Brex CEO Henrique Dubugras is currently working to raise over a billion dollars in one weekend to help fund a emergency bridging line of credit which he believes will help startup clients affected by the Silicon Valley Bank collapse be able to pay payroll next week. Dubugras declined to comment on how much capital has been committed for the credit facility so far, but said he is on back-to-back calls trying to block the funds.
“We’re working with a lot of lenders this weekend, basically to raise as much money as we can,” Dubugras said. So far, more than $1.3 billion in payroll loan applications have been made from more than 500 applicants. “The same people who are requesting the billion dollars have about 10 billion in aggregate deposits. [at SVB].
The founder says that the demand increases every five minutes. And while Dubugras said the final closing is “to be determined,” he said it is “very likely” that they will close some capital.
One question is whether the terms of the deal will be favorable to the founders or, as an entrepreneur ominously suggested to me today, will the sharks come out?
Brex does not disclose the terms of the deal, but said they are not making any money on these loans. “That’s where we’re working to get what the right rate is, but think of it this way: There’s not a lot of data right now and getting over a billion dollars in a weekend is no easy feat,” Dubugras said. “So, 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 is about the quality of applicants. As one founder told TechCrunch yesterday, bringing in an influx of people “is the easiest way to invite fraud and get pushed out of banking ecosystems.” Dubugras said the quality of SVB’s customer base is “quite good.”
“Most of the clients we get are real startups that had real business with real deposits, and they are connecting the data to their SVB account that had real money in it,” he said. “We’re verifying that these customers are real customers for sure, that’s not what I’m worried about.”
“I hope the lesson for the industry is not, well, if it’s a bank that’s not JP Morgan, it’s not safe. I think that will be terrible for our ecosystem and for the United States,” he added. Instead, the lesson, Dubugras thinks, is for founders to spread their risk. “I think in my opinion the safest place for your money is not in a bank account, it’s in a money market fund and a cash management account, which is why we do this at Brex.”
While Dubugras is focused on raising funds and claims Brex is operationally ready for this and isn’t trying to make money off desperate founders, the company will have to demonstrate that it can achieve this.
When SVB fell, Brex was seen as a formidable competitor looking to profit from the change in funds. Sure enough, sources tell TechCrunch that fintech was taking in billions of dollars in deposits. SVB then shut down the wires, and hours later it was seized by the FDIC.
“The reason we do it is obviously we want to support a community, that’s very important,” Dubugras said. “The business reason we’re doing this is because we’re going to fund these loans and our business accounts, and we expect people to continue to be our customers immediately after that.”
Dubugras isn’t the only tech executive rallying others to help provide loans to founders. Another CEO is working to raise money for an emergency fund for targeted climate startups, while others are looking for ways to create funding streams for historically ignored and marginalized groups of founders.
If you have an interesting tip or a clue about what’s going on in the SVB fight, you can contact Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912. Requests for anonymity will be respected.
