financial infrastructure
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Orum raises $56M to help speed up interbank transfers
Orum, which aims to speed up the amount of time it takes to transfer money between banks, announced today it has raised $56 million in a Series B round of funding.
Accel and Canapi Ventures co-led the round, which also included participation from existing backers Bain Capital Ventures, Inspired Capital, Homebrew, Acrew, Primary, Clocktower and Box Group. The financing comes barely three months after Orum announced a $21 million Series A, and brings its total raised to over $82 million.
Orum CEO Stephany Kirkpatrick launched the company in 2019 after working for several years at LearnVest, a personal finance site founded by Alexa von Tobel that was acquired by Northwestern Mutual in 2015 for an estimated $375 million. Tobel went on to form Inspired Capital, a venture capital firm that put money in Orum’s $5.2 million seed round last August. Prior to that, the firm also provided Orum with an “inspiration check” that was the first money into the business.
As a certified financial planner, Kirkpatrick says she saw firsthand what she describes as “deep cracks” in this country’s financial infrastructure. The fact that it takes days for money to move from one bank to another is not only inconvenient for many, but unnecessary, she believes.
“Most Americans are not familiar with the intricacies of ACH [automated clearing house) or why it takes multiple business days to move money between accounts,” Kirkpatrick said. “But none of us can allow money to wait 5-7 days to hit our accounts. It needs to be instant.”
Her mission with Orum is straightforward even if the technology behind it is complex. Put simply, Orum aims to use machine learning-backed APIs to “move money smartly across all payment rails, and in doing so, provide universal financial access.”
Orum’s first embeddable product, Foresight, launched in September of 2020. It’s an automated programming interface designed to give financial institutions a way to move money in real time. The platform uses machine learning and data science to predict when funds are available and to identify any potential risks. Its Momentum product “intelligently” routes funds across payments rails and is powered by banking providers JPMorgan Chase and Silicon Valley Bank.
“They power the back end of our Momentum platform that allows the money to move on a multirail basis,” Kirkpatrick told TechCrunch. “They power our access to real-time payments.”
Orum says it serves a range of enterprise partners, including Alloy, HM Bradley, First Horizon Bank and Zero Financial (which was recently acquired by Avant).
The volume of transactions being conducted with Orum is growing 100% month over month, Kirkpatrick said. Most of its early growth has come from word of mouth.
The remote-first company prides itself on diversity — in both its employee and investor base. For one, 48% of its 55-person headcount are female, and 48% are “nonwhite,” according to Kirkpatrick. Orum also recently joined the Cap Table Coalition — a partnership between high-growth startups and emerging investors who want to work to close the racial wealth gap — to allocate over 10% of its Series B round to underrepresented founders. For example, the financing includes investors such as the Neythri Features Fund, a group of South Asian women investing in the next generation of female founders and diverse teams.
Jeffrey Reitman, partner at Canapi Ventures (a firm whose LPs mostly consist of banks), told TechCrunch that those bank LPs conduct hundreds of millions of ACH transactions annually,
“They need a path to achieving a state where funds can be transferred instantly,” he said. “Orum’s product paves the path for many players in financial services and fintech — and beyond — to partake in faster money movement without compromising key risk principles.”
To Reitman, the company’s major differentiators are its team, which he describes as consisting of “the best group of data scientists and engineers in the space.”
“Many of their customers consider the team to be instrumental in helping to set the risk dials on how they fund transactions by teasing out key data and insights from historical transaction data,” he said. “Second, Orum is building one of the densest and most comprehensive data sets around the risks of money movement. Better data means better risk models, and it will be hard for other offerings to match Orum’s approach to building this rich data set.”
Accel Partner Sameer Gandhi, who joined Orum’s board as part of the latest financing, agrees. He believes that in an 18-month period, Orum has built “game-changing technology and an exceptional team.”
“Orum is tackling financial infrastructure from its foundation,” he said.
The headline was updated post-publication to reflect the correct funding amount.
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Amount raises $99M at a $1B+ valuation to help banks better compete with fintechs
Amount, a company that provides technology to banks and financial institutions, has raised $99 million in a Series D funding round at a valuation of just over $1 billion.
WestCap, a growth equity firm founded by ex-Airbnb and Blackstone CFO Laurence Tosi, led the round. Hanaco Ventures, Goldman Sachs, Invus Opportunities and Barclays Principal Investments also participated.
Notably, the investment comes just over five months after Amount raised $86 million in a Series C round led by Goldman Sachs Growth at a valuation of $686 million. (The original raise was $81 million, but Barclays Principal Investments invested $5 million as part of a second close of the Series C round). And that round came just three months after the Chicago-based startup quietly raised $58 million in a Series B round in March. The latest funding brings Amount’s total capital raised to $243 million since it spun off from Avant — an online lender that has raised over $600 million in equity — in January of 2020.
So, what kind of technology does Amount provide?
In simple terms, Amount’s mission is to help financial institutions “go digital in months — not years” and thus, better compete with fintech rivals. The company formed just before the pandemic hit. But as we have all seen, demand for the type of technology Amount has developed has only increased exponentially this year and last.
CEO Adam Hughes says Amount was spun out of Avant to provide enterprise software built specifically for the banking industry. It partners with banks and financial institutions to “rapidly digitize their financial infrastructure and compete in the retail lending and buy now, pay later sectors,” Hughes told TechCrunch.
Specifically, the 400-person company has built what it describes as “battle-tested” retail banking and point-of-sale technology that it claims accelerates digital transformation for financial institutions. The goal is to give those institutions a way to offer “a secure and seamless digital customer and merchant experience” that leverages Amount’s verification and analytics capabilities.
Image Credits: Amount
HSBC, TD Bank, Regions, Banco Popular and Avant (of course) are among the 10 banks that use Amount’s technology in an effort to simplify their transition to digital financial services. Recently, Barclays US Consumer Bank became one of the first major banks to offer installment point-of-sale options, giving merchants the ability to “white label” POS payments under their own brand (using Amount’s technology).
“The pandemic dramatically accelerated banks’ interest in further digitizing the retail lending experience and offering additional buy now, pay later financing options with the rise of e-commerce,” Hughes, former president and COO at Avant, told TechCrunch. “Banks are facing significant disruption risk from fintech competitors, so an Amount partnership can deliver a world-class digital experience with significant go-to-market advantages.”
Also, he points out, consumers’ digital expectations have changed as a result of the forced digital adoption during the pandemic, with bank branches and stores closing and more banking done and more goods and services being purchased online.
Amount delivers retail banking experiences via a variety of channels and a point-of-sale financing product suite, as well as features such as fraud prevention, verification, decisioning engines and account management.
Overall, Amount clients include financial institutions collectively managing nearly $2 trillion in U.S. assets and servicing more than 50 million U.S. customers, according to the company.
Hughes declined to provide any details regarding the company’s financials, saying only that Amount “performed well” as a standalone company in 2020 and that the company is expecting “significant” year-over-year revenue growth in 2021.
Amount plans to use its new capital to further accelerate R&D by investing in its technology and products. It also will be eyeing some acquisitions.
“We see a lot of interesting technology we could layer onto our platform to unlock new asset classes, and acquisition opportunities that would allow us to bring additional features to our platform,” Hughes told TechCrunch.
Avant itself made its first acquisition earlier this year when it picked up Zero Financial, news that TechCrunch covered here.
Kevin Marcus, partner at WestCap, said his firm invested in Amount based on the belief that banks and other financial institutions have “a point-in-time opportunity to democratize access to traditional financial products by accelerating modernization efforts.”
“Amount is the market leader in powering that change,” he said. “Through its best-in-class products, Amount enables financial institutions to enhance and elevate the banking experience for their end customers and maintain a key competitive advantage in the marketplace.”
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Is fintech’s Series A market hot, or just overhyped?
Ryan Falvey is co-founder and managing partner at Financial Venture Studio, an early-stage fintech venture capital firm.
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Theo Katsoulis is an associate at Financial Venture Studio.
According to industry reports, venture capital deal-making has notably rebounded since dropping off briefly in March as shelter-in-place orders gripped much of the country.
As seed-stage fintech investors, this has certainly been our experience: “Hot” deals are getting funded faster than ever, and we increasingly see the large multistage global funds competing for the earliest access to companies. However, in our experience and anecdotal conversations with other early-stage investors, that excitement has not been translating to the Series A stage.
We’ve increasingly wondered if the Series A market in fintech is really as hot as it seems. As pre-seed and seed-stage investors, we know that the health of the Series A market is of critical importance.
In early October 2020, the Financial Venture Studio put together a brief survey of the Series A market in fintech and shared it with more than 100 investors with whom we work closely. Despite the high-level numbers indicating a healthy market, our research indicates a market that remains in flux, with significant ramifications for early-stage founders.
Why Series A is so interesting
Although the seed and pre-seed fintech market continues to attract substantial entrepreneurial and investor interest, it is also in some ways one of the easiest parts of the market to fund. The check size is smaller, the velocity of new deals is highest, and while the potential returns are also the highest, this is also the part of the market where information is most scarce. Perhaps counterintuitively, the fact that there is so little information on a business — aside from a plan, a team and maybe some early anecdotal evidence to support the vision — actually makes it easier to “pull the trigger” on deals where those data points align. There just often isn’t a lot more to dig into.
Similarly, by the time a company is raising Series B capital, they typically have some objective evidence that the idea is working. Companies are typically generating revenue, small teams have grown and become more sophisticated in how they operate, and importantly, the governance functions of a company have (hopefully) begun to take shape. The simple existence of a board member with invested capital at stake means that some of the more existential risks of the earliest stage have been mitigated.
In contrast, one of the big milestones for any startup has been to raise a Series A from an institutional investor. Besides an infusion of capital (which is often 2-3x the aggregate capital a company may have raised since its inception), this “stamp of approval” lends credibility to a small company that is trying to hire talent, sell to customers, and, in most cases, raise substantial subsequent capital.
Thus, it’s critical that Series A investors remain active; if not, many of these upstart companies may fail due to a lack of investment, even if they are able to demonstrate early market traction. The Series A funding market is one of — if not the most — critical funding stage in the innovation economy because it acts as a bridge between scrappy early innovation and commercialization at scale.
It stands to reason, then, that dollar amounts invested may not be the best barometer of the ecosystem’s health. What really matters is the volume of companies being funded and the variety of product approaches being pursued.
The post-COVID Series A
Once the initial shock of the pandemic wore off, the VC community had to get back to business, which admittedly is harder to do for funds that write $10 million+ checks and like getting to know founders in person. Still, Series A investors made it a point to let entrepreneurs know they were, and continue to be, “open for business.”
As investors have gotten more comfortable with the new normal, they have been more open to a virtual diligence process. Of the firms we surveyed, only 15% stated they have not completed a Series A investment during COVID-19 work restrictions. Of the firms who completed a Series A investment during COVID-19 (~85%), about half invested in a company whose founder(s) they had a limited or no relationship with prior to the onset of shelter-in-place orders.
Image Credits: Financial Venture Studio (opens in a new window)
The shift to a virtual environment means that process is more important than ever. Numerous investors have cited their renewed focus on following a structured approach to sourcing and diligence. The interpersonal aspect remains important to close a deal, but customer references, referrals from trusted seed-stage investors and a heightened scrutiny of metrics are all at the forefront of investors’ evaluations.
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