How Many Is "Too Many" Investors?

Brex Founder Henrique Duburas Believes You Should Pack Your Cap Table With As Many Investors As Possible

When Henrique Dubugras — founder of the Brazilian payment app Pagar.me — came to the United States and joined Y Combinator, the plan was to launch a virtual reality startup with his co-founder, Pedro Franceschi.

It was a short-lived idea. 

“We quickly gave up on it,” Henrique says. “It was really hard.”

But while observing the burgeoning startups around them, they noticed that American startups were underserved in the financial space. 

“We saw that all these other startups couldn't get credit cards, even though they had raised millions of dollars,” Henrique says, “and that’s what sparked the idea.”

They went all-in on Brex, which issues corporate cards for startups, late-stage enterprises, ecommerce businesses, and life science companies. It differentiates itself from traditional credit card companies by offering corporate cards without a requirement for personal guarantees from founders. 

Since graduating from Y Combinator in 2017, Brex has raised more than $280 million over four rounds and is valued at $2.6 billion.

Speaking on an episode of How I Raised It, Henrique shares why he thinks more is merrier when it comes to investors, and why he wasn’t fazed when Stripe launched a competitive product (hint: it wasn’t a deterrent for investors).

Cram your rounds

Whether it was for the Series A or its $225 million Series C, Henrique has always had one rule for all of his fundraising rounds: bring in as many investors as possible.

“Our strategy was always to cram as many people in as we could because more help is better than less help,” he says. “I find that angel investors are much more helpful than funds,” notes Henrique, who counts PayPal founders Peter Thiel and Max Levchin as investors. 

Henrique suggests bringing in a lot of helpful people rather than just a few investors with larger allocations. Here’s his thinking: Regardless of whether an investor contributes $10,000 or $100,000, “they’re likely going to help the same [amount],” he says. If you structure your documents and terms correctly, adding or removing angels can be seamless enough. 

“There’s no friction in adding more people,” he notes. 

The benefit of adding more angel investors is getting to draw from a wider
knowledge base — which Brex definitely did.

“We would send monthly emails out to all of our investors saying, ‘Here’s what we need help with,’” Henrique says. “We were asking for help every single month, and pushing and insisting for help. We were never shy to ask.”

That approach helped Brex land the banking partners they needed in order to actually launch the company. 

Raise high, spend low

Not only did Henrique fill each fundraising round with as many investors as he could find — but he also went for the biggest sums of money he could raise within each round.

“VCs will usually tell you, ‘It’s super dangerous to raise at high prices — it adds so much pressure to yourself,’” Henrique says. “I think that’s a great tactic to negotiate down the valuation.”

With Brex, Henrique chose to ignore that advice and raise at a higher price point. 

“People want to seem like they need to raise more money so they can get the higher price, and then they blow the money over a shorter period of time,” Henrique says. 

Once you have the capital, you don’t actually have to spend aggressively. 
“If you raise more money, you can just burn less money and have more runway if things go wrong,” Henrique says. “We’ve always had tons of runway.”

Brex has been able to keep a healthy runway by hiring fewer employees and keeping their marketing costs low — even while famously covering San Francisco in billboards.

Don’t fear big-time competitors 

Just over a year after Brex’s first credit card launch in June 2018, payment processing giant Stripe announced its own credit card.

For most startups, an announcement from a major player in the market might ring alarm bells. But Henrique wasn’t too worried.

“Cards aren’t a winner-takes-all market,” Henrique says. “It’s not a market where one bank is going to run the other out of business, like Facebook versus Google or Snapchat versus Instagram. We can be very successful, and Stripe can be very successful.”

The announcement of Stripe’s corporate card was also validating — for both Brex and its investors. Having a larger competitor launch a similar product proved that Brex was definitely onto something good. 

“It validates the space,” Henrique says. “The reaction from investors was, ‘Oh, well, Stripe got into this market. It’s probably a really good market.’ That was really positive.”

Nathan Beckord is the CEO of Foundersuite.com, a software platform that has helped entrepreneurs raise over $2 billion in seed and venture capital since 2016. This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders have raised capital.