Welcome to my weekly fintech-focused column. I’ll be posting this every Sunday, so listen to the Equity podcast in between posts and hear Alex Wilhelm† Natasha Mascarenhas and I riff on all things startup! And if you want this delivered straight to your inbox as soon as it officially becomes a newsletter on May 1, sign up here.
On March 25, PitchBook released its annual Fintech report for 2021, which showed that the fintech industry raised $121.6 billion last year — a 153% year-over-year increase in terms of global VC deal value. Alex and I will dig deeper into that report next week, but it’s a nice lead-up to what I’m going to investigate today.
There has been a lot of talk lately about a slowdown in venture capital financing. But if last week’s mega rounds in fintech are any indication, the sector is proving it has the potential to be quite the outlier – at least for now.
Unsurprisingly, but still notable, Ramp, a corporate spending and expense management startup, confirmed that it had raised $200 million in equity, secured $550 million in debt and doubled its valuation to $8.1 billion. Not bad for a company that just launched publicly just over two years ago.
I also exclusively covered Jeeves’ $180 million Series C, which quadrupled that company’s valuation to $2.1 billion in six months. I’ve been writing about Jeeves since coming out of stealth last June with $31 million in equity and it’s been wild to watch it grow. It is also active in corporate spending and expense management, with more of a global footprint and infrastructure component. In fact, it describes itself as the first “cross country, cross currency” expense management platform. Jeeves has a presence in, and plans to expand into, Latin America, Canada and Europe. It also looks at Southeast Asia and possibly Saudi Arabia and Africa.
Another thing that both Ramp and Jeeves have in common—besides skyrocketing valuations—is that both companies are experiencing hypergrowth. Unfortunately, like most private companies, neither startup will share hard revenue figures. But they provide at least some statistics. Disaster says revenue grew “early 10x” in 2021 compared to 2020, while cardholder numbers grew 7x and user base grew 15x. CEO Eric Glyman also tells us that Ramp generates more than $5 billion in payment volumes year-over-year. Since it makes money from every trade, it is safe to say that Ramp is doing well and hitting an impressive revenue area. Meanwhile, Jeeves says it has seen its sales grow 900% since its September surge and, more impressively, brought in more sales in the first two months of 2022 than in all of 2021. Meanwhile, the startup has doubled its customer base to more than 3,000 companies and reached approximately $1.3 billion in gross transaction volume (GTV) year-over-year.
Is this market big enough for so many global players? That remains to be seen. But it will be fun to see how the race in space goes. As Alex, my friend and co-host of Equity podcast, noted this week, it seems like these companies can’t stop adding features and new products soon enough. For example, Brex announced last week that it has provided $10 million in growth capital through venture capital to Zesty.ai, a leading provider of predictive data analytics on climate risk. Brex launched a venture debt program last August as part of its effort to be a lot of finance for both start-up and growing companies. (It had also applied for a banking charter last year, but eventually withdrew its application). Meanwhile, newer players are also entering the scene. I recently wrote about a new company called Glean AI, founded by former OnDeck and Better.com CFO Howard Katzenberg, that aims to help companies save money by using machine learning to understand things like deal terms, line item data, redundant offers, and negotiation. analyze opportunities. These kinds of startups keep the incumbents (relatively speaking) on their toes.
It’s safe to say that as long as these startups keep adding to what they can offer other companies, the rapid pace of funding to support those initiatives will likely continue – but there’s a caveat – IF they show rapid growth as described. above.
It’s too early to really say if fintech is really an outlier when it comes to a slump in global venture capital financing, or if we’re just seeing deals that started late last year begin to close. The second quarter will give us more insight into whether fintech is actually experiencing a slowdown or avoiding it.
On that note, our amazing fintech/crypto reporter Anita Ramaswamy spoke to Justin Overdorff of Lightspeed Venture Partners on the subject and he says at least fintech is not immune to the global slowdown. For context, Overdorff joined Lightspeed in 2021 to help lead the team’s fintech practice. He told Anita:
We’re seeing some pretty big market changes. Valuations may not fall yet, but what’s changing is that we’re definitely seeing round sizes shrink. And the number of term sheets on offer is shrinking. So when you see, you know, a deal, and a [founder] who would normally go out for a $20 million Series A, the market tells them to raise 12 to 15 million because that’s where the appetite is. And instead of eight termsheets, you get two. And that’s pretty obviously happening… Now, that being said, I think there’s still a lot of appetite [for fintech] across the board.
On the venture side, Overdorff told Anita that from what he hears, VCs are “trying to make their money last longer” and as a result “it’s not known where it’s going.”
So if Overdorff’s observations are any clue, startup founders and investors alike are working harder to make sure their dollars last longer.
Robinhood Expands Into Consumer Finance As Apple Steps Up Its Fintech Game
In other notable news, Robinhood announced this week that it was launching a new debit card that allows for investing in change. As my very talented colleague Sarah Perez and I discussed, the move was important because it shows that Robinhood is taking concrete steps to move beyond just commerce and into more consumer finance areas. Sarah’s exact words were: “It puts it in more direct competition with other fintechs like Chime and even P2P payment companies like CashApp and PayPal/Venmo, which link online customer accounts to physical payment cards. The roundup feature can also help passively increase customers’ investments, such as Acorns [with its savings app] and like Venmo does with crypto.”
Another example of fintechs trying to do it all.
Meanwhile, as our friends at Protocol reported, Apple is reportedly buying UK open banking startup Credit Kudos for about $150 million. This follows the introduction in early February of a new Tap to Pay feature for iPhone that turns the device into a contactless payment terminal. The tech behemoth is clearly penetrating fintech territory.
As usual, there was no shortage of funds around the world, although I have to admit that this list feels shorter than it has been in recent weeks. Here’s an example of just a few:
In other news
Mastercard announced the launch of a new suite of open banking-driven smart payment decision tools aimed at eliminating friction and improving conversion rates in the payments ecosystem. The credit card giant called the move “one of the first significant technological developments to come out of its Finicity acquisition.”
This article from our very own Alex Wilhelm ties into the “is fintech an outlier” story from above: Forge’s public debut will set another test for SPAC-led exits. Forge operates a private equity market – basically shares in unicorn startups. It went public this week via a SPAC and, for breath, actually had an impressive debut.
Ola said on March 24 that it has reached an agreement to acquire Avail Finance, a financial services startup that serves workers as the ride-hailing giant looks to expand its financial services offering. Manish Singh gives us all the details in this piece.
Sightline, which became Nevada’s first unicorn just a few months ago, announced last week that JP Morgan Payments will become the primary processor for its Play+ transactions for online casinos, mobile sports betting, cashless casino payments “and more”. The company told me: “The gaming industry has a notoriously clunky payment ecosystem bogged down by regulations and casinos’ reliance on cash. But recently there have been tremendous technological advancements such as Sightline helping to launch the world’s first casino with a completely cashless infrastructure.”
Stori reports that it is expected to reach 1 million active customers this month. CEO and Co-Founder Bin Chen said: “We are super excited about reaching this milestone, especially since most of our customers have been rejected by traditional banks in the past. With a Stori card, they build credit history and gain financial upward mobility.” I wrote about the startup’s $32.5 million Series B in February 2021.
BMO Financial Group and 1871 last week launched a national call for applications for their leading fintech industry program for female-led startups, WMNfintech. Applications for the 2022 program will be accepted until April 22, 2022.
In this Q&A with FinLedger, Morty co-founder Nora Apsel discusses the online mortgage market’s journey, overarching goals and plans for the future. I spoke to Nora myself earlier this year and the former engineer is very impressive. Her company raised a $25 million Series B at a $150 million valuation in July 2021. In February, she told me that the startup’s revenue has grown nearly 14x since 2019, doubling in the past year alone.
Speaking of women in fintech, Mila Ferrell, one of the founders of Zoom’s product team, joined Cervin last week, becoming the first female partner at the venture capital startup. In her new role, Ferrell will “shape the future of work and shape the fintech infrastructure for the next decade and beyond,” the company said.
Tishman Speyer, one of the world’s largest real estate developers, announced it has secured $100 million in pledges, anchored by the National Pension Service of Korea and Investment Management Corporation of Ontario, for its first proptech venture capital fund. The company says it is raising up to $150 million in equity to fund investments “in technology-driven opportunities across all real estate sectors.”
Well, that’s it for this week! My newsletter was supposed to be published today, but for logistical reasons that date has officially been moved to May 1. Thanks for sticking around and reading this column in the meantime. Happy Sunday, and next week!
This post Will financial technology startups dodge the business slowdown? – TechCrunch was original published at “https://techcrunch.com/2022/03/27/fintech-roundup-will-financial-technology-startups-dodge-the-venture-slowdown/”