fintech
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Chime has agreed to stop using the word ‘bank’ after a California regulator pushed back
Chime can apparently call itself the “fastest-growing fintech in the U.S.,” but it has agreed to stop referring to itself as a “bank,” per a new report out of American Banker.
Evidently, the eight-year-old, San Francisco-based outfit was the target of an investigation by the California Department of Financial Protection and Innovation after Chime used “chimebank” in its website address, as well as used “bank” and “banking” elsewhere in its advertisements, according to the agency in a settlement agreement.
As noted by AB, Chime made the decision to settle ahead of a deadline imposed by the regulatory body.
The development shouldn’t surprise anyone familiar with banking laws. No outfit can represent itself as a bank or credit union unless it’s licensed to engage in the business of banking. The commission that pushed back on the startup issues such licenses and regulates state-chartered banks in the state of California through the Department of Financial Protection and Innovation and said in the settlement that “at all relevant times herein, Chime was not licensed to operate as a bank in California or in any other jurisdiction, nor was it exempt from such licensure.”
Chime has at times attempted to draw a distinction between itself and a bank. When the company raised its most recent round of funding — a $485 million Series F round last September that valued the business at $14.5 billion — CEO Chris Britt told CNBC: “We’re more like a consumer software company than a bank . . . It’s more a transaction-based, processing-based business model that is highly predictable, highly recurring and highly profitable.”
Still, Chime, like many newer fintech companies, has seemingly embraced the term “neobank” and “challenger bank,” and perhaps it’s no wonder. It’s certainly easier to convey to consumers what it is selling, which is banking services that include — in this case — debit cards, spending accounts and savings accounts, all offered through users’ mobile phones.
Given the settlement, expect to see more startups like Chime make clearer that in most cases, they do not have a bank charter and instead are being provided services by banks that do. In Chime’s case, for example, it now makes more plain on its website that it is a “financial technology company” and “not a bank” and that its services are being provided by the The Bancorp Bank and Stride Bank, which are both FDIC members.
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Will fintech unicorn Flywire’s proposed IPO reach escape velocity?
It’s a big morning for fintech startups today: Flywire, a Boston-based magnet for venture capital, has filed to go public.
Flywire is a global payments company that attracted more than $300 million as a startup, according to Crunchbase, most recently raising a $60 million Series F last month. We don’t have its most recent valuation, but PitchBook data indicates that the company’s February 2020, $120 million round valued Flywire at $1 billion on a post-money basis.
So what we’re looking at here is a fintech unicorn IPO. A great way to kick off the week, to be honest, though I’d thought that Robinhood would be the next such debut.
Fintech venture capital activity has been hot lately, which makes the Flywire IPO interesting. Its success or failure could dictate the pace of fintech exits and fintech startup valuations in general, so we have to care about it.
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.
Regardless, we’re doing our regular work this morning. First, what does Flywire do and with whom does it compete? Then, a closer look at its financial results as we hope to get our hands around its revenue quality, aggregate economics and growth prospects.
After that, we’ll discuss valuations and which venture capital groups are set to do well in its flotation. The company had a number of backers, but Spark Capital, Temasek, F-Prime Capital and Bain Capital Ventures made the major shareholder list, along with Goldman Sachs. So, a number of firms and funds are hoping for a big Flywire exit. Let’s dig in.
What is Flywire?
Flywire is a global payments company. Or, as it states in its S-1 filing, it’s “a leading global payments enablement and software company.” And it thinks that its market, and by extension itself, has lots of room to grow. While “substantial strides [have been] made in payments technology in the retail and e-commerce industries,” the company wrote, “massive sectors of our global economy—including education, healthcare, travel, and business-to-business, or B2B, payments—are still in the early stages of digital transformation.”
That’s the same logic behind Stripe’s epic valuation and the rising value of payments-focused companies like Finix.
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Emotional marketing and an e-mail titan walk into a bar
My mom cuts to the chase when she is describing my beat to others. In her words, I cover companies like Uber before they become companies like Uber. And honestly? I can’t exactly disagree with the description. The best feeling in tech journalism is telling a story about a startup before it becomes a household name. As an early-stage reporter, I honestly bet a lot on the potential of a savvy edtech founder or creative marketplace play. And when I’m doing my job right, I point to the unique insight that will make the startup successful or challenged in the future.
On that note, one of my favorite renewed series at TechCrunch is an EC-1 (Extra Crunch subscription required), a story series that goes through the nitty-gritty of a startup’s story, from its original days to its pivots along the way. I’ve spent the past few months on one of these projects — and mine is coming out next week! In the meantime, you’ve read packages about StockX and Tonal, and our latest just came out: the Klaviyo EC-1:
- How Klaviyo transformed from a lifestyle business into a $4.15B email titan (2,600 words/10 minutes)
- How Klaviyo used data and no-code to transform owned marketing (3,000 words/12 minutes)
- Marketing in 2021 is emotional and not just transactional (2,200 words/9 minutes)
- Drama and quirk aren’t necessary for startup success (1,900 words/8 minutes)
Image Credits: Nigel Sussman
Enjoy this long-form read and big thanks to Danny Crichton, my Equity co-host and managing editor here at TechCrunch, who has been managing and editing all of these projects.
In the rest of this newsletter we’ll get into All Raise data, the new Miami and a new lineup you don’t want to miss. Follow me on Twitter @nmasc_ for updates throughout the week.
All (aren’t) Raise(d)
All Raise, a nonprofit dedicated to increasing the footprint of women founders and funders, has released its annual report for 2020. The whole thing is honestly worth a read, but we especially paid attention to how funding has dropped for female founders:
- Round sizes for women + non-binary founders were up to 49% lower than males
- 85% of venture funding goes to all-male teams
- 64% of VC firms still don’t have a single female partner
- Black + Latinx female founders receive only 0.64% of VC funding, a slight uptick from the year prior.
Here’s what to know: On Equity, we talked about how these abysmal metrics were both a predicted but still surprising effect of Zoom investing. This disconnect is the conversation no one has during an upmarket — and metrics are one way we can benchmark progress.
- Let’s talk about gaslighting and fundraising
- Men, don’t do this
- How to fundraise over Zoom more effectively
- Founders who don’t properly vet VCs set up both parties for failure
Internet is the new Miami
To quote Winnie CEO and co-founder Sara Mauskopf, “Internet is the new Miami.” The networks made online — either through the rise of meme culture or Substack spice — can be a competitive advantage in the world of investment, as two new funds this week showed us.
Here’s what to know: Ryan Hoover and Vedika Jain announced Weekend Fund 3, which will include a $1 million community raise. And Chief Meme Officer Turner Novak finally debuted Banana Capital’s debut fund launched with $9.99 million in funding.
Novak explained how being internet-first impacts his investments:
“It just kind of happens where [my investments] are people who understand the culture of the internet, to understand memes and understand wit and humor and appreciate that a little bit more,” he said. “Those are probably the people that are more naturally intuitive investments, so it definitely does skew that direction.”
While Novak didn’t share explicit targets or mandates around investment in diverse founders, he pointed to his track record at Gelt VC, in which 41% of capital went to woman CEOs. To date, 65% of Banana Capital’s portfolio founding teams include non-white founders and 50% of the teams include more than one gender.
- And in the little-known capital lender space, Shopify is using machine learning to lend money to startups. Shopify Capital has a nice strategic ring to it, no?
Around TechCrunch
- Announcing the Agenda for TC Sessions: Mobility 2021
- Sydney Thomas is coming to judge startups at Disrupt
- And, as this clip will tell you, we’re losing the Webby’s, so vote for Equity!
Across the week
Seen on TechCrunch
Atlassian launches a Jira for every team
CES will return to Las Vegas in 2022
Microsoft’s new default font options, rated
Seen on Extra Crunch
Hacking my way into analytics: A creative’s journey to design with data
How Brex more than doubled its valuation in a year
And finally
India is in crisis. It is devastating and heartbreaking to watch this unfold and impact our family and friends and colleagues and people. My colleague Manish Singh, who is based there, wrote up the different ways you can donate to help out.
I’ll end by quoting Singh:
With several major industries, including film and sports, going about their lives pretending there is no crisis, entrepreneurs and startups have emerged as a rare beam of hope in recent days, springing to action to help the nation navigate its darkest hours.
It’s a refreshing change from last year, when thousands of Indian startups themselves were struggling to survive. And while some startups are still severely disrupted, offering a helping hand to the nation has become the priority for most.
Until next week,
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The second shot is kicking in
Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.
First and foremost, Equity was nominated for a Webby for “Best Technology Podcast”! Drop everything and go Vote for Equity! We’d appreciate it. A lot. And even if we lose, well, we’ll keep doing our thing and making each other laugh. (Note: We are in last place, which is, well, something.)
Regardless, the Equity team got together once again this week to not only go over the news of the week, but also to do a little soul searching. You see, some news broke yesterday, so we figured that we had to talk about it in our usual style. So, here’s the rundown:
- Do you want to buy TechCrunch? Apparently you can? Albeit probably along with a few billion dollars’ worth of other assets — whatever is left of Yahoo and AOL — you can now own an NFT. A non-fungible TechCrunch. What is ahead for us? We don’t know. So if you do know, tell us. Until then we’ll just yo-yo gently between panic and optimism, as per usual.
- We also dug into the latest All Raise venture capital data, and the results were abysmal.
- Next up was the news that fintech startups are setting records in 2021, raising more capital than ever before. That brought us to the latest from Brex.
- And then there was a suspicious trend when three fintech companies focused on teen banking raised in one exhale. We talk Step, Greenlight and Current.
- Natasha talked about her last Startups Weekly post, in which she unpacked The MasterClass effect’s impact on edtech.
- And to close, we discussed the latest cool-kid venture capital funds. Sure memes are cool, but did you know that they can help you raise a $10 million fund? They can!
We are back Monday morning with our weekly kick-off show. Have a great weekend!
Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday at 6:00 AM PST, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts!
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Vivid Money raises $73 million to build a European financial super app
German startup Vivid Money has raised a new $73 million Series B funding round (€60 million) led by Greenoaks, with existing investor Ribbit Capital also participating. Following today’s funding round, Vivid Money has reached a valuation of $436 million (€360 million).
Vivid Money could be considered as a Revolut competitor designed specifically for the Eurozone. Built on top of Solarisbank for the banking infrastructure, the company lets you send, receive, spend, invest and save money in different ways.
When you create an account, you get a German IBAN that starts with DE, as well as a metal card. There are no card details on the card itself — everything is available in the app instead. Like other fintech startups, Vivid Money lets you control your card from the app — you can lock it and unlock it, add it to Google Pay and Apple Pay, etc.
After that, you can top up your account and hold dozens of different currencies. When you pay with your card abroad, the startup applies a small mark-up on the current exchange rate — you should get a better exchange rate than what you usually get with a regular bank.
In addition to this fairly standard feature set, Vivid Money offers stock trading with fractional shares. You can invest in stocks and ETFs and there’s no commission. Similarly, you can buy, hold and share cryptocurrencies from the app. The startup has partnered with CM Equity AG for those features.
The company also has a cashback program and a premium subscription for €9.90 per month. Paid users get higher limits on free cash withdrawals, the ability to create a virtual card, support for additional currencies and better cashback rewards.
Finally, users can create sub-accounts called pockets. You can move money around from one pocket to another and add other users to your pockets. Each pocket has its own IBAN, which means that you can pay for certain bills with a separate pocket. You also can associate your card with a specific pocket for upcoming purchases.
Vivid Money has managed to add a ton of features in no time. It now has a ton of money on its bank account. Now let’s see if it can attract a significant user base to compete with other, well-established European fintech players.
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8 investors, founders and execs predict cybersecurity, fintech will take Belfast by storm
Things have been looking up for Belfast since the end of the Troubles. The city has undergone infrastructure improvements over the past two decades, tourism has boomed thanks to attractions such as the shipyard where the RMS Titanic was built and Game of Thrones shooting locations, and employment has risen steadily in the city since 2016, according to Northen Ireland’s Department for the Economy. The city also has the famed Queen’s University and low living costs to count in its favor, and gentrification is starting to take place, which shows things are looking up for Northern Ireland’s capital.
And as far as the local startup scene goes, the U.K.’s Tech Nation found in 2018 that about 26% of Belfast’s workforce was employed in tech, and it is among cities in the country with the highest growth potential for 2021.
With that in mind, we reached out to founders, investors and executives in the city to get an inside look at the state of the current tech startup ecosystem. According to the survey, the city is strong in sectors such as fintech, agritech, hospitality tech, emerging tech, cybersecurity, SaaS and medtech. Ignite NI emerged as an important native incubator and accelerator.
Interesting startups that our respondents mentioned include: CropSafe, SideQuest, Aflo, Material Evolution, Cloudsmith, LegitFit, Continually, Gratsi, 54 North Design, Animal Manager, Kairos Sports Tech, Budibase, Incisiv, Automated Intelligence, loyalBe, Konvi, Lane 44, Teamfeepay.com, Axial3D, Neurovalens, Payhere, and Civic Dollars.
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The tech investment scene was characterized as being strong in software and life sciences, but sometimes too conservative or risk-averse. However, this seems to be changing for the better, and foreign direct investment (FDI) is an important growth factor for the ecosystem.
Although there remains uncertainty around how Brexit will affect Northern Ireland, one executive said, “If we play our cards right, we can capitalize on it. Being positioned both in the EU and U.K. markets gives us advantages that we would be foolish to waste.”
One of the founders foresees more private capital flowing into Belfast as global investors realize that “the combination of great local universities and very strong FDI has attracted some brilliant engineers.” The low cost of living is also encouraging for talent to stay put in the city, which makes for a tech scene that’s poised to take off, this founder added.
Here’s who we spoke to:
- Cormac Quinn, founder & CEO, loyalBe
- Susan Kelly, CEO, Respiratory Analytics
- Ryan Crown, co-founder, Hill Street Hatch
- Fearghal Campbell, founder, Pitchbooking
- Jack Spargo, co-founder & CEO, Gratsi
- Brendan Digney, founder, Machine Eye Technology
- Toyah Warnock, co-founder, Lane 44
- Alan Carson, CEO, Cloudsmith
Cormac Quinn, founder & CEO, loyalBe
Which sectors is your tech ecosystem strong in? What are you most excited by? What does it lack?
We’re strong in cybersecurity and (to an arguably lesser extent) fintech. I’m excited by the droves of new startups being created here in all sorts of sectors — traditionally, Belfast hasn’t had a lot of tech startups, but I can see that changing right before my eyes, which is very exciting. I always anticipated having to leave Belfast for the U.S. to be able to start a tech company, but I’m glad this is no longer a requirement or even the standard any more.
Which are the most interesting startups in your city?
There are a few that stand out: Cloudsmith (devtools), LegitFit (scheduling), Continually (chatbots/marketing), and Automated Intelligence (data management). This is certainly not an exhaustive list of interesting startups, just a few that come to mind.
What are the tech investors like in Belfast? What’s their focus?
Investors here can be somewhat conservative and slightly traditional. If you’re raising investment north of £1 million, you would likely need to look outside the jurisdiction. There also just isn’t enough private capital at the moment, which is a shame, as Belfast has some fantastic talent combined with a very low cost of living, which means investor money tends to go further (no crazy rents, reasonable salaries, etc.). It feels we’re at the beginning of a cycle in Belfast, however — I expect to see many more local exits over the coming years, which will likely lead to new private capital inflows.
With the shift to remote working, do you think people will stay in Belfast? Will they move out? Will others move in?
I understand the city was growing pre-pandemic, and I believe this trend will continue once life returns to a semi-normal state. For a long time, Belfast was a city people didn’t want to live in due to historical issues, but that has been slowly changing. New developments are popping up all over the city, from student accommodation to hotels and nice apartments. 15-20 years ago, Belfast had hardly any of this.
Who are the key startup people in your city (e.g. Investors, founders, lawyers, designers)?
Chris McClelland, MD of Ignite NI: He’s a mentor on the city’s top accelerator program. Co-founded BrewBot.
Ian Browne, COO of Ignite NI: Entrepreneur and another mentor to startups in the city.
Mark Dowds: Venture partner at Anthemis, co-founder at Ormeau Baths (in my opinion it’s the city’s best co-working space).
Where do you see your city’s tech scene in five years?
We’re in uncertain times due to Brexit, but I think if we play our cards right, we can capitalize on it. Being positioned both in the EU and U.K. markets gives us advantages that we would be foolish to waste. I do think we will see more private capital flowing into Belfast as global investors realize that the combination of great local universities and very strong FDI has attracted some brilliant engineers. Combine that with the fact that cost of living remains quite low, which means their capital can go much further (rather than going to landlords) and you have a tech scene that’s poised for take-off.
Can you recommend any companies that should appear in our global Startup Battlefield competition?
Cloudsmith.
Susan Kelly, CEO, Respiratory Analytics
Which sectors is your tech ecosystem strong in? What are you most excited by? What does it lack?
Cybersecurity, fintech, digital — strong medtech — needs building. Great incubator and accelerator in Ignite, but needs expansion to the Northwest where deprivation and poor infrastructure need to be addressed. Public funding supports are good, but too fragmented and hard to access.
Which are the most interesting startups in your city?
CropSafe, SideQuest, Aflo (my startup!), Material Evolution.
What are the tech investors like in Belfast? What’s their focus?
Too conservative, “stale, pale, male”, and risk-averse. But changing for the better, slowly. Legal’s far too costly. Needs to shift to a more U.S. type model. Too few women on the scene. Focus on software, which is great, but too risk-averse in hardware. Needs more experienced angel investors. Halo Business Angel Network feels staid.
With the shift to remote working, do you think people will stay in Belfast? Will they move out? Will others move in?
Huge shift back to Belfast and Northern Ireland in general as a result of COVID.
Who are the key startup people in your city (e.g. Investors, founders, lawyers, designers)?
Ignite NI is driving the startup scene via Propel (Pre-Accelerator) and the Accelerator — doing an amazing job. Clarendon, Techstart, various angels, and Catalyst. Big Motive is a key design engine.
Where do you see your city’s tech scene in five years?
With more support from Invest NI, the whole of Northern Ireland can be an innovation hub linked to Ireland via the startup ecosystem.
Can you recommend any companies that should appear in our global Startup Battlefield competition?
CropSafe.
Ryan Crown, co-founder, Hill Street Hatch
Which sectors is your tech ecosystem strong in? What are you most excited by? What does it lack?
We’re strong in the tech industry. We’re excited by changing how we launch hospitality ventures. Belfast is weak in investment and investors.
Which are the most interesting startups in your city?
Payhere, Civic Dollars, and Konvi.
What are the tech investors like in Belfast? What’s their focus?
We’re lacking proper investors in Northern Ireland.
With the shift to remote working, do you think people will stay in Belfast? Will they move out? Will others move in?
The cost of living and quality of life is fantastic in Northern Ireland/Belfast. COVID-19 will see a huge influx of people moving from expensive cities such as London, Manchester, or Dublin and relocating to Belfast.
Who are the key startup people in your city (e.g. Investors, founders, lawyers, designers)?
Chris McClelland.
Where do you see your city’s tech scene in five years?
Booming.
Fearghal Campbell, founder, Pitchbooking
Which sectors is your tech ecosystem strong in? What are you most excited by? What does it lack?
Cybersecurity, SaaS, sportstech. Most excited by a range of early-stage tech companies — [there has been] an explosion in pre-seed and seed level companies over the past two to three years. Weaker at scaling up; relative lack of indigenous scale-up companies. Large number of foreign direct investment from U.S.-based companies into the city.
Which are the most interesting startups in your city?
In the sportstech sector, teamfeepay.com are growing fast. loyalBe are a seed-stage fintech company with big plans for reinventing retail loyalty programs that we always keep an eye on. Later-stage companies like medtech mainstays Axial3D and Neurovalens are doing great things too!
What are the tech investors like in Belfast? What’s their focus?
We have a mix of angel and institutional investors in Belfast. Hard to say a specific focus on a particular industry, but there are a couple of sectors that are strong in the city given the focus of the local universities. Medtech and cybersecurity both feature heavily in the startup scene.
With the shift to remote working, do you think people will stay in Belfast? Will they move out? Will others move in?
Belfast benefits from a relatively low cost of living in relation to the rest of the U.K., meaning that we are seeing an increase in startups moving here from other major cities. The support for early-stage startups has also contributed to this influx. As a city, we are well set up for moving to a hybrid way of working. You can traverse across the center of the city in 15 mins on foot, which means popping into a city center office isn’t a big undertaking.
Who are the key startup people in your city (e.g. Investors, founders, lawyers, designers)?
Invest NI – Government support agency.
Ignite NI – Seed-stage accelerator program.
UlsterBank Accelerator – Early-stage accelerator program.
Aurient Investments – Angel investment group with a diverse investment portfolio.
Where do you see your city’s tech scene in five years?
I believe we will see the strongest seed-stage companies from 2017-2020 becoming established companies within our tech scene to match the influx of FDI companies from further afield.
Jack Spargo, co-founder & CEO, Gratsi
Which sectors is your tech ecosystem strong in? What are you most excited by? What does it lack?
Strong in: Fintech, agritech, hospitality tech, and emerging tech.
Most excited by: support (financial, mentoring, etc.) is available and the cost to build and grow is low.
Weakest in: geographical barriers to rest of UK and EU.
Which are the most interesting startups in your city?
loyalBe, Konvi, and Lane 44.
What are the tech investors like in Belfast? What’s their focus?
Great — good support and intros facilitated by accelerators such as Ignite NI, Catalyst, Techstart, Ormeau Baths, etc.
With the shift to remote working, do you think people will stay in Belfast? Will they move out? Will others move in?
More likely to move in: low cost of living and well set up for being remote already.
Who are the key startup people in your city (e.g. Investors, founders, lawyers, designers)?
Chris McClelland and Ian Browne of Ignite NI; Mark Dowds of anthemis, and Cormac Quinn of loyalBe.
Where do you see your city’s tech scene in five years?
Stronger: a tech hub for the UK and the EU.
Brendan Digney, founder, Machine Eye Technology
Which sectors is your tech ecosystem strong in? What are you most excited by? What does it lack?
Agritech and Constuction tech are industries with huge potential, particularly in Ireland and Northern Ireland, where there are traditional strengths and the opportunity to influence based upon use of AI and data.
Which are the most interesting startups in your city?
Kairos Sports Tech, Budibase, Incisiv, and Automated Intelligence.
What are the tech investors like in Belfast? What’s their focus?
There are a number of VCs/funds that are generally linked to each other and Invest NI. INI is a big support and funder. Catalyst are a not-for-profit support who are possibly the most valuable in the whole system. Investment focus is generally around software and life sciences, although other funds are around. Strong focus on foreign and inward businesses.
With the shift to remote working, do you think people will stay in Belfast? Will they move out? Will others move in?
[People will] move out to rural areas within an hour’s drive of the city.
Who are the key startup people in your city (e.g. Investors, founders, lawyers, designers)?
Catalyst, Ormeau Baths, and Raise Ventures.
Where do you see your city’s tech scene in five years?
Significant growth in the scene, with an expansion into more later-stage businesses.
Toyah Warnock, co-founder, Lane 44
Which sectors is your tech ecosystem strong in? What are you most excited by? What does it lack?
Belfast is a growing hub of fantastic businesses and funding opportunities.
Which are the most interesting startups in your city?
Gratsi, 54 North Design, and Animal Manager.
What are the tech investors like in Belfast? What’s their focus?
SaaS.
With the shift to remote working, do you think people will stay in Belfast? Will they move out? Will others move in?
Belfast is inexpensive to live in. Many people will be moving in.
Who are the key startup people in your city (e.g. Investors, founders, lawyers, designers)?
Ormeau Baths.
Where do you see your city’s tech scene in five years?
It will grow rapidly. Belfast is going through a period of gentrification.
Can you recommend any companies that should appear in our global Startup Battlefield competition?
Lane 44, Animal Manager, and Gratsi.
Alan Carson, CEO, Cloudsmith
Which sectors is your tech ecosystem strong in? What are you most excited by? What does it lack?
Strong in security, fintech, and medtech. Excited about devtools.
Which are the most interesting startups in your city?
Cloudsmith and Axial3D.
What are the tech investors like in Belfast? What’s their focus?
Small investor scene, but with an ambitious founder scene. Medtech and security are popular.
With the shift to remote working, do you think people will stay in Belfast? Will they move out? Will others move in?
No idea. Probably a bit of both.
Who are the key startup people in your city (e.g. Investors, founders, lawyers, designers)?
Techstart Ventures, Ignite NI, Catalyst, Clarendon Co-Fund, Denis Murphy, Colm McGoldrick, and Alastair Bell.
Where do you see your city’s tech scene in five years?
Bigger and better than ever.
Can you recommend any companies that should appear in our global Startup Battlefield competition?
VideoFirst.
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PicPay, the Brazilian mobile payments platform, files for an IPO on Nasdaq
Brazilian mobile payments app PicPay filed on Wednesday an F-1 with the Securities and Exchange Commission (SEC) for an IPO valued at up to $100 million. The company plans to list on the Nasdaq under the ticker symbol PICS.
PicPay operates largely as a financial services platform that includes a credit card, a digital wallet similar to that of Apple Pay, a Venmo-style P2P payments element, e-commerce and social networking features.
“We want to transform the way people and companies interact, make transactions, and communicate in an intelligent, connected, and simple experience,” said José Antonio Batista, CEO of PicPay, in a statement.
While the company is based in São Paulo now and operates across Brazil, PicPay originally launched in Vitoria in 2012, a coastal city north of Rio. In 2015 the company was acquired by the group J&F Investimentos SA, a holding company owned by Brazilian billionaire brothers Wesley and Joesley Batista, which also own the gigantic meatpacker JBS SA.
According to the company’s registration statement, J&F was involved in the biggest corruption scandal in Brazil’s history, known as The Car Wash, and in 2017 entered into a plea deal with the Brazilian Federal Prosecutor. In December 2020 the company agreed to pay a fine of $1.5 billion and contribute an extra $442.6 million to social projects in Brazil. That being said, J&F continues to be a powerful conglomerate in the country, positioning itself as a strong backer for PicPay.
2020 was an explosive year for PicPay as the company saw its active userbase grow from 28.4 million to 36 million as of March 2021. According to the company’s 2020 financial report, which PicPay shared with TechCrunch, the company’s revenues also grew drastically from $15.5 million in 2019, to $71 million in 2020. The company is not yet profitable, however, and PicPay shelled out $146 million in 2020 to fuel its growth.
“We believe that the growth of our base and user engagement in our ecosystem demonstrates the scalability of our business model and reveals a great opportunity to generate more value for these customers,” Batista added.
Fintech is one of the most popular sectors in Brazil today, because there’s a lot of room for improvement in the region. The country has traditionally been controlled by four major banks, which have been slow to adapt to technology and also charge very high fees.
PicPay’s IPO is being led by Banco Bradesco BBI, Banco BTG Pactual, Santander Investment Securities Inc., and Barclays Capital Inc.
*The Brazilian Real was valued at 5.50 to $1 USD on the date of publication.
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Hustle Fund backs Fintor, which wants to make it easier to invest in real estate
Farshad Yousefi and Masoud Jalali used to drive through Palo Alto neighborhoods and marvel at the outrageous home prices. But the drives sparked an idea. They were not in a financial position to purchase a home in those neighborhoods (to be clear, not many people are) either for investment or to live. But what if they could invest in homes in up and coming cities throughout the U.S.?
Then they realized that even that might be a challenge, considering that with all their student debt, affording a down payment would be impossible.
“There was nothing available out there besides a crowdfunding platform, which when we first signed up, took away $1,000 from our account that we didn’t have, and then our capital would be locked up for three to 10 years,” recalls Yousefi.
So the pair started doing research and spoke to 1,000 individuals under the age of 35. Eight out of 10 said they would like to invest in real estate but were deterred by all the barriers to entry.
“There is clearly a large demand for access to real estate,” Yousefi said. “And we wanted to give people a way to invest in it like they can in stocks, via a mobile app.”
And so the idea for Fintor was born.
Yousefi and Jalali founded the company in 2020 with the goal of purchasing homes via an LLC, and turning each into shares through an SEC-approved broker dealer. Individuals can then buy shares of the homes via Fintor’s platform. Its next step is to sign agreements with individual real estate investors or bigger real estate development firms to list their properties on the platform and give people the opportunity to buy shares.
And now Fintor has raised $2.5 million in seed money to continue building out its fractional real estate investing platform. The startup aims to “fractionalize” houses and other residential property, giving people in the U.S. access to investment opportunities “starting with as little as $5.” The company attracted the interest of investors such as 500 Startups, Hustle Fund, Graphene Ventures, Houston-based real estate investor Manny Khoshbin, Mana Ventures and other angel investors such as Cindy Bi, Skyler Fernandes, VU Venture Partners, Minal Hasan, Andrew Zalasin, Alluxo CEO and founder Safa Mahzari, SquareFoot CEO and founder Jonathan Wasserstrum and Teachable CEO and founder Ankur Nagpal.
Image Credits: Fintor
Fintor is eying markets such as Kansas City, South Carolina and Houston, where it already has some properties. It’s looking for homes in the $80,000 to $350,000 price range, and millennials and Gen Zers are its target demographic.
“Fintor can give the same return as the stock market, but at half the risk,” Yousefi said. “As two [Iranian] immigrants, we’ve seen how much this country has to offer and how real estate sits at the top of everything, yet is so inaccessible.”
The pair had originally set out to raise just $1 million but the round was quickly “way oversubscribed,” according to Yousefi, and they ended up raising $2.5 million at triple the original valuation.
Jalali said the company will use machine learning technology to filter and rate properties as it scales its business model.
“We’ll use ML to categorize neighborhoods and to come up with the price of properties to offer to potential sellers,” he added. “Our ultimate goal is to create indexes so that people can invest in multiple properties in a given city. That creates diversification right away.”
Elizabeth Yin, co-founder and general partner of Hustle Fund, believes that Fintor is solving a generational problem with real estate.
“Retail investors have almost no access to great real estate investments today and the best opportunities are reserved for the select few,” she told TechCrunch. “Not to mention that in addition to access, retail investors often need a lot of capital in order to have a diversified portfolio or be accredited to join funds.”
Fintor’s approach to securitize real estate assets will give millions of investors who are not accredited investors access they would otherwise not have had, Yin added.
“Simultaneously, it provides increased liquidity to property owners, while improving the user experience for both parties,” she said. “Effectively this becomes a new asset class, because it’s entirely turnkey and is fractionalized, which opens up many new pockets of investors.”
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FintechOS nabs $60M for a low-code approach to modernizing legacy banking and insurance services
“Challenger” startups in banking and insurance have upended their industries, and picked up significant business, by building more customer-friendly tools and services — more personalized, easier to access and usually competitively priced — than those typically provided by their bigger, incumbent rivals. Now, a startup out of Romania that is building tools to help the incumbents respond with better services of their own is announcing a significant round of funding as its business grows.
FintechOS, which has built a low-code platform aimed at larger (older) banking and insurance companies to help them build new services and analytics on top of and around their existing infrastructure, has raised €51 million ($61.5 million at today’s rates, but $60 million at the time of the deal closing) in a Series B round of funding.
FintechOS’s opportunity has been to target the wave of incumbents in the insurance and banking industries that have been slowly watching as newer players like Lemonade (in insurance) and a huge plethora of challenger banks (Revolut, N26, Monzo and many others) are swooping in and picking up customers, especially among younger demographics, while they have been unable to respond mostly because their infrastructure is too old and big. Turning a huge ship around, as we have seen, is no small task — a situation that has become only more apparent in the last year of pandemic living and the big shift to digital interactions that resulted from it.
“When we launched FintechOS in 2017, we could already see existing solutions to digital transformation would struggle to deliver tangible results. By contrast, our unique approach has quickly inspired a sea-change in how financial institutions address digitization and engage with their customers,” said Teodor Blidarus, co-founder and CEO at FintechOS, in a statement. “Events over the last year have only increased pressure on our industry to evolve and as a result we’re seeing growing demand for our powerful platforms. Our latest round of funding will help us grow at the pace needed to improve outcomes for financial institutions and their customers globally.”
(It is not the only one. Others out of Europe in the space of bringing new tools to incumbent banks to help them make more modern and competitive products include 10x, Thought Machine, Temenos, Mambu and many more.)
The Series B round of funding is being led by Draper Esprit, with Earlybird, Gapminder Ventures, Launchub and OTB Ventures (which all participated in its Series A in December 2019) also participating. There are other backers in the round that are not being disclosed at this time, the startup added. FintechOS is also not disclosing its valuation. The company, based out of Bucharest, has raised just under $80 million to date.
FintechOS is active today in the U.K. and Europe — where it has been growing at a CAGR of 200% and says its services touch “millions” of people, with some of its key customers including the likes of banking giants Societe Generale and IdeaBank and international insurance brokers Howden. The plan will be to continue investing in those markets, as well as expanding internationally.
And it will be adding more services. Today, the banking platform is designed to help banks launch more retail services for consumers and small and medium business customers, and for insurance companies to build new health, life and general insurance products (there are a lot of synergies in how insurance and financial services companies have been built over the years, and so it’s a natural couplet when it comes to building tools for those industries).
In the financial sector, FintechOS lets banks build in new digital onboarding flows, credit cards and loan products, savings and mortgage products. Insurance products include new approaches to generating and handling quotes, customer onboarding and management and claims automation — which may well bring FintechOS into closer contact and collaboration with the most successful startup to come out of its home country to date, the RPA juggernaut UiPath. In all cases, it helps stitch together data from a bank’s own systems with more modern tooling, and to link that up with yet more modern tools to help process that data more easily.
This is “low code,” but it typically means that the company needs to work with third parties to enable all of this. Partners include the likes of integrators and other global services technicians, such as Microsoft, Deloitte, CapGemini, KPMG and so on. (And the founders of the startup themselves come from consulting backgrounds so they well understand the role these companies play in the process of bringing technology into big businesses.)
FintechOS is tapping into a couple of very big trends that have arguably been the biggest in the financial and related insurance industries.
The first of these is the fact that core services around things like credit/loans, current deposits and savings are not just very complex to build but actually have largely become commoditized — similar to digital payments — and so packaging them up and turning them into services that can be integrated by way of an API makes them more easily accessed without the heavy lifting needed to build them from scratch. This lets companies focus instead on customer service or building more interesting tools around those basic services to customise them (for example AI-based personalization). Disintermediating basic functions from the services built around them is arguably a bigger trend, but it has been especially prevalent in enterprise, which has long been a slow-moving space when it comes to innovation in the back-end, and the front-end.
The second of these is the big swing toward using no-code and low-code tools to empower more people within organizations to get stuck in when they can see something not working as efficiently as it could, and building the workflows themselves to improve that. This also applies to trying out and testing new products — again something that typically has not been done in financial and insurance services but can now be possible with low-code and no-code tools.
“Not only is our technology helping financial institutions become customer centric, but it’s also helping them provide products and services to more people and businesses,” said Sergiu Negut, the other co-founder who is FintechOS’s CFO and COO, in a separate statement. “With so many markets still underserved, the ability to tailor offerings to a segment of one offers the opportunity to increase financial inclusion and adheres to our ideal that easy access to financial services is essential. We’re delighted to be working with investors who share our views on how fintech should be transforming the financial services industry.”
Notably, Draper Esprit also has backed Thought Machine, another big player in the world of fintech that is taking some of the learnings and models that have helped new entrants disrupt incumbents, and is packaging them up as services for incumbents, too. It takes a different approach to doing this, not using low-code but smart contracts, which could be one reason why the VC doesn’t see the investments as conflict of interest. They are also tackling an enormous market, and so at least for now there is room for them, and many others in the space, such as 10x, Temenos, Mambu, Rapyd and many others.
“When we met Teo and Sergiu, we were immediately convinced of their vision: a data led, end-to-end platform, facilitated with a low-code/no-code infrastructure,” Vinoth Jayakumar, partner at Draper Esprit, said in a statement. “Incumbent financial services firms have cost-to-income ratios up to 90%, so we see a huge and increasing need for infrastructure software that allows digitisation at speed, ease and lower cost. Draper Esprit builds enduring partnerships; with the team at FintechOS we hope to build an enduring fintech company that will dramatically change financial services experiences for people all over the world.”
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Payhawk raises $20M to unify corporate cards, payments and expenses
Fintech startup Payhawk has raised a $20 million funding round. QED Investors is leading the round with existing investor Earlybird Digital East also participating. Payhawk is building a unified system to manage all the money that is going in and out.
Essentially, companies switching to Payhawk can replace several services they already use and that didn’t interact well with each other. Payhawk lets you issue corporate cards for your employees, manage invoices and track payments from a single interface.
After signing up, customers get their own banking details with a dedicated IBAN. You can connect with your existing bank account, load funds to your Payhawk account and start using it in multiple ways.
Compared to other companies working on similar products, Payhawk gives each customer their own IBAN, which means they can receive third-party payments.
One of the key features of Payhawk is that customers can issue virtual and physical cards for employees with different rules. You can set up a team budget, configure an approval workflow for large transactions and let Payhawk handle receipt collection from those card transactions.
You can upload invoices to manage them through Payhawk. The startup tries to automatically extract data from those invoices for easier reconciliation. Payhawk also lets you reimburse employees. The service acts as a single source of truth for your company’s spending. Finally, you can connect Payhawk with your existing ERP system.
As a software-as-a-service solution, you pay a monthly subscription fee that will vary depending on optional features and the number of active cards. Clients include LuxAir, Lotto24, Viking Life, ATU, Gtmhub, MacPaw and By Miles. Overall, the startup has 200 clients.
The company has been growing nicely as revenue doubled in Q1 2021. It currently accepts clients in the European Union and the U.K. but it already plans to expand beyond those markets. Up next, Payhawk plans to launch credit cards, more currencies and tighter integration with corporate bank accounts.
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