Brex and Zip Join Forces to Streamline Enterprise Spending, Eye IPO

In a strategic move aimed at reducing cash burn and strengthening its position in the enterprise sector, Brex is partnering with Zip, a procurement startup. This partnership, announced by the CEOs of both companies, marks another instance of Brex collaborating with a former competitor. The goal is to offer enhanced procurement and payment solutions for businesses.

Brex, initially focused on providing corporate cards to startups and SMBs, has been evolving into a “financial operating system” for companies. While the company branched out into software to diversify revenue streams, interchange fees still constitute a significant portion of its income. This realization has prompted Brex to seek partnerships to bolster its enterprise offerings.

Last fall, Brex partnered with Navan to launch “BrexPay for Navan,” integrating its corporate card with Navan’s travel management services. Now, the collaboration with Zip introduces “Brex for Zip,” embedding Brex’s virtual cards directly into Zip’s procurement platform. This integration aims to streamline procurement and payment workflows, prevent unauthorized spending, and simplify global operations with a unified card program.

According to Brex CEO Pedro Franceschi and Zip CEO Rujul Zaparde, the partnership is a natural fit, as both companies collectively serve over 30,000 businesses, including prominent names like Anthropic, eToro, BetterUp, Carta, Coinbase, Gong, Zapier, Wiz, and NeuroLink. By combining their strengths, Brex and Zip aim to enhance their respective positions in the enterprise market.

Brex reported a 70% growth in enterprise revenue in the first quarter, with net revenue retention exceeding 130%. Zip also experienced significant growth, with a 155% increase in its strategic enterprise segment. Zip’s customer base includes OpenAI, Discover, Snowflake, Reddit, and Sephora.

Franceschi acknowledged that Zip’s procurement solution was more advanced than what Brex could offer independently to enterprise clients. He noted that while corporate cards suffice for startups with simple procurement workflows, sophisticated enterprises benefit from a more comprehensive solution like Zip.

The partnerships with Zip and Navan reflect Brex’s strategy to focus its resources and reduce cash burn. In January 2024, Brex reduced its workforce by nearly 20% as part of a restructuring effort. These efforts appear to be yielding positive results, with cash burn down approximately 90% year-over-year in the first quarter, according to Franceschi.

Brex, valued at over $12.3 billion at its peak in 2022, has raised over $1.5 billion since its inception in 2017. The company anticipates reaching $500 million in annual net revenue this year and saw a 154% increase in realized revenue in April. While not yet profitable, Brex aims to achieve profitability by the end of the year.

An IPO remains on the horizon for Brex, but Franceschi emphasized the importance of proper governance structure, financial profile, and market conditions before going public. The company’s coopetition strategy, as seen in its partnerships, is driven by customer needs and a desire to build deeper product integrations.