So much of the purchasing for tech startups and small businesses is online. Yet they often struggle to pay for the services and platforms they need because they don’t have business credit cards.

This problem is especially acute for startups that lack credit as they’re more likely to have a hard time securing financing from banks than startups with good credit scores. FinTech giant Brex seeks to address this problem by supplying startups with the banking stack they need to scale.

In today’s episode of The Modern CFO, host Andrew Seski talks with Brex COO & CFO Michael Tannenbaum about how Brex empowers startups, the global nature of startups, how he thinks about growth in different market cycles, and more.

Please note that the transcript is AI-generated and may contain errors. The content in the podcast is not intended as investment advice, and is meant for informational and entertainment purposes only.

[00:00:00] Andrew Seski: Hello, everyone. Welcome back to another exciting episode of The Modern CFO Podcast. As always, I'm your host, Andrew Seski. Today, I'm thrilled to be joined by Michael Tannenbaum, CFO of Brex. Michael, thank you so much for being here. 

[00:00:21] Michael Tannenbaum: Thank you for having me.

[00:00:23] Andrew Seski: So, today, I'm excited to talk about a myriad of topics, including leadership, rise to the CFO, what excited you about Brex. So, we've got a ton to cover today and I kind of want go back in time to leaving undergrad and kind of your first roles. It's always interesting to hear kind of how people cut their teeth, whether it's in finance. We've had a number of CFOs who actually went into, you know, service first and others who started in, you know, the typical Big Four. So, I'd love to go kind of hear about your early career and, you know, walk us through the rise to your position today.

[00:00:58] Michael Tannenbaum: Sure. Thank you for having me. I actually wanted to be an economist when I was in college. But my thesis advisor at school thought that academia would be not a good fit because I was too commercial and I enjoyed working a lot and, you know, in that profession, not that they don't work a lot, but, you know, you have summers off and there's a lot of lifestyle benefits to being part of university and he didn't think that those would resonate with me as much. So, he had pointed me into investment banking, which obviously was something I was aware of. And my research was heavily on like housing markets and mortgage. And I went into the Financial Institutions Group at JPMorgan in investment banking. So, banks, insurance, mortgages, all those kind of companies. And it was an interesting time 'cause I graduated from college during the GFC and, you know, banks were going under or being bought and sold. And so, I started in regulated financial services, M&A. And then I worked in a private equity company out in San Francisco where I focused largely on financial services also. And then, I went to a company called SoFi, which is now a public company, and I joined there relatively early, about 75th employee. And I kind of worked my way up through that company, starting in the capital markets team, and then took on additional roles, ran the mortgage business, which was kind of a nice round trip from my undergrad. And then, I was the chief revenue officer there. I met Henrique and Pedro at Brex. They were just coming up with an idea at the time. They were, I think 20 years old, and I was 29 or so, maybe 28. And they compelled me to come and join them as the first employee of Brex. So, that's how I got here. And I started as a CFO, and I always say this, but since it's a podcast about CFOs, I think it's even more relevant. My dad, who's also a CFO, always said to me when I joined, you know, "You're the CFO of a three-person company. It's kind of like being the CFO of nothing. So, you can call yourself chief if you want but." So.

[00:03:05] Andrew Seski: Before we go back into Brex, I'm kind of curious. Do you think that sitting across the other side of the table on the investment side was informative or, you know, gave you some perspective as to what it's like to be, you know, more of an operator on the private company side?

[00:03:18] Michael Tannenbaum: I think when you're just starting in your career, you look at the senior-most people that you see, at least I did. So, for me, that would be like the heads of the groups that I worked for or some of the senior people and the clients. And you ask yourself like, do I want to be that person, you know? Is that a role model for me? And I think, for me, I definitely gravitated more towards, I was always excited by, you know, the banker that had gone and became a CFO. I think that was a path that I wanted pretty quickly. And I, you know, as I mentioned, I kind of grew up with that, so it seemed very natural and attractive to me. 

[00:03:57] Andrew Seski: So, for everyone who doesn't know, I mean, I know I remember earlier days of learning about Brex, but, you know, now, I think you've got an incredible brand and it's very well known. But for those who are just learning about Brex for the first time, can you give us a bit of a summary of what was exciting to you first to make the leap to be that early?

[00:04:15] Michael Tannenbaum: I think like a lot of good companies, you know, you start in a very specific niche and then expand out. There's a lot of, I didn't go to business school, but there's a lot of, you know, academic textbooks about business that talk about that, you know, crossing the chasm, etc. concept. And I think Brex when I joined it was really focused on startups and this need in the market for a credit solution and really a payment solution for startups. So much of the purchasing for technology companies is online, right? You can't buy Google Ads, for example, or Amazon Web Services without a credit card. They don't give small companies net 30 payment terms. You just have to pay on card. But at the same time, you have all these, you know, certainly at least 50% foreign entrepreneurs that are trying to start tech companies with a couple million dollars in the bank and can't get a credit card. And so, that was like a very hair on fire problem for that segment. And we really doubled down. And that was the Brex that I joined. 

[00:05:17] But the promise that I signed up for was always that credit card and expense management together would be more powerful than them separate, meaning that, you know, at SoFi when I was responsible for determining who got credit cards for example and expense management reporting as part of being the VP of Finance, it was such a challenge to wrangle everybody and get these receipts and ensure that there was spending controls. And so, with the broader promise that I think Brex has now realized, which is that you can combine expense management software and corporate card payment services in a way that is more powerful than either of them separate has proven to be true. And I think that's where, you know, Brex has moved and really defined this category of corporate payment.

[00:06:11] Andrew Seski: Yeah. And this has been an incredible solution because it really empowered, like you mentioned, the international community as well. And I think I'm seeing, you know, in the venture world especially, a lot of focus on emerging markets now, which I think is great for innovation. It's great for, it's good I think for the world, in my opinion. But I do want to focus a little bit now to, you know, you've continued to innovate and one of the current focuses we were just chatting about before. I would love to hear a little bit about the Empower solution and kind of how maybe you're addressing an even larger market today than that first, you know, really bold innovation years ago.

[00:06:49] Michael Tannenbaum: Yeah. I think we followed our customer in some way because these startups, one of the unique thing about startups relative to most small businesses is that for a lot of them, if you come back a year later, they're significantly larger and more complex with a lot more employees and more revenue and business systems and the way that they grow and the rate is much faster. And so, our startups that maybe joined us in 2017 or '18 started to get larger and have more sophisticated expense management needs, budgeting controls, vendor-specific controls. And so, with that, we decided, which was, is a little bit contrary to what most companies do, which is they add features incrementally as they move upmarket. Instead, we decided to actually work with DoorDash, which is public. Could just, you know, a very large tech company, wasn't an existing Brex company customer and bring the product all the way up to be able to serve a company like DoorDash and to then make that the reference point for the expense management and then, of course, modify some of the features for smaller companies, but rather than kind of incrementally grow to support customers, which is, you know, what is the kind of typical path, we took the product all the way up. I think because we realize there's something unique about the tech market that we serve, where those companies, they want to be DoorDash, right? If you go to a standard, you know, bakery, that company's likely not, oh, I wish I could be Hostess, right? Or whatever the premier bakery is Pepperidge Farm. I think that in the startup land, they do look up at those companies and the solutions that they use. 

[00:08:41] And so, for us it's very valuable to have this, you know, product embedded in some of the world's most impressive technology companies. And it also gets to a comment about remote work and the financial tools that are enabling that, which you reference with kind of the global nature of startups. I think because you have so many entrepreneurs that are, and executives in startup and tech, now with remote work, there's a lot more focus on global hiring and, you know, Brex and Empower in particular is helping enable the financial needs of remote workers, in particular, those outside of the US that are interacting with US companies and need to be able to purchase and get reimbursed and have expense management work and integrate with the ERP and all of those geographies. And that's a very, that's a very new tailwind to credit cards, right? If you think like, let's just take off-sites for example, which are much more common now, historically in corporate payments land or credit card land like at SoFi, only executives and traveling salespeople would interact with expense management. Now, pretty much everyone needs to because they get work-from-home stipends or they go on off-sites. And so, and in particular people, you know, in a remote, international office. So, I think Brex is rising to the moment and particularly Empower of this kind of new distributed workforce. 

[00:10:15] Andrew Seski: Yeah. Thanks for sharing that. I mean, it's really interesting to hear about sort of the aspirational nature of some of these firms and how that's led you to innovate. I'm really curious as how you think about, we might be dancing around your definition of a modern CFO, but it sounds like you went slightly against the grain in terms of strategy as you were mentioning how most firms here slowly go upmarket, slowly add features. How do you think a CFO should think about, you know, strategic finance as opposed to, you know, maybe more traditional roles? You know, I'd love your kind of definition of a modern CFO and kind of that explanation of how you think about it.

[00:10:48] Michael Tannenbaum: Yeah. I think that you've gotta support the growth of the business in a financially sustainable way. I think a CFO often, and sometimes I embrace this too probably to my detriment, can be curmudgeonly, right? That's sort of the caricature and there is a role for that, you know? There's a reason that that exists. But I think ultimately, a modern CFO is supporting the growth of the business but doing so with appropriate financial guardrails. And those guardrails change, you know, as the market changes and we've seen that dramatically certainly over the past year. I also think a modern CFO has to acknowledge his or her role in risk management. Typically, the CFO is the senior-most person in the organization focused on risk or caring about risk. And whether that's included in the job description or not, it is part of the job. And I think ultimately, CFOs are seen as risk managers and judged by their boards and by ultimately the stock price on their ability to do that. And that's increasingly so in the world that we're in.

[00:11:58] Andrew Seski: That's a really good point, especially in the momentum of some of these firms in their growth. There are certainly corners that can be skipped if you're raising just outsized rounds of financing. And I think we saw some of the detriments of maybe going too fast and bringing things too quickly and aggressively over the last few years. So, it'll be interesting to learn and see how the role of strategic finance will kind of continue to expand upon, you know, a different market cycle, which we may be approaching right now. How are you thinking about continuing scale and growth in, you know, different market cycles? I mean, you said you started your career during the Great Financial Recession and it must be a really interesting time to start your career and have that perspective. It'd be interesting to hear about how you think about growth in different market cycles.

[00:12:49] Michael Tannenbaum: Yeah. I think, you know, growth is still what sets you free, right? They always say growth solves a lot of problems. And that's true. And so, you need to, at least if you are in the environment that I'm in, which is, you know, venture-backed technology, growth is still the thing that is ultimately gonna be what rewards your company and the share price. But that said, I think the resource environment and allocation has to change with the market. Here, it's actually much simpler today because rise in interest rates just has increased the cost of capital, right? So, it has raised the bar for projects that you might wanna pursue because the returns need to be higher when an investor or a company can keep their money in for, you know, risk-free for 4%, right? That's very different environment than zero. I mean, if you just think about, you know, if you've got a million dollars and you can earn $40,000 doing nothing, that's sort of compelling, right? You divide 40,000 by 12, you know, you're talking about $3,500 bucks a month, right? It's kind of a lot. So, I think that really changes the way that you should be thinking about investment. The opportunity cost is different. I mean, you know, individuals, not that everybody has a million dollars, not even close, but everybody's making their own version of decisions across the economy that I just mentioned in a way that they weren't for many years. But at the same time, I think we have to remember, you know, interest rates are still historically low and the things can change very quickly and have over the past 10 years as well, not just with COVID, but, you know, these environments do change and I think that interest rates were also rising at least until in 2019 in the beginning. And so, you don't want to overcorrect and just try to eke out every last dollar profitability at the expense of growth either. 

[00:15:06] And I think that, you know, the perspective at least I had coming out of the financial crisis, I joined JPMorgan in the summer of '10. So, at that point was sort of the phase where a lot of people like my parents' friends were like, oh, why would, you know, they refer to me as "Mikey," why would Mikey join investment banking now? It's such a horrible time. And I think what people don't remember and this is true of companies as well is like the performance that you're seeing at that point is reflecting an environment from a year ago. And so, that's also true today, you know? In many ways that's true of a lot of things in finance and the way companies work is that what you're working on today is gonna show up in the financial results in the future. And that's why, you know, when a public company misses earnings, there's so much concern because, you know, smart money knows that that means that's problems from a year ago showing up now.

[00:16:08] Andrew Seski: Right. So, there's been a pretty significant turnover and churn in employment in the world. We've talked about kind of the changing globalization of workforces. I'm always curious as to know how you've seen your role develop and change in terms of what is, what are kind of like. I think there's not a single CFO I've had on who knows that they've gotta be data-driven and strategic, but it's always interesting to hear something that they've seen that's really changed in the needs of their role, whether that's, you know, really supporting human resources and hiring the finance team themselves or, you know. Is there an area that has changed drastically in the last few years or one that you think maybe slightly outside of what is perceived as the scope? 

[00:16:51] Michael Tannenbaum: Yeah. Well, one we talked about is risk management. I think risk management, you know, there's gonna be some companies that have, like I'm head of risk. That's less common. I mean outside of financial services, I think that isn't necessarily there. But just like within financial services and outside, the same risk still exists, right? You have the liquidity in capital markets risk, you have operational risk, you have enterprise risk. You have all of these product-specific and brand and reputational risks. And I think that that, at least from my experience, that risk management is a big part of the CFO. I'm not sure if other CFOs even some probably don't realize that that's part of their job. But I do think it's the expectation that they manage that. 

[00:17:41] To your point around data, I think what I have found is that the finance role, of course, is to be data-driven, like you said. That's almost a buzzword at this point or assumed, but I think it's the context around the data that a lot, you know, very rarely and probably and shouldn't finance does data report to finance, right? It's not if you're a data scientist, you don't dream of being someone like me. If you do, you should change your job. But I think the point is that you, but the context around the data, whether it be, you know, financial metrics or just the importance of having clean data that is universally understood and agreed upon within the company, which is a challenge, that is the domain of finance. And so, providing like they need to provide the metrics and the KPIs that people are focused on and ensure that those are well-defined and promulgated in the company. And that's definitely a big part of the CFO job. That's also probably not in the job description. 

[00:18:47] Andrew Seski: Right. No, I really appreciate that. That's a great point. So, let's take a step back and think about Brex and markets again but in terms of, you know, we're recording this at the very end of 2022, coming up on the new year. What are you thinking about, what's top of mind for the next 12 months? And then, if we could zoom out even further, I know it's difficult and kind of the volatile way of the world at this exact moment, but, you know, maybe something that you're really excited about coming up in the next maybe three to five years. Just to pull us out above 30,000 feet. 

[00:19:18] Michael Tannenbaum: Yeah. I think that this planning cycle, this time, this moment in, I guess, macroeconomic history is a time where finance leaders rise to the occasion or don't. And I think there's historically a long wishlist that, you know, a good finance person has, and many of those things have been ignored because, you know, finance doesn't drive the company nor should it. But now, in these kind of environments where there is more focus on cost and profitability, there is more focus on risk management. These are the opportunities for finance teams to kind of step up and go further down their wishlist and implement the things that they've wanted that have not been priority for a while and to get more financial discipline within the company, teach the company about return on investment and what this interest rate environment means and what investor expectations are not in like a heavy-handed, I will seize my power way, but that's how you rise to the moment as a CFO at this time. And that's true of risk management as well. I think if you've been a good risk manager, you know, you will sort of naturally show the company the value of that. And if you've been a poor risk manager, you know, now's the time where you learn from your mistakes and change things. 

[00:20:45] Andrew Seski: Yeah, I appreciate that. I think one of the interesting conversations that I've had from some of the more fractional CFOs that I've had on the show who just have kind of chosen a point in time in a company stage where they feel like they are the most aggressive value add has been that growing along the pains of cycles and different stages of firms can be a lot of complexity and sometimes you have to go straight through those experiences to just have a track record of learning how to do them. I'm kind of curious from your perspective because you have had to grow alongside like SoFi, you were early, actually extremely early. What is the change of the role across, you know, stages of venture, you know, taking on some of these more specific risk management challenges? You know, it's interesting to hear the difference between some CFOs who have been there since the very beginning versus, you know, CFOs that are hired just for IPOs, you know, amongst those small group of CFOs who have done so.

[00:21:42] Michael Tannenbaum: Yeah. I mean, at a really early stage company as I kind of began with, the title of CFO almost feels ridiculous, right? Because there's no finance to be chief of. But, so at that point, while my title was CFO, I was really just doing whatever it takes and that's part of being at a very early stage startup. You know, roles and responsibilities are very fluid and you tend to have a lot of principles of comparative advantage. And, you know, whoever has the comparative advantage in something will do that. And that caused me at some point to run marketing, which lasted two years. It caused me to run PR, a bunch of things. It caused me to do a bunch of things where I might have had a comparative advantage relative to the people that were at the company at that stage. And then, I think when you get past the early stage and you're in the finance department, you're functioning, you know, it's sort of like this, if you're familiar with like the hierarchy of needs, Maslow, psychological concept, you're kind of go from like life or death to just more fundraising, which is close to life or death. And then, you move up into like, you know, KPIs and performance, you know, company performance management and strategy and all these things, you know, as the company scales. And so, you kind of work your way up that hierarchy of needs. And I think at the same time, similar to any role, not unique to finance, you're transitioning from being an IC to a manager, right, and then to being a manager of managers. And then, when you're at the stage and I think like risk management, to your point, that's always that you're always being a risk manager. Because in the beginning of a company, you have nothing. So, there's not much risk to manage, right? And whereas you have nothing to protect, right? You have only to gain. And so, you really are talking about existential risk only. And as you get larger, you have more of a brand and more of a franchise and investor relationships and equity and all these things that you wanna protect. And then, you need to start to be more judicious about those. And then, when you get even larger to the point where you can focus on strategy, you actually define your risks and your risk tolerance and your approach. And, you know, you put thresholds and you do board reporting. And so, that's sort of at the stage that Brex is at. And that evolves alongside the same financial management.

[00:24:18] Andrew Seski: I love the hierarchy of needs. We should map that out at some point. 

[00:24:22] Michael Tannenbaum: Yeah, it'd be fun. 

[00:24:23] Andrew Seski: Yeah. That's awesome. I love that. I always say that, you know, listeners should go back and hit that back 30-second button and relisten to a part of the podcast. I think that would be a really good one for people to consider and just have some awareness about where they are in that hierarchy of needs and really just be super accountable in terms of, you know, where the priorities are, right? So, one of my favorite parts of this entire podcast and one of the things that I love is the diversity of people and experiences of the guests on the show. And Michael, I'd love to hear a little bit about what you feel maybe underestimated in the world today, if there's anyone actively addressing it. Of course, it doesn't have to be about finance or markets. Welcome to make it so. But I would love to hear your thoughts from a unique vantage point.

[00:25:09] Michael Tannenbaum: Yeah. I think one thing that really has caught my attention is DALL-E, you know, from OpenAI. I'm not sure if you're familiar with what I'm talking about. But basically, some of these new AI-enabled models and how they can produce images, for example, with a few keywords entered that are, you know, very accurate. And I think there's a lot of implications for that also with text, right? They can write articles and the implications for that in professional services, which I think finance is a part of, are really big because there's so much work that you do within accounting and finance that can be automated and that's been a promise for so many years, and it's not totally happened. You know, of course there's BPOs and there's definitely financial software that makes the close easier and there's financial software that helps with FP&A. But, you know, there's still a lot of manual processes involved and I think that what you're starting to see with some of these intelligent AI models is gonna change a lot of white-collar work, particularly in accounting and finance. So, that's definitely something. 

[00:26:29] The other thing I'd say is, you know, we talked a bit about remote work. I do think that the impact of remote work on collaboration, even on the built environment, my wife's an architect and so I always think about, you know, if you think about like what highways did or what the air conditioner did for the built environment around the world. Imagine, you know, this concept of remote work when so much of our housing and our way of life has been tied to commute. And if even 20% of the world, which I know is a huge amount, but let's say 20% of the world is or at least the country is working remotely 50% of the time, you know, that's just traumatic. And I think that that's, we haven't even seen the impacts of these yet.

[00:27:13] Andrew Seski: That's really interesting. I mean, you're right. The promise of AI has been something we've been talking about for quite a long time. Actually, it kind of makes me wonder if you had, you know, the magic wand of operational efficiency, what problems would you be trying to actively solve, you know, maybe for you or maybe a thing that you're seeing coming, you know, down the road? 

[00:27:33] Michael Tannenbaum: I'd probably say on that, just I guess switching gears a little bit, would be, you know, performance compensation and management. I think it's so hard to have performance comp because, at least in my experience, there's so much overhead. There's so much debate. It's so hard to do properly that a lot of good companies, including Brex, just say like, we're not gonna do it, right? Like we are just gonna try to pay, you know, we'll pay you right. We'll promote you, but we're not gonna do bonuses. We're not gonna go through that cycle. And I think, of course, that naturally hurts the top performers as well. You know, that solves for the middle. It is a strategy, but I think if I could wave a magic wand, I would get that right. 

[00:28:16] Andrew Seski: Yeah, I think it's really important too. I mean, the world I operate in and you do as well as private company stock is pretty difficult to grant out efficiently. The IRS has made that kind of complicated. I know that most of the world of venture kind of relies on options, but it'd be really interesting to watch the future of kind of the equity management piece of all of that as well 'Cause I think it is a space that's moving really quickly. Now, if all that were based on, you know, a new form of compensation management that was run by something, you know, more compelling than the two of us, that'd be very, very cool. I think it might be down the path. So, that's really exciting.

[00:28:53] So, I want to take one more opportunity to kind of run through anything that's kind of upcoming at Brex and anything that you're more excited about maybe a little bit longer out into the next few years. I know you said you've got kind of your planning for the next year pretty much sorted through, but just kinda wanna refocus one more time on Brex here while we've got you.

[00:29:14] Michael Tannenbaum: Yeah, I think for Brex and it gets to this increasingly global and remote workforce, but I think that what you're starting to see is companies much earlier in their life cycle hiring outside the United States. It used to be that maybe after a thousand people, you think about an outsourced operation site in a lower-cost country or an R&D center in a certain country or a specific office to sell in a new market. Whereas now, the workforce and the skill sets are increasingly global at least but at the same time where we have a world that is in some ways deglobalizing with China and Russia, too. So, that's sort of an interesting time. But at least for the sphere that the United States operates in, the workforce particularly in technology is becoming more global. And I think that means that financial tools will have to adapt. And, you know, Brex is trying to meet that moment and offer companies that are operating across multiple geographies and require complicated expense management the ability to do that seamlessly in a way that really empowers employees to get their job done. And I think that is something that's very exciting for the future for us. 

[00:30:31] Andrew Seski: Yeah, that's incredible. I'm looking forward to that. Well, Michael, if there's a way for anyone who's interested in learning more about Brex or maybe getting in contact with you, what would, what's the best way to do so? 

[00:30:42] Michael Tannenbaum: I'm just Michael at Brex, so that's one of the perks of being an early employee, your first name at the company. And I'm not giving that up, so you'll have to pry that from my dead lifeless grip.

[00:30:55] Andrew Seski: Alright, great. Thank you so much, Michael, for joining The Modern CFO Podcast. I know we'll have an opportunity to speak again in the near future, but thank you again for making the time.

[00:31:03] Michael Tannenbaum: Thanks, Andrew. Appreciate it.