Henrique Dubugras (Founder & Co-CEO of Brex)
Henrique on starting a company and raising capital as a teenager, advice for students looking to get involved with startups, and more.
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Interview Guest: Henrique Dubugras (Twitter: @hdubugras)
Role: Founder & Co-CEO of Brex
Previous: Henrique (and his Brex co-founder Pedro) built payments company Pagar.me at the age of sixteen. In just three years, Pagar.me grew to $1.5 billion in volume of transactions processed. Before Pagar.me, Henrique worked on various education startups.
Roshan’s favorite quotes from the interview:
On Henrique’s unusual deal to learn more about the US college application-process: “I found this Brazilian guy on Facebook who was graduating from Stanford, and funny enough, he was starting a startup. We made this deal in which I would code for him for free, and in exchange, he would teach me the Stanford application process.”
On building technology from the ground up, in-house: “We believe that the reason Brex hasn't already been built is that no one has ever rebuilt a core banking technology.”
On selling being a learned skill rather than an innate one: “When I started our first company Pagarme, I thought that sales was this innate skill; either you know how to do it and you're schmoozing people kind of like a car dealer salesman, or you're nerdy and smart, and you can't be both. It turns out that sales is just a skill like any other.”
On his career vision: “Pedro and I always liked the idea of working on something for 30+ years. Some people are serial entrepreneurs, and they want to build and sell companies and build multiple things. That was never really our thing. We just wanted to work on something for a long, long period of time.”
On the evolution of Brex’s vision: “Before, we thought it would be more like a platform layer in which we build a credit card, banks and software companies would integrate with us, and it would be more like Android. The more time passes, Brex has evolved to be more like the iPhone, in which it's more of a vertically integrated closed system.”
Roshan: To start, what's the story of how you got started as an entrepreneur at such a young age?
Henrique: My story starts really young when I started coding around the age of 12 because there was this game I wanted to play. It was an online RPG, and you had to pay monthly to play it. I figured out that if I learned how to code, I could build and modify an emulator and play it for free. That's kind of how I got started.
I built a pirated version of the game that got super popular in Brazil because instead of charging a monthly fee, I changed it to a freemium model where you could play for free and buy items inside the game. That got super popular in Brazil until about six months later when I got these legal notifications saying I was breaking some patents. I didn't know what patents were, but my mom got super upset and told me to shut everything off.
So, that's kind of how I started, and after that, I began to look into other things.
I started watching a TV show called Chuck about an excellent programmer and hacker that had gone to Stanford and saved the world of code through the CIA. I wanted to be exactly like Chuck, so I needed to go to Stanford. I got obsessed with going to college in the US. I'm born and raised in Brazil, and the concept of applying to US colleges is very complicated. You have all these SATs and essays and everything you have to go through. It wasn't straightforward.
So, I found this Brazilian guy on Facebook who was graduating from Stanford, and funny enough, he was starting a startup. We made this deal in which I would code for him for free, and in exchange, he would teach me the Stanford application process. I started work for him, his startup raised money, and I saw the evolution and the pattern of what to do.
After a year of working for this guy, I decided to start my own startup, soI left and tried to start an education company, because I think every student has an idea to do an education company at some point. The company helped other Brazilian students with the whole US application process. That didn't work out that well, but it's kind of how I got into tech and startups. I tried to do a bunch of stuff and couldn't raise any money. At that point, I was having fights with my mom, moved out of my house, got emancipated, and was running out of money. I found this hackathon in Miami worth $50,000 and was like, "wow, if I can win this thing, it's more time without my mom."
So, I went into this hackathon and built this app called Ask Me Out. It was like Tinder, but instead of using geolocation, it used Facebook friends; you could like and match your Facebook friends. It turned out we won the hackathon. We came back to Brazil and tried to launch it as a company, but that also didn't work out. That's how I got into payments, though, because I had a bad experience implementing these awful payment systems.
Around the same time, I met my co-founder, Pedro. I met Pedro because he was also a coder since he was a kid. He started coding when he was nine, and then when he was 12, he got very hacker famous because he was the first person in the world to jailbreak the iPhone 3G. After that, Brazil's largest payments company hired him to build security for an iOS app because no one in Brazil understood iOS security and he was hacking iPhones. So, that's how he got into payments.
We met at the end of 2012 over Twitter fighting Vim vs. Emacs (two text editors for programming). I was Vim. He was Emacs. It got complicated to fight over 140 characters, so we went to Skype and became best friends there. At that point, we decided to start our first company, Pagarme, which was like Stripe in Brazil. That's the story of how we got into tech.
Roshan: How did you guys raise money for Pagarme at such a young age?
Henrique: I tried to raise money for a while with all those previous companies and was not very successful. For Pagarme, it was a funny story. When I was doing the education company, I started getting close with these foundations that gave people scholarships to study abroad. One of them was founded by this guy named George Apollo Lehman, who's one of the co-owners of AB InBev, one of the largest brewery companies in the world. He's Brazilian, and he was giving scholarships for people to study abroad. His foundation did an event for education stuff, and I went there intending to meet him because he was the wealthiest person in Brazil at the time and one of my biggest idols. I wanted to know him. I remember running down the stairs to find him, but I didn't find him and then went to lunch.
When I was coming down the stairs after eating, he was going up. I dashed over and stopped him and mumbled a bunch of stuff. I think I said something like, "Hey, can you give me a little bit of your time to get some coffee,” or something I saw on some Silicon Valley podcast. It turns out it worked for a bizarre reason, and he took a meeting with me. At that point, he told me he doesn't really know anything about payments, but he invests in this fund that specializes in payments. He introduced me to this guy who turned out, very luckily, to also be an entrepreneur that had built and sold a payments company when he was very young.
He was our first investor, but we didn't raise a lot of money. It was $300,000, which looked like a lot of money to us at the time –– in Brazil, that was like a million reals. In today's currency, it's probably $150,000. It wasn't that much of a process. It was more about relating with someone, but we had been unsuccessful at it so far. I wouldn't say the terms were very favorable; we sold a large part of the company for that money.
Roshan: Not many sub-twenty-year-olds have built 100+ person teams. Why did you sell Pagarme?
Henrique: It's a good question, and we think a lot about it. The company was working. It had product-market fit; it was profitable; it was growing. Pedro and I always liked the idea of working on something for 30+ years. Some people are serial entrepreneurs, and they want to build and sell companies and build multiple things. That was never really our thing. We just wanted to work on something for a long, long period of time, and we thought that if we're going to dedicate 30 years to something, we want it to be something huge. Even though we were in love with Pagarme, it was only in Brazil, and we didn't think it could be that big compared to the opportunity we have in the US. Also, both of us got into Stanford, and we wanted to check out college. It was my dream for a long time, so that's kind of why we decided to do it.
Roshan: You had initially applied to Y Combinator with an augmented reality startup. How did you and Pedro develop Brex while at YC? What was your overall experience like with YC?
Henrique: When we got to Silicon Valley, we felt like we were tired of FinTech and didn't want to go into FinTech again. We wanted to do something on the bleeding edge of technology, because Silicon Valley is where all the innovators are. That's why we decided to do VR; it seemed very innovative and hard, and something Silicon Valley people would do. It turned out that it is very innovative and hard, and maybe Silicon Valley people do it, but the two Brazilians that got here lost any interest in doing it. So, we got into YC with that idea, but I don't think we got in because the idea was great. Rather, I think we got it because we had built and sold this company before; for our backgrounds.
We got into YC, started re-looking for an idea, and then realized FinTech was actually in our heart. So, we pivoted during the batch, and by the end of the batch, we had the Brex idea. The experience was very positive, we had a good amount of money when we sold Pagarme, and we were in college, so life was good. YC created this environment in which we felt competitive with everyone, which added some pressure and helped us start Brex. It was also always very easy to validate our ideas because we had many companies around us to ask.
Roshan: Let's move on to some questions about Brex. What is your vision for Brex, and how has that evolved over the past three years?
Henrique: We want to create something we call a financial operating system: everything you need to run your business from a financial perspective, all in one place. Before, we thought it would be more like a platform layer in which we build a credit card, banks and software companies would integrate with us, and it would be more like Android. The more time passes, Brex has evolved to be more like the iPhone, in which it's more of a vertically integrated closed system.
Roshan: Who were your first few hires at Brex? What was your strategy around building a team at Brex versus when you did it at Pagarme?
Henrique: It was very different from Pagarme. The first few hires at Brex were our CFO and general counsel. In order to get Brex off the ground, we really needed to get a good banking partnership and get a Mastercard license. It was pretty hard. Starting a credit card company is not as easy as I think people imagine after seeing Brex. We needed those two key hires to make everything work. So, that's how we started Brex, but at Pagarme, it was not like that at all. We hired two great engineers first. One of them is with us today, and the other started a company in which Pedro and I are big investors. We're definitely happy that we did it that way. At Pagarme, we were also very stingy with pay and wanted people to take huge pay cuts. At Brex, we just wanted to get the best people, no matter the pay.
Roshan: A big part of your strategy has been building technology from the ground up, in-house. Why is that?
Henrique: We believe that the reason Brex hasn't already been built is that no one has ever rebuilt a core banking technology. Often, people build a bunch of software and then go try to integrate with banks. That's really, really hard to do. Banks have software they built in the 80s and 90s. It doesn't integrate with anything, doesn't work with anything, and nothing is real-time. We believe that one of our biggest competitive advantages is having rebuilt 100% of the software stack from scratch, which allows us to have no constraints in what we can build in the FinTech sector, versus before you were always constrained by what the bank could support.
Roshan: What are the advantages of building a FinTech company in the US, rather than in Brazil? What about the potential challenges?
Henrique: The US is more competitive, but at the same time, it's more fragmented. Looking at Brazil, there's like five big banks. To take market share from one of them, it's a little bit harder. Here in the US, there are thousands of banks. Pre-COVID, there were 40 banks in the US with over $10 billion in market cap. So, if you think about it, 40 companies worth over $10 billion are doing the exact same thing. The market is just so big, and there is so much spread out across smaller banks that I think there are massive opportunities to win market share in the US, especially after COVID.
Roshan: Moving into some advice-related questions, do you have any advice for students interested in becoming founders? Are there any traits and skills that you think make a good founder?
Henrique: The first thing is to explore ideas outside your day-to-day. I don't know how many times I've heard students have an education idea, an idea around a marketplace for dorm food, or something that has to do with their day-to-day lives. And remember, there are thousands of students in US colleges majoring in computer science thinking about the same ideas. At the same time, there are many other sectors that no smart computer science majors are thinking about. If you even think about FinTech, or real estate, or alternative energies, or insurance –– there's so much opportunity in all these other markets. If you just take a summer job at one of those companies instead of a traditional tech company to learn a different market, you're going to be exposed to a lot of different ideas. My second piece of advice is that recruiting is one of the most important things you'll have to do in a startup. So, make smart friends who you can work with in the future either as co-founders or that can become early employees. That will make a huge difference later on.
I think the two most important skills for founders are coding and sales. I say coding because if you depend on other people other than your co-founder to push code for you, it's going to be a pain. Very rarely, for example, does YC take startups that don't have a technical co-founder. So, if you have to choose any major, I'd recommend computer science. I'm a huge CS guy.
The second skill is just selling. When I started our first company Pagarme, I thought that sales was this innate skill; either you know how to do it and you're schmoozing people kind of like a car dealer salesman, or you're nerdy and smart, and you can't be both. It turns out that sales is just a skill like any other, so I went and read a book about it. There are a lot of those books, but I recommend The Little Red Book of Selling or The Sales Bible. After reading those, I was like, "Oh, wow, this makes a lot of sense. I can actually learn this thing." It's just a skill like any other, even like coding, that anyone can learn, no matter if you're shy or not shy. If you're building a startup you're going to sell to investors, candidates, and customers, so it's important to know how to do it.
Roshan: What are good ways for students to get involved with startups while still in school? Is Brex looking to hire any interns, either right now or over the summer?
Henrique: The best way is to find a way to work part-time, during school, not only during the summer. For us, it's not that we don't hire interns, but we rarely hire interns. We're now starting to a little bit more. The reason we don't is that our business is so complex that it takes three months to learn FinTech, and then after that's over, the interns leave, so it's hard to generate a lot of value. The model that has been successful for us, and sometimes we get students that can reconcile, is both working and studying. That's really good because you can get real responsibility. You might need to take a more manageable workload during the year, but I think that's probably the best way.
Roshan: Two last questions, both of which are more fun. Outside of work, what hobbies occupy most of your time? How do you stay physically and mentally fit, given the high demands of your job?
Henrique: This is something that's evolved for me over time. Work from home has actually helped a lot. Before, doing anything was very hard. Now, since you're in your house the whole day, it's easier to get stuff done. I just work out at home. I have some weights here, and I've been learning how to play the guitar recently, which has been really fun. I try to not work too much on the weekends and have the weekend be actually for resting. But that's now. Early on, I worked every weekend.
Roshan: Do you have any favorite books, podcasts, movies, video games, etc. that have been a big influence in your life as a whole or in your work?
Henrique: My favorite book is called The Innovator's Dilemma. The Innovator's Solution is the sequel. We view that as the Bible for any business, so I highly recommend anyone thinking about starting a startup to read those two books. For video games, I like Counter-Strike. It was my thing growing up, and I still play to this day. I recently bought a gaming computer for my house to play it. For podcasts, I like one called Invest like the Best; it's pretty interesting. Then for movies, I really like documentaries around stories of people that were successful. I'm watching this Hugh Hefner documentary now that's quite interesting. I like all the Wall Street documentaries. I just like seeing how other successful people did it in the past at different times.
We hope you enjoyed the interview with Henrique. We had a blast recording it :)
You can find Henrique on Twitter @hdubugras.
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