Capital One acquired Brex Bank for a deep discount to its highest valuation, but early believers are laughing all the way to the bank

There is a sense of schadenfreude in Silicon Valley when a unicorn stumbles. So when the Wall Street Journal broke the news Thursday afternoon that Capital One would acquire BRICS for $5.15 billion in cash and stock (Capital One issued an official statement confirming the details 30 minutes later), you could practically hear the collective laughter from Sand Hill Road to South Park in San Francisco. This figure represents less than half of BRICS’ recent private market valuation of $12.3 billion from its 2022 Series D-2 round.

Before everyone sharpens their knives, consider that for the venture capitalists who initially supported Brexit, the sale is a victory.

Micky Malka’s Ribbit Capital, which led a $7 million Series A for Brex shortly after its founding in 2017, is likely looking to make a very good return. Reached by phone this afternoon, Malka declined to provide details, but as a BRICS board member since the beginning and the company’s largest shareholder, he was surprisingly not enthusiastic about the deal: “We’re excited about the team, which was one of YC’s youngest teams at the time. [the founders] Since they were 16 years old. Capital One will be a great partner and their ability to scale [as part of the bank] “It’s a good thing for America.”

In fact, that early bet — Y Combinator, Kleiner Perkins, DST Global, and individual investors including Peter Thiel and Max Levchin joined Ribbit — multiplied somewhere in the neighborhood of 700-fold. Even accounting for dilution across subsequent rounds, early stakeholders are walking away from the kind of gains that have long made venture capital look like an attractive asset class to outsiders.

However, the impact of this valuation pruning is even more severe when you consider what happened to BRICS’ main rival, RAMP, over the same period. Just as Brix lost momentum several years ago, Rump was on a tear. The competing expense management fintech has at this point raised $2.3 billion in total equity funding and seen its valuation rise from $13 billion in March last year to $32 billion by November across successive funding rounds.

You can argue whether these types of paper gains across a dizzying number of financing events mean much (which is certainly not always the case). However, assuming that Ramp presents an honest picture of the world, its appeal is undeniable. The company announced last October that it had surpassed $1 billion in annual recurring revenue and had acquired more than 50,000 customers. The discrepancy is perhaps most painful for post-Brexit investors, who have watched a rival foist them on several occasions while they wait to exit.

The Capital One deal comes at an inflection point for BREX. Just five months ago, the company announced that it had obtained a license to operate in the European Union. As CEO Pedro Franceschi wrote in a blog post at the time, the move enabled BRICS to “issue credit and debit cards directly and offer its spend management products to any company in all 30 EU countries without the need for workarounds.” Previously, the company could only work with EU companies that maintained a presence in the US, a major restriction for any potential global player.

For Capital One, the timing is very good. The bank, which already swallowed Discover Financial in a $35 billion deal last May, is gaining Brex’s technology platform and client roster — including, reportedly, TikTok, Robinhood and Intel — as well as immediate access to European corporate banking clients through a new EU license. (TechCrunch has reached out to Brex for more information.)

The $13 billion in deposits that BRICS is said to be overseeing in partner banks and money market funds has also supposedly improved the situation.

The founders, Brazilian entrepreneurs Pedro Franceschi and Henrique Dubogras, dropped out of Stanford University as freshmen to launch BRICS in 2017 after being accepted into YC’s winter 2017 “cohort,” where they initially pitched the concept of virtual reality. But they were bound to return to payments after – at 16 years old – they sold a payments processing startup in Brazil that raised $30 million, and was later acquired for more than $1 billion by one of its strategic investors.

Dubugras steps down from day-to-day operations in 2024 to serve as Chairman of the Board. Franceschi will remain CEO following the acquisition.

As with almost every startup, BRICS’ path has not been without its bumps. There was a questionable turn in 2019, when the then-23-year-old co-CEOs, who had never run a restaurant before, bought the beloved South Park Cafe in San Francisco. The couple envisioned BRICS card members dining before heading upstairs to a private lounge, a timing decision that proved stunningly poor when COVID-19 shut down much of San Francisco for more than a year.

Then, in 2022, as the macroeconomic picture darkened and venture capital firms began demanding actual profitability from their portfolio companies, BRICS made a decision that generated a great deal of ill will; It has abandoned tens of thousands of small and medium-sized business clients, telling them that their accounts will be closed unless they secure “professional” funding from venture capital firms, angels, or accelerators.

The move, designed to focus resources on high-margin enterprise customers and emerging SaaS businesses, struck many as tone-deaf. A company that had built its reputation serving underbanked startups suddenly walked its champions out the door (that’s how the move was viewed at the time).

It may be the strategy that put BRICS in a position to make this exit. By focusing on corporate clients with deep pockets and predictable revenue streams, the company has been able to stabilize its business model, even as Ramp ramps up fundraising. (Mercury, another competitor, doubled its valuation to $3.5 billion with a $300 million raise last March. To steal some of the attention directed at the Ramp in 2025, Mercury recently shared with Fortune that it had averaged $650 million in annual recurring revenue.)

Capital One said it expects the deal to close in the second quarter. For post-Brexit investors, including TCV, GIC, Baillie Gifford, Madrone Capital Partners, Durable Capital Partners, Valiant Capital Management, and Base10, all of whom invested at a valuation of $7.4 billion or higher, exit may not be quite what they had hoped for, but they still have liquidity, which is important in today’s climate.

Pictured above: Brex co-founder and CEO Pedro Franceschi