Brex CEO Henry Dubugras is currently raising over a billion dollars in a weekend to build a emergency bridging credit line which he believes startup clients affected by the collapse of Silicon Valley Bank will be able to earn their paychecks next week. Dubugras declined to comment on how much capital has been committed to the line of credit so far, but said he is in back-to-back talks to secure funds.
“We’re working with a lot of lenders this weekend to raise as much money as we can afford,” said Dubugras. To date, more than $1.3 billion in payroll credit applications have been submitted by more than 500 applicants. “The same people asking for the $1 billion have about 10 billion in total deposits [at SVB].
The founder says demand is increasing every five minutes. And while Dubugras said the final close is “TBD,” he said it’s “highly likely” that they will close some capital.
One question is whether the terms of the deal will be favorable to the founders, or, as an entrepreneur ominously suggested to me today, will the sharks get out?
Brex is not disclosing the terms of the deal, but said they make no money from these loans. “That’s what we’re working on to get the rate right, but think of it this way: There’s not a lot of information out there right now and it’s not easy to come up with over a billion dollars in a weekend,” Dubugras said. So you know, I think we’re just trying to see if we can come up with something that works for everyone and create an option.”
Another question concerns the quality of the applicants. As one founder told businessupdates.org yesterday, onboarding an influx of people is “the easiest way to invite fraud and get kicked out of the banking ecosystem.” Dubugras said the quality of SVB’s customer base is “quite good”.
“Most of the clients we get are real startups who had real companies with real deposits – and they link the data to their SVB account that had real money,” he said. “We’re definitely verifying that these customers are real customers – I’m not worried about that.”
“I hope the lesson for the industry is not, hey, if it’s a bank that isn’t JP Morgan, it’s unsafe. I think that will be terrible for our ecosystem and for America,” he added. The lesson instead, Dubugras thinks, is that founders share their risks. “I think the safest place for your money in my opinion is not a bank account, but in a money market fund and a cash management account, so that’s why we’re doing this at Brex.”
While Dubugras focuses on raising, claiming that Brex is operationally ready for this and not trying to cash in on desperate founders, the company will have to prove they can pull this off.
When SVB fell, Brex was considered a formidable competitor trying to profit from shifting funds. Sure, sources tell businessupdates.org that fintech got billions of dollars in deposits. Then SVB closed the wires and was seized hours later by the FDIC.
“Obviously the reason we’re doing it is that we want to support a community, which is very important,” Dubugras said. “The business reason we’re doing this is because we’re going to fund these loans and our business accounts, and we hope people continue to be our customers after that.”
Dubugras isn’t the only tech executive to convene others to provide founder loans. Another CEO is trying to raise money for an emergency fund for climate-focused startups, while others are exploring ways to create funding sources for historically overlooked and marginalized groups of founders.
If you have a juicy tip or clue about what’s happening at the SVB, you can reach Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912. Anonymity requests are respected.