That's weird. I remember the great SMB cleavering, where they spiked anyone that was, say, a small brick & mortar, preferring to focus on firms that were more pure tech and higher average balances. I've banked with Brex for, I don't know, 5 or 6 years now, and somehow dodged that, but it was concerning at the time since migrating operating accounts is an enormous pain in my ass.

This was made a bit more annoying when they lost their magical single operating cash sweep account and forced you to split to a separate Treasury account in order to earn interest. Even with auto balance shifting rules, I've had a few transactions fail because of bad timing. (And ACH is scheduled at the same time an intra-bank transfer is scheduled, but the ACH processes overnight and intra-bank has to wait until market open.) Super obnoxious.

+1 for Mercury.

Another good thing about Mercury is that in case you’re stuck/not being treated fairly, you can just email/publicly mention Immad (CEO) and he’ll reply within minutes and will look into this

As if they weren’t before?

Investors will only invest in AI plays. They don’t seem to care for fintech.

For many?

there are no good brexits, bro. god promise.

If Ramp is getting all the business, is there any reason to think they wouldn't command a much higher valuation?

Brex killed a ton of their customer relationships to "refocus" on larger biz. That created a lot of negative sentiment for the brand.

> All Ramp did was spend more on ads and marketing

That's distribution. It matters.

Ramp has a much more synonymous name, better recognition, and less bad reputation.

Yeah, I was pretty unhappy about this. They are already really annoying to use, with a bunch of “offers” popping up every time I open the app.

Who in the world uses debit cards

Great pod. Timing wise he had to have known about it during recording, but he didn't give anything away.

I assume if you put in 100 mn at a 12 bn valuation in the last round, you're either getting 100 back at 1x pref or you're screwing over the common even more?

Considering the 12bn round was back in 21, I'd expect most of the employee base to be taking a haircut on the value of their options.

No. The last two investment tranches will get back their money, based on 1X liquidation preference. Employees who joined in the last 5 years if they got options are fucked. If they have RSUs then they will take a fraction of their equity.

It sounds like investors got out okay, but employees got fucked big time. It's a terrible exit and Brex waited too long until their growth stalled.

Most people at Brex will lose on this.

Let's talk about “Liquidation preference”.

Means investors get paid before founders during an exit.

The basic math: investors get their money back first, then everyone else splits what’s left.

Usually 1 times.

Sometimes 2 times or 3 times.

Occasionally, “participating preferred”... get money back PLUS percentage of remaining proceeds.

This means founders can build a $100 million company and get nothing when it’s acquired if venture capitalists structured it right.

Here’s how it works in a typical acquihire:

The startup raised $10 million. Gets “acquired” for $15 million. Sounds like a win.

The liquidation waterfall:

Venture capitalists get their liquidation preference first: $10 million.

Legal fees and transaction costs: $2 million.

Retention bonuses for engineers: $2.5 million.

Founder compensation: $500,000 vesting over 3 years.

Early employees who built everything: $0.

The $15 million exit becomes:

Investors made whole.

Lawyers paid.

The acquirer got talent locked for 4 years.

The founder got $500K spread over 3 years.

Employees got nothing.

In a real exit, liquidation preferences get worse with multiple rounds.

Series A investors: 1 times preference on $5 million.

Series B investors: 1.5 times preference on $15 million.

Series C investors: 2 times participating preferred on $40 million.

The company sells for $100 million.

Series C gets $80 million for their preference. Plus 30% of the remaining $20 million. Total: $86 million.

Series B wants $22.5 million. But only $14 million remains after Series C.

Series A gets $0.

Founders get $0.

Employees get $0.

The company sold for $100 million.

Late investors took it all.

That’s liquidation preferences.

The structure venture capitalists use to ensure they extract regardless of the outcome.

Build a $50 million company?

Liquidation preferences eat it.

Build a $100 million company?

Liquidation preferences eat it.

Build a $500 million company?

Finally, maybe founders see something.

But most companies never reach $500 million.

So most founders never see anything.

The preference isn’t protection.

It’s extraction by design.

Real-world example: Brex.

On January 22, 2026, Capital One announced the acquisition of Brex for $5.15 billion.

Brex was last valued at $12.3 billion in 2022.

58% down round.

$7.15 billion vanished.

But the real damage happens in distribution.

Brex raised hundreds of millions across multiple rounds.

Late-stage investors who invested at the peak $12.3 billion valuation have senior liquidation preferences.

The waterfall likely looks like:

Series D/E investors: 1 to 2 times preference on $300+ million.

Series C investors: 1 times preference on prior rounds.

Series A/B investors: 1 times preference on early rounds.

Total preferences could easily exceed $3 to 4 billion.

Leaving $1 to 2 billion for common stockholders.

Founders and employees hold common stock.

After 8 years building a company “worth” $12.3 billion that sold for $5.15 billion, the founders might walk away with a fraction of what they expected.

Or nothing at all.

Meanwhile:

Pedro Franceschi, co-founder and CEO, gets to keep working... for Capital One now.

Venture capitalists get their preferences paid.

Capital One gets the business.

Build a $12 billion company. Sell for $5 billion. Watch preferences eat everything.

The founders who built it get whatever’s left after investors take their cut.

That’s liquidation preferences in the real world.

Not hypothetical.

Happening right now.

But wait...

Won’t founder Pedro be fine?

Probably better than employees, yes.

Here’s the extraction hierarchy:

Capital One negotiates a management retention pool.

Pedro gets carved out before liquidation preferences hit.

Part of his payout comes as a retention bonus, not equity distribution.

He likely sold shares during secondary markets at peak valuation.

Translation: Pedro probably walks away with low 8-figures plus a retention package.

Not zero.

But nowhere near “co-founder of $12 billion company” money.

Who gets destroyed:

Early employees with common stock options: $0.

Mid-stage employees who joined at $5 to 8 billion valuation: $0.

Late employees who joined at $12.3 billion valuation: negative. Underwater options.

Engineers who turned down Google... $300K salary plus $500K stock.

For Brex... $180K plus equity “worth millions”.

Just lost everything.

The real extraction:

Pedro built an independent fintech company.

Raised billions.

Hired hundreds.

Served thousands of customers.

Now he’s a Capital One employee for the next 3 to 5 years.

Can’t leave. Retention package clawback.

Can’t compete. Non-compete clause.

Can’t build independently. Golden handcuffs locked.

He traded “founder of Brex” for “division president at Capital One.”

The money he gets is real. The freedom he loses is worth more.

The pyramid:

Top: Late-stage investors. Get preferences, exit clean.

Middle: Founder/CEO. Gets some payout, loses independence.

Bottom: Employees. Get nothing, lose jobs, or become Capital One workers.

Liquidation preferences don’t just determine money.

They determine who keeps their freedom.

Investors: always free to move to the next deal.

Founder: locked into the acquirer for years.

Employees: lucky to have a job offer.

Pedro won’t starve.

But he’s not independent anymore.

That’s the extraction that doesn’t show up in the press release.

Fintech exuberance was a symptom of zirp. Brex enabled more credit to folks who couldn't otherwise get credit without a personal guarantee. Zirp and exuberance is over at this point in the credit super cycle. AI doesn't help those fundamentals. Valuations are trending towards fundamentals (based on interest rates, discounted cash flows, etc).

Capital One is paying a fair price for the customer base and infra imho to add to their business customer portfolio.

Congrats to Brex et el on their incredible journey.

Fintech of that cohort is trading poorly, if they haven't found a way to survive post-ZIRP. Many have not.

“Breaking even” on what? The cost to exercise? Or the missed opportunity cost of going somewhere else?

I feel like one of their primary investors wanted out. It was probably not the opportune time considering the cost of money right now.

Economy’s maybe at risk… see housing starts esp.

Hopefully they had the confidence/insight to negotiate properly. I went through BN$ exit (was employee 19) early in my career and unfortunately, only select people at the top got retirement money. The most frustrating part was the Big Co. execs that came in much later, did literally nothing, and got a massive payday. Lesson learned though...

Now I'm wondering if I should've accepted an interview with them. For a while Brex was spamming me with recruiter emails like no other company had done before it.

Different businesses. Stripe main business is a payment processor. Brex provides credit.

Stripe has for years helped non-EU companies to do tax fraud in the EU, and in a just world their management would be charged.

Every time a customer in the EU pays with Stripe, they exactly know if they are a private customer or not and in which country that customer is located in. Stripe also knows who the counterparty is ("their merchant").

Yet Stripe systematically enabled their merchants to avoid paying appropriate VAT for sales to private customers in the EU. The merchants would send you a "receipt" and then go dark, no proper invoice provided and no appropriate VAT payments to the EU made.

Their merchants could write fantasy names on the invoices, Stripe would not check or correct anything. They simply ignored the whole Mini-One-Stop-Shop in terms of VAT.

That's the "benefit" of using Stripe, they had very happy merchants who didn't need to pay taxes when selling digital products to EU customers.

I had to light a very big fire under their ass for them to provide proper invoices. I have zero indication they systematically remediated the tax fraud situation and actually paid the EU the VAT that Stripe merchants owe if you'd look into Stripe's accounting.

Stock up 15% up YoY. That company isnt dying by any measure. They just acquired a business banking company on the cheap.

> Chase got it instead, but they are losing it next month because of their shenanigans and greed

Well, on a related note: https://oag.ca.gov/news/press-releases/attorney-general-bont...

"Capital One marketed its 360 Savings accounts as “high interest” accounts with “one of the nation’s best savings rates”...However, while interest rates rose nationwide...Capital One kept the interest rates for its 360 Savings accounts artificially low...Instead, Capital One created “360 Performance Savings,” a nearly identical type of savings account that provided much higher interest rates than 360 Savings..."

“Capital One misled consumers through false marketing and a lack of transparency regarding its savings account system, cheating consumers nationwide. Given an opportunity to make loyal customers whole, Capital One sank their teeth in even more, attempting to underpay people it harmed and continue its deceptive practices"

I'd recommend US Bank.

I see you getting downvotes, but can you elaborate a little on what happened? What kind of business did you mean? If you don't want to share more here, you can email me.

Crypto is just extension of the banking system and VC powered money extraction schemes. Bitcoin is the only notably different thing in my opinion.

If growth rate was really 50% YoY, their investors would not let them sell for $5 billion.

Not sure what's gonna happen to them of course, but C1 doesn't really layoff the entire team like that. They have a few acquisitions that merge in but often stay as their own business unit and have a fair amount of autonomy.