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T HE NEW YORK TIMES INTERNATIONAL EDITION MONDAY, AUGUST 5, 2019 | 7

Business

Things should be dismal in Silicon Val-

ley right now, with technology’s biggest

companies under attack from regula-

tors, lawmakers and even President

Trump.

Not for Henrique Dubugras and Pe-

dro Franceschi. The two Stanford drop-

outs, both 23, are the founders of Brex,

one of the hottest young companies to-

day. Their start-up’s mission? To pro-

vide charge cards to other start-ups.

“We knew that if we could build what

we wanted to build, people would want

it,” Mr. Dubugras said. “We never had

questions about that.”

Mr. Dubugras, sporting a black hoodie

and tortoiseshell glasses, was speaking

from Brex’s new San Francisco head-

quarters, where an orange “511572” mu-

ral displayed the bank identification

numbers that appear on all its charge

cards.

The two-year-old start-up moved into

the sun-filled space this year as invest-

ors poured in tens of millions of dollars,

valuing Brex at $2.6 billion — and mak-

ing Mr. Dubugras and Mr. Franceschi

worth roughly $430 million each on pa-

per, according to EquityZen, a market-

place for private stocks.

Brex is an example of Silicon Valley’s

unflagging start-up exuberance, even

amid the Big Tech backlash. Start-ups

raised $55 billion in venture capital in

the first half of this year, the most since

2000, according to CB Insights and PwC.

And a burgeoning class of these compa-

nies is thriving by catering to a fast-

growing market: other start-ups.

Apart from Brex, there is Carta, which

helps start-up employees manage their

equity and is valued at $1.7 billion. There

is Guideline, which provides retirement

services to start-ups. There are Brex

copycats. And there is InterPrime,

which helps start-ups manage their

“idle cash” and has more than 50

customers.

“Start-ups are great because they’re

underserved and provide a lot of feed-

back to companies like ours,” said Kan-

ishka Maheshwari, a founder of Inter-

Prime, based in Menlo Park, Calif.

Brex’s journey began in Brazil, where

Mr. Dubugras and Mr. Franceschi were

raised. At age 12, Mr. Franceschi gained

notoriety for “jailbreaking” iPhones to

remove their software restrictions. At

14, Mr. Dubugras created a gaming com-

pany that was later shut down over pat-

ent violations, causing what he joked

was a “14-year-old life crisis.”

The two met on Twitter as teenagers

and together built a payments start-up,

Pagar.me, based in São Paulo. By the

time they turned 20, they had sold it to

Stone, a Brazilian charge card proces-

sor.

In 2015, they moved to Silicon Valley

to attend Stanford University. Going to

Stanford was a dream, they said, be-

cause of the TV show “Chuck,” whose

protagonist was a hacker who studied

there.

But after eight months, the pair

dropped out. They were participating in

Y Combinator, a start-up accelerator,

with an idea for a virtual-reality com-

pany, Veyond. There, they noticed how

difficult it was for entrepreneurs to get

bank credit from traditional sources,

which required a credit history and a

personal guarantee. So they turned

Veyond into a credit card company,

which they later renamed Brex.

The idea was to appeal to start-ups by

offering nearly instant approvals and

requiring no personal guarantees. Brex

struck a partnership with Sutton Bank,

in Ohio, to issue the cards. To mitigate

risk, the company monitors customers’

bank accounts and adjusts credit limits.

It also requires that the start-ups pay off

their balances each month.

The cards cost $5 a year per user after

the first five users, who are free. Brex

would take transaction fees from mer-

chants.

Mr. Dubugras and Mr. Franceschi be-

came co-chief executives. Mr. Dubugras

now handles partnerships, fund-raising

and communications, with Mr.

Franceschi focused on technology and

operations.

Immediately, Brex had more demand

than it could handle.

“We call that ‘things are on fire,’ ” said

Anu Hariharan, a partner at Y Combina-

tor’s Continuity Fund, which invested in

Brex. “Everyone wants it, and you’re

like, ‘Oh, my god, I don’t know how to

deal with this.’”

Among the start-ups that flocked to

Brex’s charge cards were Hims, an on-

line medicine provider; SoFi, a personal

finance start-up; and ClassPass, a fit-

ness company.

Another was Boxed, an e-commerce

start-up in New York, which began us-

ing a Brex card a year ago to pay for

items like inventory and digital ads. The

card let Boxed sell some merchandise

before paying for the goods, which freed

up capital to fund more growth, said

Chieh Huang, the chief executive.

Boxed, which has nearly $250 million

in funding and more than $100 million in

annual revenue, had an extremely high

limit, Mr. Huang said.

“It’s so much that we don’t want any-

one physically holding the card,” he said.

“It’s, like, melting your hand.”

While growth took off, Brex initially

struggled to recruit engineers because

of the competitive talent market, said

Larissa Maranhao Rocha, the compa-

ny’s first employee and chief communi-

ty officer. “You’d Google us and nothing

came up,” she said.

That changed after Brex raised fund-

ing in February and October last year.

Within six months of being in business,

the company hit a $1 billion valuation.

Its investors include Peter Thiel and

Max Levchin, co-founders of PayPal.

Brex then went on an advertising

blitz, covering San Francisco’s bus

stops, billboards and airport terminals

with its logo and tag lines like “The cor-

porate card that actually lives up to the

hype” and “Don’t charge it. Brex it.”

In November, Mr. Dubugras showed

off the billboards at a conference, saying

they were a cheaper way to reach poten-

tial clients and employees than digital

ads. Afterward, San Francisco’s bill-

board prices rose, he said. Now he has a

new rule: “Don’t talk about advertising

that works.”

Today, Brex has 220 employees. The

company estimates that it will have just

under 400 by the end of this year.

Brex’s rising profile soon drew more

venture capitalists. Mr. Dubugras and

Mr. Franceschi turned down many of

them, but used the meetings to pitch

their charge cards for the other compa-

nies that the venture capitalists had in-

vested in.

One meeting was held at a cafe in San

Francisco’s South Park, near the offices

of more than 10 venture capital firms. It

was crawling with entrepreneurs and

investors, all potentially eavesdropping.

So in March, Brex opened a private

lounge, the Oval Room, directly above

the coffee shop.

Named after the White House’s Oval

Office and South Park’s shape, it is one

of the perks that Brex offers its

customers. Others include credits for

cloud storage, discounts on WeWork of-

fice space and points for spending on

scooter rentals.

Mr. Dubugras and Mr. Franceschi are

enjoying some fruits of leading a hot

start-up. Mr. Dubugras said he now buys

subscription home-cooked meals for his

Bernese mountain dog, Ruby, who is

named after the coding language Ruby

on Rails.

How long Brex’s success can continue

is unclear. Most start-ups fail, and al-

ready hundreds of Brex’s customers

have gone out of business.

Brex tries to be understanding when

that happens, Mr. Franceschi said. Un-

like credit card providers that tell

customers, “You’re running out of busi-

ness, you didn’t pay us, I’m going to cut

you off now,” he said, Brex sees failed en-

trepreneurs as future customers who

may try again with a new idea.

Mr. Dubugras said he did not expect

venture capital to disappear if things

turned, and added that as long as Brex

served the fastest-growing start-ups, it

would be all right. Brex can usually tell

when customers will run out of money,

he added, because it constantly moni-

tors their financial health and adjusts

credit limits.

But just in case, Brex, which is unprof-

itable, has stockpiled money. In June,

the company said it had raised another

$100 million from investors, including

DST Global and Kleiner Perkins. That

brought its total funding to $315 million,

including debt.

Neil Mehta, an investor at Greenoaks

Capital, which led Brex’s funding round

in October, said he was taken by the

start-up because it offered a “J.D.C.E.” —

jaw-dropping customer experience —

comparable to the first time he used

Uber or drove a Tesla.

“It’s just the beginning” for Brex, Mr.

Mehta said.

This year, Brex also started working

with life sciences and e-commerce com-

panies; the latter now make up 30 per-

cent of its business. Some publicly

traded companies have asked Brex

about its card, but the company has

turned them away.

As Brex gets bigger, it’s crucial to stay

disciplined, Mr. Franceschi said. In Sili-

con Valley, “it’s easy for you to kind of

get your feet off the ground and forget

what matters,” he said.

A start-up serving start-ups

SAN FRANCISCO

Stanford dropouts’ Brex,

which offers charge cards,

is valued at $2.6 billion

BY ERIN GRIFFITH

Above, Pedro Franceschi, left, and Henrique Dubugras, the founders of Brex, a company that provides charge cards to other start-ups.

Below, Brex’s advertising blitz in San Francisco helped raise its profile, drawing employees and more venture capitalists.

PHOTOGRAPHS BY ARSENII VASELENKO FOR THE NEW YORK TIMES

“We call that ‘things are on fire.’

Everyone wants it, and you’re

like, ‘Oh, my god, I don’t know

how to deal with this.’”

The Federal Reserve’s decision to cut

rates for the first time in more than a

decade was driven, in part, by a recogni-

tion that policymakers have a role to

play in the fate of American workers.

The United States economy contin-

ued its record run of hiring last month,

as employers added 164,000 jobs, the

Labor Department reported on Friday.

The job market has gained about 21.

million workers since 2010, and the Fed

now faces the lowest unemployment

rate in nearly 50 years.

Despite the positive momentum,

many people have remained on the side-

lines or have seen only modest pay in-

creases. By lowering rates last week,

the Fed hoped to protect the economy

against potential risks to ensure that it

keeps growing. The decision could fos-

ter a labor market that continues to

draw in disadvantaged workers while

prodding companies to raise wages.

“The best thing we can do for those

people is to sustain the expansion, keep

it going,” the Fed’s chair, Jerome H. Pow-

ell, said after the move. “That’s one of

the overarching goals of this move —

and all of our policy moves.”

The wealthiest also benefit from the

Fed’s decision, since rate cuts push up

stock prices, creating big gains for in-

vestors. But the central bank’s push to

portray its policy as a win for rank-and-

file workers highlights an evolution:

The Fed is trying to be more attuned to

the needs and attitudes of everyday

Americans.

Some of the changes are superficial.

Mr. Powell, previously referred to as

“chairman” in the Fed’s post-meeting

releases, is now a gender-neutral

“chair.” The 17-member policymaking

body is as diverse as it has ever been,

with leadership roles held by two openly

gay members, five women, one black

member and one person with Indian

heritage. The powerful Federal Reserve

Bank of New York flew rainbow flags

outside for pride month this summer, for

the first time.

A visit to the Federal Reserve Bank of

Atlanta’s Instagram account shows that

it is following up its #dogsofthefed cam-

paign with a #humansofthefed one,

complete with inspirational stories and

not-so-candid snaps.

But something more significant is

happening under the surface.

An institution long shrouded in mys-

tique and hemmed in by its desire to re-

main above the political fray is opening

up. Fed research has long hit on diverse

and even hot-button topics — from so-

cial mobility to global warming — but

presidents at its 12 regional banks in-

creasingly promote and publicize that

work. They even occasionally take posi-

tions on issues like immigration and

skills training.

Fed officials have also spent much of

the year visiting community groups in

places like Augusta, Ga., and Camden,

N.J., part of a widely publicized cam-

paign aimed at convincing the public

that policymakers are listening to work-

ers’ concerns. Officials now regularly

talk about unemployment rates by race

and gender.

A political calculus is at play. The Fed

needs to shore up public support at a

time when President Trump regularly

criticizes its actions and when govern-

ment bodies — especially opaque ones

aligned with bankers — are anything

but popular. It has come under congres-

sional and popular pressure for being

slow to diversify and not focused

enough on the most economically disad-

vantaged.

Mr. Powell nodded to those chal-

lenges in a recent speech in Paris, say-

ing, “Our audience has become more

varied, more attuned to our actions and

less trusting of public institutions.”

America’s shifting social discourse

also enables the Fed’s evolution. Janet

L. Yellen, the Fed’s first female leader,

broached the topic of income inequality

in an October 2014 speech, questioning

whether it was consistent with Ameri-

can values. It was an unusual topic for a

Fed leader to take up at the time, and Re-

publican lawmakers chastised her.

“You’re sticking your nose in places

that you have no business to be,” Mick

Mulvaney, a South Carolina representa-

tive at the time and now Mr. Trump’s act-

ing chief of staff, told Ms. Yellen during

her testimony to the House Financial

Services Committee the next February.

Representative Sean Duffy, a Wiscon-

sin Republican, said the speech showed

political bias because Democrats were

campaigning on the issue ahead of the

midterm election.

Five years later, Fed officials fre-

quently talk about income inequality. In

February at a forum with teachers in

Washington, Mr. Powell echoed Ms. Yel-

len’s sentiments — but got no pushback.

“We have work to do to make sure that

the prosperity that we do achieve is

widely spread,” Mr. Powell said. “We

need policies that can make that hap-

pen.”

Since Mr. Trump rode a wave of popu-

lism into the White House, issues like in-

equality and tepid wage growth for

workers, once the domain of the left,

have become shared concerns. Even in

areas like gay rights, there has been a

sea change. When the Federal Reserve

Bank of Richmond flew a pride flag in

2011, it drew controversy.

But the Fed’s push goes beyond poli-

tics. It is striving to communicate

clearly, which makes monetary policy

more effective.

When borrowing costs fall because in-

vestors correctly anticipate Fed rate

cuts, it becomes cheaper and easier for

households and companies to get fi-

nancing. Using the bully pulpit might

prod other policymakers, who hold the

reins on everything from education to

immigration, into action. And conversa-

tions with ordinary people paint a

clearer picture of the economy than ag-

gregate data alone.

“You’re supposed to serve the people

you represent, and you have to know

what their experiences are if you’re ac-

tually going to serve them,” Mary Daly,

president of the Federal Reserve Bank

of San Francisco, said in a June inter-

view.

Amid rising opportunity gaps, setting

good policy requires hearing diverse ex-

periences, she said. “The average is no

longer sufficient, I would argue, for rep-

resenting how the economy is playing

out.”

If rising inequality makes an expan-

sive view of the economy prudent, low

inflation makes it essential. The Fed has

two jobs: maximum employment and

slow and stable price increases. It has

long seen its policy setting as a trade-off

between the two; a strong labor market

The Fed wants you

to know it gets you

WASHINGTON

An institution shrouded

in mystery aims to connect

with average Americans

BY JEANNA SMIALEK

F ED, PAGE 8

By lowering rates, the bank could

foster a labor market that draws

disadvantaged workers while

nudging businesses to raise wages.

NOTICE TO CHAOFENG JI:

Youhavebeennamedasareliefdefendantinalawsuit

ledbytheU.S.SecuritiesandExchange

CommissionintheUnitedStatesDistrictCourtfortheSouthernDistrictofNewYork.Thename

ofthecaseisSEC v. Yin, et. al.,andhasacasenumberof17-cv-0972-JPO.TheSECallegesthat

throughyourownershipinterestinafamilybrokerageaccountnominallyheldbyyourrelative,

reliefdefendantBeiXie,youreceivedill-gottengainsfromillegalinsidertrading.TheSEC

furtherallegesthatyouhavenolegitimateclaimtothoseproceeds.TheSECseeksdisgorgement

ofyourill-gottengains.

YouaredirectedtocontacttheSECat:TrialUnit,Attn:GaryY.Leung,SeniorTrialCounsel,

LosAngelesRegionalOŒce,SecuritiesandExchangeCommission,^444 S.FlowerSt.9thFloor,

LosAngeles,California,90071,323.965.3213,[email protected],sothatyoumaybeservedwith

theSummonsandSecondAmendedComplaint.IfyoudonotcontacttheSECwithin

daysofthepublicationofthisnotice,theSECwillbeentitledtoseekentryofyourdefault

judgementagainstyoubydefaultintheabove-entitledcasepursuanttoRule^55 oftheFederal

RulesofCivilProcedure.

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