty of other companies clawing for the business that Brex has decided to leave behind - i.e. Relay, Ramp, emerging neobanks, etc. It’s a crazy time to be operating a company and this is one of many surprising headlines we’ll see over the next several months.
📅 Upcoming Events
We’ll be in NYC on the week of September 12th! Keep an eye out for exact details on our first IRL SMB Syndicate event!