by Brex CEO Henrique Dubugras is currently working to raise over $1 billion in a weekend to fund an emergency bridging line of credit that he believes will help startup clients hit by the Silicon Valley bank collapse get their paychecks next week make. Dubugras declined to comment on how much capital has been committed to the line of credit so far, but said he is on back-to-back calls to try to freeze the funds.
“We’re working with a lot of lenders this weekend to basically raise as much money as we can afford,” Dubugras said. To date, more than $1.3 billion in wage loan applications have been submitted by over 500 applicants. “The same people who are applying for the $1 billion have around $10 billion in deposits in total [at SVB].
The founder says demand increases every five minutes. And while Dubugras said the final close was “TBD,” he said it was “very likely” that they would close some capital.
One question is whether the terms of the deal will be favorable to founders or, as one entrepreneur ominously suggested to me today, the sharks will come out?
Brex does not disclose the terms of the deal but said they are not making any money on these loans. “Here we’re working to get the rate right, but think of it this way: there’s not a lot of information out there right now and hitting over a billion dollars in a weekend is no easy feat. ‘ said Dubugras. “You know, I think we’re just trying to see if we can find something that works for everyone and create an option.”
Another question concerns the quality of the applicants. As one founder told TechCrunch yesterday, onboarding an influx of people is “the easiest way to invite fraud and get kicked out of banking ecosystems.” Dubugras said the quality of SVB’s customer base is “pretty good”.
“Most of the clients we get are real startups who had real deals with real deposits – and they connect the data to their SVB account that had real money in it,” he said. “We make sure these customers are real customers – I’m not worried about that.”
“I hope the lesson for the industry isn’t, hey, if it’s a bank that’s not JP Morgan, it’s insecure. I think this is going to be terrible for our ecosystem and for America,” he added. Instead, according to Dubugras, the lesson for founders is to spread their risk. “I think the safest place for your money I think is not in a bank account but in a money market fund and cash management account, so that’s what we do at Brex.”
While Dubugras focuses on raising and claims that Brex is operationally ready for it and not trying to make money from desperate founders, The company has to prove that it can pull this off.
As SVB fell, Brex was seen as a strong contender looking to capitalize on the reallocation of funds. Sure enough, sources tell TechCrunch that fintech received billions of dollars in deposits. Then SVB shut down the lines and was seized by the FDIC hours later.
“The reason we’re doing this is obviously because we want to support a community, that’s very important,” Dubugras said. “We’re doing this for a business reason, because we’re funding these loans and our business accounts, and we’re hoping that right after that people will remain our customers.”
Dubugras isn’t the only tech executive urging others to lend to founders. Another CEO is working to raise money for an emergency fund for climate-focused startups, while others are looking at ways to create sources of funding for historically overlooked and marginalized startup groups.
If you have a hot tip or tip about what’s happening at SVB, you can reach Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1.925.271.0912. Requests for anonymity are respected.
