Brazilian startup receives US$100 million from investors

RIO DE JANEIRO, BRAZIL – Flexible benefits are here to stay, even with a progressive return to the physical world. That is the thesis of startups like Flash – and it is backed by companies like tech giant Tencent and by national and global investment funds. The startup, which sells an app for employees to decide how much to spend on categories such as culture, education, food, and transportation, announced on Wednesday, March 9, a US$100 million investment.

The Series C was led by new investors Battery Ventures (Coinbase, Niantic) and Whale Rock (Loft, Nubank). Another addition was Chinese tech giant Tencent, which invested in Brazilian businesses like Nubank and Omie.

“Battery and Whale have the vision of platforms that serve other companies, including the human resources area, while Tencent has a vision of the payments world. The first two are in the United States, while Tencent is in China. So we now have a global vision about our markets,” said co-founder Ricardo Salem in a conversation with From Zero to the Top, InfoMoney’s entrepreneurship brand.

There are no internationalization plans: the challenge is still huge in Brazil. The benefits market moves R$150 billion (US$30 billion) annually, according to estimates from the industry itself. Only 2% of Brazilian companies adopt the flexible benefits model – but another 48% intend in the future to let their employees choose in which areas they prefer to have financial aid, according to the 30th Corporate Benefits Survey, published in July 2021.

Flash was created by Salem, an engineer turned consultant; Guilherme Lane, an administrator turned programmer; and Pedro Lane, a lawyer turned communicator.

Pedro was dissatisfied with the corporate benefits market. Besides seeing complaints about the service and level of service from food stamps and food voucher operators, he saw employees selling their benefits for a fee to make better use of the money invested in them.

Pedro, his brother Guilherme, and his friend Salem talked to lawyers and human resources professionals to understand how to change the market but remain compliant with corporate benefits legislation.

Flash began operating in 2019 as a flexible benefits app. Depending on the categories chosen by each hiring company, app users can move their balance between benefits such as food, meal, mobility, health, education, culture, and entertainment. The amounts are spent through a Mastercard card, accepted in more than 2 million establishments.

Flash has a points platform to manage these transfers of values between categories. The platform also allows managing other benefits offered by partners or the companies themselves. For example, the employee can upgrade and manage his dependents in the health plan.

Salem said that Flash serves “thousands of companies and hundreds of thousands of employees. Some of the companies served are MadeiraMadeira, Loggi, and VTEX. For the companies, the first goal is to take the operational burden of benefits off the human resources department. “It became difficult to maintain the physical routines of the human resources department during the pandemic, such as paper approvals. HR had to go digital. So we built products to solve the pains arising from this transformation,” Salem said.

A second goal is to turn benefits into a tool for attracting and retaining talent. A survey commissioned by the startup with more than 100 human resources departments served by Flash showed that for 62% of them, flexible benefits improved talent retention.

The startup monetizes itself in two ways. As a credit card issuer, it earns a commission on each transaction. In addition, each company pays a monthly fee per active employee, depending on the size of the company and the complexity of the products contracted.

Flash had already raised US$30 million in three rounds, made with funds such as Global Founders Capital (which has in its portfolio businesses such as Facebook and Slack), Monashees (99, Rappi), and Tiger Global (Blue Account, Daki).

The new $100 million investment came ten months after the last round. “We were not looking for a raise, as we always calculate up to two years of cash after each investment. We anticipated it because exceptional investors came to us, looked at our metrics, and suggested accelerating the plans. Seeing the regulatory changes, we agreed that the scenario was positive for our current products and the creation of new products,” added the co-founder.

Decree 10,854 changed some rules for companies that join the Worker’s Food Program (PAT), aimed at large businesses. Published in November last year, the decree provides, for example, the end of the “rebate”. It is a discount requested by the companies to the voucher administrators. The administrators used to charge the accredited restaurants a fee to cover this cost.

Contracts signed after May 2023 will no longer be able to provide these discounts for the companies. “The rebate generated a market reserve. It was a commercial barrier that made our competition with the traditional benefit administrators unfeasible,” argued Salem. “The market was already large among the companies we served: the small and medium-sized ones and the large ones that preferred to offer our benefit rather than receive the rebate money. Without gimmicks like this on the table, our potential to expand to large companies grew,” added co-founder Pedro Lane.

The C series will be used precisely to expand Flash’s solutions. According to Salem, each category will be further deepened to increase the number of transactions. Moreover, more pains in the area of human resources will be solved. The startup did not detail which solutions will reach the market in the coming months. But the expansion will require hiring: the startup intends to double its staff of 320 employees by the end of this year.

Comparing 2020 and 2021, the startup multiplied its revenue tenfold. The goal is to repeat this proportion of growth in the comparison between 2021 and 2022, even with a larger customer base. “The revenue growth will come both from increasing the base and from each company taking on more products,” Salem said. The plan is to continue to attract large businesses – and both the adoption of hybrid working and regulatory changes will follow as impulses for Flash.

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