Tech companies are pinching their pennies—from industry behemoths like Google and Microsoft to small-scale startups.
If you want to see exactly how, look at their credit card bills. Brex, a corporate card and expense management fintech unicorn, published new data on this today—laying out how their customers, which include 10,000 seed, early-stage, and late-stage startups, were spending through the end of 2022.
Late-stage startups, in particular, are more focused on profitability right now, which means they are pulling back on things like advertising and marketing or travel and entertainment, according to Michael Tannenbaum, who is the CFO and COO of Brex. That being said, travel costs are higher than they were at the beginning of the COVID pandemic when people had effectively stopped going on work trips or hosting work dinners and events altogether.
“Earlier stage companies generally have had flat spending for the past six months, while later stage companies are becoming more conservative, and I think that reflects the funding data,” Tannenbaum says.
During our conversation, Tannenbaum pointed out that consulting and contractor spending has actually gone up, which is indicative of companies re-evaluating their headcount and which full-time roles they really need. Startups also tend to turn to third parties for advice when more pressure is put on the economy, according to Tannenbaum.
Naturally, Tannenbaum and I spoke a lot about interest rates, and how uncertainty over the future of rates can throw a lot of volatility into the private markets, or make VC exposure less appealing to some investors. All of these macroeconomic indicators are influencing Brex’s business, too, as it’s a venture-backed fintech that depends on startup spending for corporate card revenue.
“We have Brex Cash, which is a business that benefits from rising interest rates, but no question, we are a company that serves startups—and as startups pull back on spending, that affects us, too,” Tannenbaum says.
In October, Brex announced that it had laid off approximately 11%—or 136 members—of its staff. When I asked Tannenbaum whether there may be more layoffs in the future, he said it was “hard to speculate on that,” but said everyone would get more clarity when interest rates steady.
Here are three of the most interesting tidbits from Brex’s data:
Some perspective…If you’ve been following along, Stripe is reportedly in talks to raise up to $3 billion in new funding, though it looks like the payments company will take a severe valuation haircut in the process. Here is why a Stripe down round could actually be a good thing, as Anne Sraders reports.
Today is the last day…To weigh in on the private markets for Semaphore’s 15th annual confidence survey of private equity, venture capital, hedge fund, and other professionals. Did 2022 turn out to be a poor year for both investment returns and the managers/service providers of PE, VC, and hedge funds? Are investors complicit in the downfall of Sam Bankman-Fried and FTX? How could a split Congress influence the private markets? Weigh in, if you like, and share your level of confidence in yourself, the economy, and your business; it’s anonymous and should take you 3-4 minutes. You can take the survey here. Have a look at last year’s results here and here.
Now that it’s February…Here is a cartoon from Ian Foley to get you through the month.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.
VENTURE DEALS
- Colossal Biosciences, a Dallas-based biosciences and genetic engineering company, raised $150 million in Series B funding. United States Innovative Technology Fund led the round and was joined by Breyer Capital, Bob Nelsen, Animal Capital, Victor Vescovo, In-Q-Tel, Animoca Brands, Peak 6, BOLD Capital, Jazz Ventures, and others.
- Enko, a Mystic, Conn.-based crop health company, raised an additional $10 million in Series C funding. Eight Roads Ventures, Nufarm, Endeavor8, and Akroyd invested in the round.
- The Exploration Company, a Bordeaux, France- and Munich-based space tech company, raised €40.5 million ($43.94 million) in Series A funding. EQT Ventures and Red River West co-led the round and were joined by Promus Ventures, Cherry Ventures, Vsquared, Omnes Capital, July Fund, Partech, Possible Ventures, Habert Dassault Finance, Schlumberger, and Sista Fund.
- Hnry, a Sydney, Australia- and Wellington, New Zealand-based accountancy fintech platform, raised $35 million in Series B funding. AirTree Ventures, Athletic Ventures, and Left Lane Capital invested in the round.
- Lulalend, a Cape Town, South Africa-based digital lender for small- to medium-sized businesses, raised $35 million in Series B funding. Lightrock led the round and was joined by DEG, Triodos Investment Management, Women's World Banking, The International Finance Corporation, and Quona Capital.
- Sunstone Credit, a Baltimore-based clean energy financing platform that helps businesses go solar, raised $20 million in Series A funding led by an affiliated fund of Greenbacker Capital Management.
- Freemodel, a Burlingame, Calif.-based home renovation company, raised $19.5 million in Series A funding led by QED Investors.
- Finley, a San Francisco-based private credit loan management software platform, raised $17 million in Series A funding. CRV led the round and was joined by Bain Capital Ventures, Haystack, Y Combinator, Nine Four Ventures, and Upper90.
- Select Star, a San Francisco-based data discovery and governance platform, raised $15 million in Series A funding. Lightspeed Venture Partners led the round and was joined by Bowery Capital, Sozo Ventures, and Pebblebed.
- Optilogic, an Ann Arbor, Mich.-based supply chain design software company, raised $13 million in funding led by MK Capital.
- Guardz, a Tel Aviv-based cybersecurity company, raised $10 million in seed funding. Hanaco Ventures led the round and was joined by iAngels, GKFF Ventures, and Cyverse Capital.
- Nexus, an Austin-based platform powering Support-a-Creator programs for live-service video games, raised $10 million in funding. Griffin Gaming Partners led the round and was joined by Sony Innovation Fund, Valhalla Ventures, content creators CohhCarnage and Berleezy, Pace Capital, and S3 Ventures.
- Orbital Sidekick, a San Francisco-based space-based monitoring solutions provider, raised $10 million in funding. Energy Innovation Capital led the round and was joined by Williams, ONEOK, University of Minnesota’s Endowment, 11.2 Capital, Syndicate 708, and In-Q-Tel.
PRIVATE EQUITY
- Stonepeak acquired Intrado Life & Safety, a Longmont, Colo.-based public emergency telecommunications services provider, for $2.4 billion.
- Addtronics, a Kaho Partners portfolio company, acquired Missouri Tooling & Automation, a Lebanon, Mo.-based robotic automation systems provider. Financial terms were not disclosed.
- Highlander Partners acquired Black Sage Technologies, a Boise-based counter unmanned aircraft systems platform provider, from Acorn Growth Companies.
- MiddleGround Capital acquired Megatech, a Québec City-based digital manufacturing platform. Financial terms were not disclosed.
- Slate Hill Partners acquired a minority stake in XO Wealth Management, a Dallas-based investment advisor. Financial terms were not disclosed.
- Vivo Infusion, an InTandem Capital Partners portfolio company, acquired CIVIC Infusion, a Wilton, Conn.-based infusion treatment provider. Financial terms were not disclosed.
EXITS
- GI Partners agreed to acquire Atlas Technical Consultants, an Austin-based infrastructure and environmental solutions provider, from Bernhard Capital. The deal is valued at approximately $1.05 billion, including debt.
- Cirtec Medical and SaniSure agreed to acquire the precision components division of Q Holdings, a Pepper Pike, Ohio-based silicone and elastomeric molding and extrusion solutions provider to the medical device and biopharma markets, from 3i Group. The deal is expected to be CAD $172 ($128.89 million).
OTHER
- Flight Centre Travel Group acquired Scott Dunn, a London-, San Diego-, and Singapore-based luxury tour operator. Financial terms were not disclosed.
- Marqeta acquired Power Finance, a New York-based credit card program management platform. Financial terms were not disclosed.
- MikeWorldWide acquired MRB Public Relations, a Freehold, N.J.-based public relations firm. Financial terms were not disclosed.
SPAC
- Lotus Technology, a Singapore-based electric vehicle maker, agreed to go public via a merger with L Catterton Asia Acquisition Corp, a SPAC. The deal is valued at approximately $5.4 billion.
PEOPLE
- Centana Growth Partners, a New York-, Palo Alto-, and San Francisco-based growth equity firm, hired Sarah Mears Kim as a partner. Formerly, she was with Archipelago Analytics.
- White Star Capital, a London-based investment firm, promoted Eddie Lee to general partner.
Correction, Feb. 1, 2023: The digital version of this newsletter has been corrected to reflect that Enko raised an additional $10 million in funding.
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