Is Brex the New WeWork?

Off the news that it's cutting 20% of its staff this got me thinking about parallels to WeWork: both were dressed up as tech companies with tech margins and valuations while they're really other (still useful) kinds of businesses.

WeWork provided a valuable service. It was hard to find a flexible office space for a growing (or contracting) company in a hip, fun space.

Brex provided a valuable service. It was hard for startups with little business history to get credit cards.

Both catered to the technology startup space but neither carried the gross margins or profitability of a software business. Yet, both raised at valuations that implied they were technology businesses with software margins.

Brex may also be a poster-child for ZIRP: money was cheap, so they could lend it out via credit cards quite easily. But this type of financial service is a battle for bips and is only truly profitable at tremendous scale and with other businesses as part of it - like the Visa, Mastercard rails.

Brex reportedly is at $270M in annual revenue, according to an Information article. It's unclear how much of that is their expense management software they've been pushing lately and how much is credit card business. I'd assume most is their credit card business.

Of course, they're not profitable and still burning cash every month. But, let's be generous and apply the standard SaaS public co multiple of 7X: $1.89 as a valuation, maybe bump it up to $2B if they're growing fast.

The company has raised $1.2B and has a valuation of 12B in the private markets. They have real competitors like Ramp which presumably have software-like margins. I'd assume 95% of employees are underwater on their equity (and I'd assume the founders have sold hundreds of millions in secondaries).

So, what happens next?