The coronavirus pandemic should’ve meant disaster for Brex, the high-flying Silicon Valley start-up that lends to thousands of other start-ups.

Founded by a pair of Brazilian twenty-somethings who dropped out of Stanford in their freshman year, the company’s ascent has been dizzying, even by Silicon Valley standards. Brex reached unicorn status in 2018 months after launching its first product, a corporate charge card for start-ups. Then it doubled in value last year and raised funding in May at a $ 3 billion valuation.

Flush with nearly half a billion dollars in venture capital funding, Brex plastered San Francisco with ads, went on a takeover spree and even opened a restaurant. Its free spending raised eyebrows in the VC community, some of whom wondered in the aftermath of the WeWork debacle if Brex was another private company pumped up beyond reason. Its main product, an unsecured, high-limit charge card for start-ups, exposes it to risky, money-losing companies that could fail in droves in a recession.

But after a rocky few months in which Brex abruptly pulled customers’ credit lines and let go of employees (more on that later), something unexpected happened: In the middle of a once-a-century pandemic that left millions of Americans unemployed, boom times have returned for American start-ups, said Brex’s 25-year old co-founder Henrique Dubugras.

“We’ve seen lot of our customers raise a lot of money and spend a lot of money investing for next year, or whenever the economy returns,” Dubugras, wearing a T-shirt and jeans, said via Zoom from his new home base in Los Angeles. “I think 2021 is going to be an amazing year for everyone in tech, honestly.”

It’s a sharp turnaround from earlier this year, when Covid-19 seemed to be the catalyst for a long-expected reckoning for the venture-backed world. In March, famed venture firm Sequoia Capital warned start-ups to expect the worst in a memo reminiscent of its famous 2008 “R.I.P. Good Times” memo. To conserve cash, previously spendthrift companies cut thousands of jobs and raised funding at punitive terms.

But the hand wringing in Silicon Valley proved to be short lived. Public markets recovered in March and April after the Federal Reserve and lawmakers took a series of unprecedented actions to flood markets with liquidity and inject cash into people’s bank accounts.

That’s kept dollars flowing throughout the venture ecosystem. Investments in U.S. based start-ups rose 30% in the third quarter to $ 36.5 billion, driven by a record number of so-called mega rounds of at least $ 100 million, according to CB Insights. Applications to form new businesses surged 77% in the quarter, according to Census Bureau data.

“VCs are getting a lot of returns, and these guys, they already have three homes and planes and a boat, so they need to deploy the money somewhere,” Dubugras said. “Everyone considers public markets to be expensive now so private markets are where a lot of the money is going.”

Dubugras has a unique view into the health of American start-ups. Brex says it lends to tens of thousands of them, using real-time data on their businesses to help make dynamic lending decisions.

After a few lean months earlier this year when spending dipped more than 10%, average per-customer spending on Brex cards is now at a record level, roughly 5% higher than it was before the pandemic, he said.

The categories have shifted, of course: Start-up employees are spending far less on Seamless orders and Uber trips as restaurant and rideshare transactions plunged 60% and 40% from pre-pandemic levels, the company said. Travel and events-related spending is only 25% of what it was before. But growth in online marketing and recurring software costs like Amazon Web Services and work-from-home stipends has made up for those declines, he said.

As the Census data suggests, new companies are being formed at a furious clip, and many of these firms – whether they are retailers, restaurants or professional services— are “looking more and more like tech companies,” said Dubugras.

For example, business owners that may have relied on brick and mortar in the past now mostly sell “through eBay and Amazon and Shopify and Etsy and Instagram, Facebook, Pinterest, all these different sales channels,” he said.

That has benefited Brex and other fintech firms offering small businesses the most modern experiences, companies Dubugras referred to as “frenemies”: Payments firm Square and e-commerce platform Shopify. Brex customer acquisition has grown in line with the 77% jump in third-quarter new business formation, according to Dubugras.

“We’ve never seen more businesses being created,” he said. “The restaurant that shut down next to you, some other entrepreneur is going there and starting something else, you know?”

Dubugras said that if he were starting a company now, he would look to take advantage of knock-on effects from major shifts like the adoption of remote work. His company went to a remote-first model in September. “What are the second-degree changes from remote work?” he said. “If remote work is more popular and people move out of the big cities to more suburban places, what are the new things that they’re going to need?”

It’s hard not to find Dubugras’s story and his relatively unguarded nature appealing. Along with his co-founder Pedro Franceschi, Dubugras grew up in Brazil as a tech-obsessed teenager (Dubugras is from Sao Paulo, while Franceschi is from Rio de Janeiro). Dubugras was just 14 when he started his first company, and later founded a payments firm with Franceschi before moving to the U.S. to attend Stanford University. The pair dropped out after eight months and started Brex after joining Y Combinator, when they observed that many of their fellow entrepreneurs struggled to get corporate credit cards.

After the pandemic struck, Brex had initially denied the need to cut jobs. As the situation grew more serious, Dubugras and Franceschi backtracked, and they let go of 62 employees, or about 17% of its workforce, in late May.

“We kind of said we weren’t going to do it, and then things started getting worse and we’re like, `Oh, f—k,'” he said. “We ended up having to do it anyway. We lost some trust because of that. I think my learning from that is to never say we’re not going to do it again.”

When I tell Dubugras the story of a Brex customer I’d spoken to, he immediately sits up straighter, his easy-going demeanor changing slightly. The customer, an online retailer, attributed his success in part to the ample credit Brex had given him before the pandemic (Brex has said it gives companies ten to 20 times more credit than traditional lenders like American Express.) But in April, Brex suddenly pulled nearly all of his credit, knee-capping his business.

While Brex positions itself as a new economy leader that understands founders, it relies on a pair of jumbo credit lines from old school banks — Barclays and Credit Suisse— for a total of more than $ 300 million in revolving credit facilities, to make loans. If Brex customers had losses beyond a certain threshold, the banks could’ve yanked the credit lines, which would’ve been a disaster.

“In March and April, no one knew what was going to happen in the world,” Dubugras said. “We had to make some tough decisions to reduce a bunch of [credit lines] and to make sure we didn’t have losses that tripped our covenants with our banks, so they would keep giving us credit and we could keep serving businesses.”

He continued:  “These decisions were done for the greater good in some ways, which is like, `Look if we get our credit lines called or something like that happens, we’re going to have to shut all the credit lines.”

Losses climbed, but were manageable, according to Dubugras.

“We assume that 70% of our businesses are going to go out of business every couple of years, because we serve start-ups and most start-ups fail,” he said. “I think that’s known and that’s okay. All of our credit models and all of our processes are assuming a big amount of churn due to business failure.”

By June, Brex was again growing briskly, Dubugras said, and the company restored many of its customers’ credit lines. Brex would’ve been fine had the situation worsened, he said, because of its ample cash stockpile.

It’s not lost on Dubugras that while many of his VC-backed customers, particularly those in technology and online businesses, are thriving, millions of Americans have lost their jobs. JPMorgan Chase CEO Jamie Dimon, who runs the biggest U.S. bank, said this week that the pain was concentrated among the “bottom 20%” of wage earners, many of whom have spent down their savings as the pandemic drags on.

“The world is unfortunately getting more and more polarized in terms of the haves and have-nots,” Dubugras said. “It turns out we serve a lot of the haves in start-up land. A lot of it is about tracking from the old sectors of the economy to the new sectors of the economy.”

Brex is a few years away from an initial public offering, though it’s likely to tap markets in a different way before then, Dubugras said. He recognizes that the company needs to diversify its funding sources, since his bank lenders could pull their loan facilities. As soon as next year, Brex is likely to invite rating agencies to scrutinize the company’s loan receivables and ultimately create bonds to sell to big investors like insurance companies and pensions, he said.

In the meantime, Dubugras said he no longer tries to convince skeptics that Brex is built for the long term.

“For a long time, we did our best to counteract that and share about why Brex is a good business, and the only thing that brought us was more competitors,” he said. “At this point, I’d rather leave the VC community thinking it’s unsustainable.”

With contributions from CNBC’s Nate Rattner