Novo and Brex, challenger banks for businesses, raise millions

Two challenger banks for business owners are entering 2022 with fresh infusions of cash to help them flesh out their products and attract more customers.

On Tuesday, Brex, in San Francisco, announced that it had raised $300 million in a Series D-2 round led by Greenoaks Capital and TCV. The money will go toward expanding the company’s products and reaching high-growth companies.

Meanwhile, Novo, in Miami, made public a Series B funding round of $90 million, led by Stripes, a New York-based investor in software and consumer companies. Novo hopes to build out its lending capabilities and develop products that would let small businesses send and receive money more quickly.

Both companies compete with banks that serve business owners, and they collaborate with banks, too. Brex's bank partners include Emigrant Bank, JPMorgan Chase and LendingClub Bank. Novo works with Middlesex Federal Savings and Patriot Bank.

“Brex has …. [accelerated its] growth since our last investment,” Neil Mehta, founder and managing partner of Greenoaks, said in a press release. “Brex is building a full financial operating system that keeps getting more comprehensive.”

Brex has raised $1.2 billion from investors since it was founded in 2017 and is valued at $12.3 billion. The company sought an industrial bank charter in February but withdrew the application in August, voicing plans to resubmit at a later date.

At the same time, Brex announced that Karandeep Anand would assume the role of chief product officer. Anand most recently served as the head of the business products group at Meta, the company formerly known as Facebook, and before that led product management strategy for Microsoft’s Azure cloud and developer platforms.

“Karandeep understands our customers and knows how to build and scale business products with consumer-grade ease to meet the needs of fast-growing companies,” said Henrique Debugras, co-chief executive of Brex.

Novo, which launched in 2018, has received more than $135 million of funding to date. It is valued at $700 million.

In 2021, it introduced “Reserves,” or subaccounts that can hold funds for different expenses. It also rolled out the ability to create and manage an unlimited number of invoices; cash-flow insights; and an app marketplace where users can find tools to help them budget, make payments and more.

“As we look towards the rest of 2022 and beyond, one area we’re particularly excited about is providing short-term capital for reducing cash-flow friction and implementing technologies that can automate this process,” Tyler McIntyre, chief technology officer and co-founder of Novo, said in a news release.