Brex’s Michael Tannenbaum on fintech growth strategies

When you’re starting a company, it’s only natural to crave a roadmap.

But although it’s inspiring to look at the paths other companies have successfully traveled, you also run the risk of ending up at the exact same destination.

That’s why Brex’s CFO Michael Tannenbaum believes in breaking a few rules.

If you live near a startup hub of some sort, you’ve probably seen the fast-growing fintech startup’s billboards and out-of-home takeovers. However, you might not know how Shakespeare and McDonald’s have also played a role in their story.

“Michael is the rare CFO who also leads up marketing, which makes him the perfect person to talk us through the company’s trajectory”

This week, I invited Michael to come on the show and tell us about their growth strategy. Michael is the rare CFO who also leads up marketing, which makes him the perfect person to talk us through the company’s trajectory.

And what a trajectory thus far: in the past year they’ve grown from 30 people to a 200 + person company. This June, they completed a fresh round of funding, bringing their valuation to $2.6 billion dollars.

In our conversation, Michael shares the strategies that have been most impactful for growing their word of mouth, the attribution model that’s the engine for their marketing strategy and Brex’s long-term plans to disrupt the credit card industry, vertical by vertical.

Short on time? Here are five quick takeaways:

  1. Break some rules. For Brex, the first one was having their CFO run marketing, along with a few other things typical fintech startups wouldn’t do, like outdoor advertising.
  2. Michael and his team created a lucrative reward system for startups, which they were able to do through group purchasing (taking advantage of a vertical that allowed them to buy software packages).
  3. It depends on the industry, but Brex has had huge success by acting bigger than they are – particularly in the B2B space, where people are looking for signals that your product is going to be supported for years in the future.
  4. They say you should write what you know (in Brex’s early days, that meant startups and e-commerce). But always have an eye on future evolution.
  5. When people tell you that your startup should follow a certain prescription or conform to industry standards – but your gut is telling you something else – follow your intuition instead.

If you enjoy our conversation, check out more episodes of our podcast. You can subscribe on iTunes, stream on Spotify or grab the RSS feed in your player of choice. You can listen to our full conversation above, or read a transcript of our conversation below.

From Wall Street to startup

Tara: Michael, welcome to the show. I remember first meeting you and Enrique in August 2018, and your team was maybe 30 people? We were joking about how people were confusing you with Brexit and –

Michael: Common mistake.

Tara: Right. Now, though, that’s all changed. In just one year, your company’s grown to: 200 people, a $2.6 billion valuation, and I feel like everyone knows Brex.

Michael: Well, that’s good. That’s our job: to make sure everybody knows us.

Tara: It’s been an exciting year. Let’s go back to where it all started. Tell us about your path to becoming the CFO at Brex.

Michael: I actually started in a Wall Street background, private equity. I worked at a company called SoFi, which is an online student lender, and has other products. I’m sure they’d like me to say that. I met our CEO, Enrique, who you mentioned, and he told me about this credit card business he wanted to build. I was interested in starting a company from scratch, and I had actually managed the corporate card at SoFi, as the VP of finance. I knew the opportunity and joined super early.

Tara: You definitely had relevant expertise, but I really love that you made the transition from the traditional industry (on Wall Street) to tech. That’s a night-and-day experience and responsibility set change to dive into an early stage startup, built from scratch.

Michael: Early stage is tough. Nothing’s set up. I remember, when I was going with Enrique to raise our series B, we went to an investor. They had fresh coffee, everything was laid out, and it was super organized. I thought, “Oh, this used to be my world.” Now, I come into the office, nothing works, people can’t set up Microsoft Office, everything’s broken, and people are complaining. It’s a little bit of a different life.

“The first rule of marketing we’ve broken is having the CFO run it”

Tara: That’s exciting, because you’re able to be in control and drive all that change. What made you trust the founder’s vision and make that jump?

Michael: I was really aligned. They wanted to build something really big. They understood technology, and they had a unique respect for regulatory and compliance. What actually made me most comfortable was when they said they were building their system like a ledger, so it can’t be messed up. I had seen things go haywire. When they said that to me, I was like, “Okay, this could be for me.”

Break the rules

Tara: You’ve been breaking all the typical timelines for growth, incredible name recognition, marketing tactics that span some traditional partnerships, to very disruptive formats in really visible ways. Let’s talk about that. How have you been able to grow your brand and build the word of mouth momentum?

Michael: The first rule of marketing we’ve broken is having the CFO run it. I started running it right away because we needed someone to, and I had seen success in marketing at SoFi. Now we have an experienced team, but at the time it was just me. The first thing did was that we took advantage of the fact that we had a physical card. You have that every day, and if you’re a financial services company (particularly a lending company like where I came from), you crave something that allows you to be in front of your customer every day. You lend to someone; you do it once, and then they pay you back but don’t care about you. We had this physical card in front of our customer, and that gave us the idea that we could build a brand early.

So, we did some things that typical startups and typical fintech startups wouldn’t do. A big, notable one has been outdoor advertising, which we can talk more about. Out of home was successful for SoFi, and we really doubled down on it at Brex. We’ve been really, really good at ground game. Which means we’ve sort of blanketed the ecosystem of early stage accelerators, early stage venture capital firms, and been able to – from that entire startup life cycle perspective, across all different types of marketing – stay in front of the customer.

“For us, it was super important to understand the value of word-of-mouth… there were a lot of people talking about Brex”

Tara: How much of that marketing were you already doing before you actually launched the product?

Michael: This was a big problem for me, because I was getting married. I was married in April 2018, and I was going back to New York. Everybody was going to be asking my wife what her dopey husband did, and I was working at this company that sounded like Brexit.

We had no rank on search. We had not announced to the world, no Crunchbase profile, nothing. We started with last touch. So, last touch means “how did the customer get to you?” Did they come through email marketing? Did they come through search? Did they come through PR? Did they come through a paid channel? Did they come through referral or word-of-mouth? So, we just had last-touch attribution in place to be able to identify, using mainly our website architecture, where did the customers come from?

Tara: Where were you seeing your customers coming from? Was it surprising?

Michael: For us, it was super important to understand the value of word-of-mouth. As you indicated, Tara, there were a lot of people talking about Brex. One of the first things we wanted to understand was how to track word-of-mouth and earned traffic? A lot of times, from press, it’ll be from a website that is not Brex. They’ll come there and not Google, right? We started getting that, but we weren’t able to track where people were really coming from. So, we actually added to our application flow an optional question: “Where did you hear about Brex?” About 60% of the people told us. We made it optional because you never want to ruin your funnel by asking –

Tara: You don’t want to slow down the sign-up process, right?

Michael: Right. But, it was so valuable to hear people were saying, “I heard about it from an investor” or “I heard about it from a friend.” So, we added a paid referral program. Then, we also added a huge initiative to go after all the venture firms and all of the accelerators and sort of build this ground game.

Tara: So what I’m hearing is that you stared at the very beginning creating a product that solved problems for your customers. Then at the same time you were laser-focused on understanding where are the customers were they coming from, and how you could leverage that for growth.

Michael: Right. How do we double down on the channels that work? One thing that didn’t work early on was paid. Digital paid was super hard to get right. We have a smaller market, so at least initially, we were totally focused on startups. There aren’t that many of them, and the thing is, they’re not usually searching for a credit card. When they are, they’re not searching for one that’s just for startups. So then, you’re bidding against American Express on the term “credit card,” it gets very expensive.

Tara: So it’s expensive paid search, and startups don’t like clicking on the paid ads.

Michael: Correct.

Leveraging rewards and partnerships

Tara: So you mentioned a few different channels and things that you learned through the attribution model. One of them that has been making a splash is your rewards program. If you’re in the Bay area, you’ve likely seen the billboards or other ads that promote the more than hundred million dollars you’ve been able to give back to startups. That’s incredible. That’s super catchy. As someone who works in the startup space, I want to get a slice of those rewards. How were you able to build such a powerful rewards network, and how have those partnerships been important?

Michael: Totally. The inspiration for the billboard campaign came from the McDonald’s “billion customers served.” They used to do that, as you know, Tara – we’re both from New England, so we know what goes down at McDonald’s.

Tara: You’ve got me smiling here, yeah.

Michael: McDonald’s is probably everywhere, but we definitely remembered their “billion customers served,” and we had that counter. That was the creative inspiration. The reason we’ve been able to offer such lucrative rewards for startups is that we’ve done what people in broad industry call “group purchasing,” which means that we take advantage of the fact that we have this specific vertical that’s all buying mainly software. Intercom is a perfect example. So many of our customers are buying Intercom that we can actually go to someone like you and say: “We represent all these companies. If you give us a discount, then we can pass that along to our companies in the form of rewards.” It’s great for Intercom, because Intercom would get new startups using them. It’s great for Brex, because we’re able to pass on a discount to our customers. We’ve done that with a number of software vendors, probably most notably AWS, because AWS is just so expensive that they’re able to offer a pretty big discount to our customers.

Tara: The partnerships, too, have enabled you to align yourself with these really established tech companies. How has that been helpful for marketing? Is that part of the strategy as well?

“In terms of your product, it is super helpful to be considered stable and bigger than you are”

Michael: It is. With Brex, we’ve always acted bigger than we are. When we launched, we had paid media all over the city in the form of outdoor and out-of-home. We had tons of press, because we basically combined two rounds into one announcement. So we seemed like we were everywhere. We did this big launch on social. Then, when we did rewards, which was probably about four months after we launched the product. We came out and we said, “We have Amazon, we have WeWork, we have DoorDash, we have Salesforce.” We had some big names. All of a sudden, it was, “Well, we’re Brex.” We have this dopey nothing, and we’ve got these huge companies –

Tara: Yeah, now you’re in the lineup with those really well-known brands that are household names and driving real results and impact for their customers.

Michael: Totally. So partnerships are important, for sure.

Act bigger than you are

Tara: You mentioned that you’ve always acted like a larger company. Do you think that’s important for other founders? What does that enable you to do?

Michael: It depends on the industry. It matters in almost everything you do, in the sense that it can be awkward. We’ll talk about its implications for branding, but in terms of your product, it is super helpful to be considered stable and bigger than you are, because if you’re the B2B space, people are looking to you and hoping your product is going to be up and supported for years in the future. In the consumer space, it’s a little bit different. People are willing to try a new brand.

Tara: It’s transactional, a one-time purchase. You’re not planning for two, three, five years out.

“When you’re really small, it’s hard to get branding right because people want to have these grand visions, but you’re three people in a room hoping to get some traction”

Michael: Right. But for B2B marketing, it’s super valuable. On the branding side – I like to talk about this, because it’s just something I’ve noticed with startups and something Brex has gone through – when you’re really small, it’s hard to get branding right because people want to have these grand visions, but you’re three people in a room hoping to get some traction. It’s awkward to say, “We’re changing the future of work” or “We’re the global standard for financial services” when people are looking around and finding that you barely have a website. So we started super clear: We’re the first corporate card for startups. There’s tons of affinity around that. We were one of the first people to directly market to startups. People who work at a startup know they work at a startup. It really worked. As we’ve gotten bigger, we’ve had to broaden our product and broaden our messaging. So that’s been a bit of an evolution for Brex.

Align your business strategy around solving problems

Tara: You have a lot of customers. Startups come and go, and a lot of them also grow over time with you. But of the ones that have shut down, I read the stat that no one has defaulted on their credit card payments. Can you share any details about that? Because that’s unbelievable; that is really different than the normal industry standards.

Michael: It’s definitely different than the industry’s perception of startups. It’s funny, because people will ask us what happens in a downturn? Everybody’s hurt in a downturn, but one of the unique things about startups is that they’re usually succeeding or failing totally separate from the economy. If you think about Intercom: when you guys started, Intercom got traction not because the aggregate spend on customer service software was growing or shrinking. It either worked or it didn’t. So it’s almost its own ecosystem in some ways.

Even though we’re in a great economy, there are plenty of startups failing all the time. Bank account underwriting may not be the best for everything, but it’s certainly the best for people that don’t make money. You can’t underwrite based on the P&L, or you’d never give anybody credit. Because we found a perfect way to underwrite these people, we’ve been able to get ahead of the failures and not lose money.

“When you’re a CFO or an operations person and you go to a startup, you have to be an expert on payroll, office space, benefits”

Tara: That just circles back to really being familiar with your customers, and then aligning your whole business strategy around solving problems for them and speaking to them.

Michael: One of the things we’ve done that’s really spoken to our customers is that we launched a blog pretty early. It was successful, and it was originally written mainly by me about what it’s like to try and set up all these things as a startup for the first time. When you’re a CFO or an operations person and you go to a startup, you have to be an expert on payroll, office space, benefits – all of these things I really didn’t know that much about. I set them up for the first time, and then I just wrote about it. The differentiated insight was that everybody in a startup is searching “How do I set up payroll for a startup?” for the first time. So when people are searching that, they’re going to come to our content.

Maybe Gusto has an article about payroll, and maybe Intercom has an article about customer service and marketing software, and maybe somebody else has an article about benefits, but we combined all of these things, and we got a lot of Page Rank because we just wrote honestly about our experiences, what vendors we selected and what we did.

Tara: Just in real time, you’re capturing that experience and sharing what you were learning, which is a step that a lot of companies would overlook.

Michael: It’s like the real-world startup, right?

Tara: It makes me think of Gimlet Media’s podcast, too, where they’re documenting your journey to start a podcast.

Michael: Meta, if you will. That’s a popular word these days.

Tara: It’s a bit meta, but it sounds like it’s been effective.

Michael: Yes, it confused my wife, because she was like: “When did you become a blogger, exactly? I thought I married a CFO.” And I said, “Listen, I’ll do what we got to do.”

The customer’s multi-touch journey

Tara: Are you at a point now where you’re tracking from that first introduction to Brex until when they sign up, and then beyond?

Michael: From sign-up all the way until how much they’re spending.

Tara: How would you build that multi-touch model? How have you been following those customers and building that in?

Michael: It’s heavily based on the website and how they interact with that website over time, or how they interact with other digital media we have, whether it be paid ads or whether it be affiliate sites like Credit Karma. We get a lot of information from the customer journey, and then we also get self-attested information when they tell us. We combine all that to understand the journey. We use a 40-20-40 model. 40% for the first touch, 20% for everything in the middle, 40% for the last.

Tara: Is that where you started when you expanded past last touch?

“We definitely had some board members emailing wondering, ‘What is this guy doing, and why is he spending so much money?'”

Michael: We have not played around with that too much. A lot of the time we’ve spent has been trying to get better at measuring the out-of-home we do, because out-of-home is one of the bigger parts of our budget, so we want to make sure.

Tara: What are some examples of the out-of-home initiatives you’re running, just for our listeners?

Michael: We do billboards, we do transit, we’ve done the subway in New York City –

Tara: All the things you’re told not to do.

Michael: All the things you’re told that are expensive and bad and wasteful. And of course, you can imagine we definitely had some board members emailing wondering, “What is this guy doing, and why is he spending so much money?” It’s actually not that expensive; it’s a cheap way to gain a lot of reach, and because we put that outdoors in a city like San Francisco where everybody either works at a startup or knows someone that works at a startup, there was so much affinity around that term here that it really worked. We’ve only really done this in other places where there’s high concentration of whatever customer we’re targeting.

Tara: What I’m hearing is it wasn’t actually that expensive, because it allowed you guarantee that almost every startup in the Bay Area saw your advertisements or had at least an impression. How did you track the impact? Are there tools you’re using?

Michael: There are. You have a marketing analytics person, a data person, someone who’s somewhat technical and can work to basically parse the data. A bunch of people offer this, but you can parse the data and figure out the last-touch attribution there: where did that actual site visit come? Through a combination of cookies and the pixels that you install from Facebook and Google, you sort of piece together this model. You can use a pre-packaged one that comes from a vendor (like HubSpot), or you can sort of build it yourself. The key is, each time you add a new form of marketing, whether it’s email, paid strategy or referral, you just make sure you’re able to attribute that and track it in your model.

Tara: You keep everything in your attribution model, and then as you start learning from it, you add in the multiple layers.

“If you know that you’re going to learn something and you know you can check whether it works or not, there’s nothing wrong with trying”

Michael: Right. When you create a campaign, it’s sort of campaign-level. We create an email campaign, and that campaign is associated with certain tracking. I didn’t get into this before, but we have five levels of attribution within each touch, right? Level One is marketing, sales or BD. And then you get into paid, out-of-home, investor channel, sales, marketing, versus SDR. From there, you get all the way down to Level Five, which would be the specific campaign – meaning that if you came from a product announcement campaign, that would be the most granular level.

But that would roll up into email marketing – or that would roll up into email campaigns that are branded to existing customers versus in-funnel customers versus new customers, and then it would roll up into email, which would roll up into outbound, which would roll up into marketing.

Tara: That makes perfect sense. You’re looking first at the broad categories of what’s working and what directionally should we be investing more in, then drilling deep into the individual initiatives that are driving the most impact. The advice then, for other companies, is to just track everything you can, have discipline with those weekly funnel meetings, and when you’re reviewing your data, break it down into the different categories so you’re getting a complete picture.

Michael: That’s right. That is the message, because if you’re tracking everything, it actually lets you try more things. If you know that you’re going to learn something and you know you can check whether it works or not, there’s nothing wrong with trying.

How to expand strategically

Tara: That speaks to us at Intercom. We’re a big culture for experimentation, data-driven learning. It opens up these possibilities to try something, to A/B test, to see what’s working and to learn from those experiences. How does that fit into where you’re going next? We know you’re successful in capturing the startup corporate card market. You’ve launched the e-commerce card. You’ve launched the life sciences card now. You’re really looking at some of these initiatives to expand your total addressable market. You’re no longer just a card for startups. You’re going new places and finding these new segments. What’s your thinking behind the expansion strategy, and why are you moving so quickly?

Michael: Actually, my parents asked me that. They’re like: “Oh, we’re nervous. We see on Facebook that Brex is everywhere. It seems like you’re doing too much, Mikey.”

Tara: Yeah, are you pivoting? What’s going on?

“Everything’s changing, but the financial services offerings for retail companies did not evolve”

Michael: I know they worry, but that’s okay.

Tara: You’ve got your support team.

Michael: We are focused on the segments for which the traditional financial services market and products work least well. If you think about where we started (startups), it’s obvious. E-commerce is another thing. Everything about retail had moved online except financial services, right? People are on Shopify, people are selling over the internet, and they’re delivering via packaging. Everything’s changing, but the financial services offerings for retail companies did not evolve. So that was a huge area for us to enter. Life sciences, again, face many of the same issues as do startups. They’re younger companies, newly started. They’re spending a lot of money on card and need rewards tailored to them. So that was a natural one. Where you’ll see us continue to evolve are other areas where you have these industries and these types of companies, and the existing financial products aren’t doing anything to recognize the unique attributes of their business.

Tara: What type of industries are you thinking about?

Michael: One that comes to mind often is nonprofits. They’re sort of similar in some ways to startups, because they raise money, they often don’t make any money, and they spend the money. That financial model – that type of cash flow – is not well-understood by existing lenders, so that’s one that seems very natural. Another one is the professional services segment.

Tara: You heard it here first: Brex for nonprofits and Brex for professional services. Watch this space.

Michael: Yes. No promises, but those are two areas I might think about.

“Shakespeare says, ‘Ambition should be made of sterner stuff.’ That’s a quote from Julius Caesar. The point is that they are very ambitious, and we never wanted just startups”

Tara: So, has this always been a part of the Brex strategy? When you were launching, did you think you’d start with this one segment to gain some traction and awareness, but you’ve had this in your back pocket?

Michael: I mean, we know how this game goes, Tara. I would say that we never thought we would only be for startups, because our founders are extremely ambitious. I thought I was ambitious – but they’re ambitious. I’m not as ambitious as them. They’re very, very ambitious.

Tara: Serial founders in their early 20s.

Michael: Right. Shakespeare says, “Ambition should be made of sterner stuff.” That’s a quote from Julius Caesar. The point is that they are very ambitious, and we never wanted just startups. So we always knew we would go outside of startups. People often say, “Write what you know,” and they knew e-commerce, because they had done that down in Brazil. So that was the natural second place for us to go, and there was a big need. As we started doing that and thinking about the marketing, me and Henrique (our CEO) were thinking, “How do we message this launch, this second product, this e-commerce?”

That’s when we came up with this. Just like we had the first credit card for startup, we can do that for e-commerce too. That’s going to be really special and powerful, because we’re talking to the customer in a way that nobody has done before. That’s where this overall strategy of vertical started to emerge. We always knew we were going somewhere, but I’m not going to pretend that we had a crystal ball.

Tara: That makes perfect sense. You’re now leveraging not only your experience from your past work, but also what you’ve learned works at Brex. My last question would be that you’re a 200-person team today – that’s certainly a lot larger than you were a year ago, but it’s still pretty small to have three launches in the last year and a half, multiple audiences and the verticals you’re supporting. How do you manage that? When you’re going after a new vertical, do you actually allow the same team that’s built up that expertise to now flip to a different vertical, or do you find new people to run with the new launch?

Michael: What we’ve done that’s been smart is we set up a lot of our system and infrastructure the right way the first time. For us to modify our rewards program or our underwriting or our statements, it’s not that much technical work. At the company level, it doesn’t seem like we have all these products, because everything’s sort of working together and we’ve set it up with this idea. It’s a little bit about a go-to-market strategy and BD and marketing. We’ve started to implement the GM structure, so we had a GM manage our go-to-market. He actually had run growth with me and been the first marketing hire with me, so that was an interesting experience for us both.

Tara: For each vertical you’ll have a GM who leads that, and ultimately, all roads lead back to the core platform and the problems you’re solving.

Michael: That’s right.

Tara: That’s exciting. Well, we’re going to stay tuned for a few more launches in the near future, at the very least.

Michael: Please do. Keep your eyes open in San Francisco, and you’ll see new stuff.

“Every time that you think about doing something because other people tell you this is how it should be or it seems industry-standard – but it’s against your intuition – I would say follow your intuition”

Tara: You’ve certainly had a really effective growth and expansion strategy. Presumably, you’ve also made some mistakes. Are there any pitfalls for people to watch out for – anything that you think is important to be cautious of when you’re growing a company?

Michael: Every time that you think about doing something because other people tell you this is how it should be or it seems industry-standard – but it’s against your intuition – I would say follow your intuition, especially in the beginning where you’re just trying to figure out what works. We had heard that paid was super valuable, and people were asking, “What’s your paid marketing?” I didn’t really want to get into it yet, but we felt sort of like we had to, and that ended up being a little bit of a waste of time. I talked about our first failed podcast – we tried to imitate Masters of Scale – but there wasn’t really room in the market for another startup podcast. We were just sort of looking at what other people had done that had been successful without thinking fully through whether it was relevant for our audience.

Tara: Are there any other companies, or startups in particular, that you look to for inspiration in terms of continued expansion?

Michael: One company that is super impressive is Zillow. They’ve been really strategic over time, and they’ve used marketing and data in somewhat untraditional ways. They started by indexing all the homes and really playing off the way that people have so much affinity for their house and how much it’s worth. Over time, they created a marketplace for other services, and now they’ve started to pivot into actually buying the houses. They’re competing in that buying universe, but with such data and audience advantages that the company, from a strategic perspective, is just really, really impressive.

Tara: They probably have an incredible ability to know what’s going to sell and who specifically, even, is going to buy it.

Michael: I’m sort of giving conflicting messages, because at some points I’m saying it’s good to read about what’s worked for other people, and that often will inspire you. Let that create new ideas for how you can do something. But just copying what other people do probably won’t work. But reading about other success stories really can help you formulate new ideas, new paths and new strategies.

Tara: Makes sense. It inspires you to be ambitious and take your own course. Well, Michael, thank you so much for coming on the show. We’ve learned a lot from this conversation. Where should we go to keep up on what’s the latest and greatest with Brex?

Michael: As we talked about, keep your eyes open for our billboards. We’ve doubled down on that strategy, brought someone in-house to run it. We also produce a lot of great content for startups in the blog format. So check out our blog – it’s called The Log.

Tara: We’ll be watching. Thanks again, Michael.

Michael: Thank you, Tara. Appreciate your time.

The Growth Handbook v1 – Desktop Article – horizontal 2019