Financial technology startups raised $121.6 billion last year — a 153% year-over-year increase in terms of global VC deal value — and span a range of outfits from payment firms to digital banks to players who make corporate spending.
However, it is not so typical for us to hear that venture capitalists deposit millions of dollars in a traditional bank. But today, Cross River Bank told TechCrunch it has raised $620 million in funding at a valuation north of $3 billion.
Cross River Bank is not just any bank. The Fort Lee, New Jersey-based institution is also a technology infrastructure provider that facilitates loans and payments for many of the fintechs also backed by top VCs. And while fintech has exploded in recent years, so has Cross River Bank’s business — and investor interest, too.
Private equity firm Eldridge and Andreessen Horowitz co-led the financing, which also included participation from funds and accounts advised by T. Rowe Price Investment Management, Whale Rock and Hanaco Ventures, and several other firms. (If we want to get technical, the money was actually raised by CRB Group, the bank’s parent company.)
It’s a huge jump since the company’s last raise — a $30 million round in October 2016 with capital from Battery Ventures, Andreessen Horowitz (a16z) and Ribbit Capital. At the time, the move by investors in some Silicon Valley fintech startups was considered rare. But as the biggest players in fintech have come to rely on Cross River Bank for things like embedded payments, cards, loans and crypto solutions, it will feel much less so in 2022.
The latest round marks the third time a16z has put money into Cross River Bank, with the first time in the company’s first institutional round closing in October 2016 — a $28 million funding that ended at $30 million, as others added to it. Prior to this increase, the bank had raised a total of $82 million in funding in three rounds.
At the time of that 2016 raise, Cross River told us it generated more than $2.4 billion in loans for companies like Affirm and Upstart in 2015 alone. Fast-forward to today, and that number has grown 10x — to over $24 billion.
“Cross River enables any company to become a fintech company, a vision we are optimistic about at a16z and another reason why we have been committed to Cross River since the early days of the company,” said David George , general partner of the Growth Fund at Andreessen Horowitz.
He went on to say that his firm saw Cross River in action years ago with one of its portfolio companies, Coinbase.
“When Coinbase first started looking for a partner bank, many traditional financial institutions had general policies that prevented them from participating in crypto,” George told TechCrunch. “Cross River, on the other hand, had the foresight to lean into this new frontier and support Coinbase, and many other leading crypto firms, which are still happy partners to this day.”
In a written statement, Todd Boehly, co-founder and CEO of Eldridge, described Cross River as a technology company “with the established expertise of a bank”.
In addition to Coinbase, Cross River also counts Affirm, Best Egg, Checkout.com, Coinbase, Divvy, Freedom Financial, Pay.com, Rocket Loans and Stripe among its 80 customers.
“The agility and scalability of our [API-based] core is what makes us great,” said Gilles Gade, who holds the titles of founder, president and CEO of the bank. “As companies grow, they turn to us because they know we are the right choice for embedded finance and infrastructure.”
He even describes his company as the ‘epicenter of the fintech ecosystem’.
“We grew up in it in the sense that we participated in the pregnancy,” said Gade. “We have always been at the center of the revolution of providing access to credit to the less fortunate – all enabled by technology – with obviously very robust compliance surrounding it.”
Track record of growth
In an interview with Gade, I learned that Cross River Bank is exceptional in another way as well. It has been profitable since 2010 – two years after its inception, meaning it posted a net profit after tax. Meanwhile, according to Gade, sales have increased by an average of 50% year-on-year.
“There were ebb and flow,” he said. “Some years it was faster and some years slower, but we’ve grown constantly.”
The decision to take the new capital was primarily driven by a desire to expand globally, Gade explained.
“Until now, we’ve been very focused on North America,” he told TechCrunch. “But international expansion is very important to us and continues the theme of inclusion and access to credit.”
The company also plans to continue building out its embedded payments, cards, loans and crypto products, hiring (obviously) and forging more strategic partnerships. Currently, Cross River has more than 800 employees and Gade expects it to be “north of 1,000” by the end of the year.
Cross River will also try to buy “bags of technology,” Gade said.
“We rely heavily on all of our partners to develop their own front-end, but as we continue to make strides in embedded finance, there are certainly some front-end applications that we would like to acquire and potentially develop our own. developing,” he added.
As for the long-term focus, the bank places crypto/web3 as “front and center”.
“Crypto has been Cross River’s darling for eight years,” Gade told TechCrunch. “It started with our relationship with Coinbase as a loyal provider of banking integration, crypto to fiat and fiat to crypto onboarding for their customers.”
The goal is to provide its partners with a regulatory and approved framework to increase their crypto offerings and increase their reach.
“We want to offer much more [crypto-related] products and services than we have ever done,” he added. “We are focusing on a crypto-first strategy… We’ve been on this for a long time and we understand the requirements of the market, its dynamics and where the market is headed. We want to be judicious about that.”
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This post Cross River Bank goes from small to mighty, with a valuation of over $3 billion and a crypto-first strategy – TechCrunch was original published at “https://techcrunch.com/2022/03/30/cross-river-bank-lands-620m-at-a-3b-valuation-as-it-gears-toward-a-crypto-first-strategy/”