Tag: EC Fintech

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Now is the time to invest in Black-owned banks

In the past two weeks, millions of dollars shuffled from startup and investor bank accounts housed in the collapsed Silicon Valley Bank to the JPMorgans, Brexes and Wises of the world. As founders and investors continue looking for new places to park their money, it’s essential to consider this moment as an opportunity to start banking with some of the few Black-owned banks.

Digitally, there is Intrepid, founded by Collin Thompson, which works exclusively with businesses and global remote teams. Thompson told TechCrunch+ that his company’s goal is to become a trusted partner to founders, especially those affected by the SVB collapse.

Intrepid offers similar services to Brex, in addition to more specialized assistance, such as all-in-one HR tools. In the wake of SVB’s crash, Intrepid has implemented services like higher Federal Deposit Insurance Corporation insurance and sweep accounts. To create insurance beyond the typical $250,000 backed by the FDIC, Thompson said he’s building a new deposit network product with his banking partners, allowing his company to create multiple deposit accounts within the FDIC-insured limit and letting customers access those accounts through a single application. Intrepid also provides social resources, such as introductions and events, for those looking to grow their business networks.

“Given our diverse backgrounds, this informs how we manage risk, what types of customers we take on and how we serve,” Thompson said. “Our interests, experiences and character guide us, and this will impact the types of customers we attract. We believe that every customer, regardless of their background or identity, deserves to have a financial partner they can trust and rely on, and we are here to provide that.”

There are also brick-and-mortar Black banks, such as Unity National Bank, currently the only Black-owned bank in the state of Texas, which has a branch in Atlanta; Liberty Bank, which has branches in nine states, including Louisiana; and OneUnited, which is based in Massachusetts with branches in Los Angeles, Miami and Boston.

Many Black-owned brick-and-mortar banks are based in the U.S. South, which aligns with the latest venture migration pattern to states such as Georgia, Texas and Florida. Though these banks do not have many branches, they could still be important when considering financial diversification.

Now is the time to invest in Black-owned banks by Dominic-Madori Davis originally published on TechCrunch

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Pitch Deck Teardown: StudentFinance’s $41M Series A deck

There’s no shortage of “upskilling” startups out there, but it’s rare to see one raise a $41 million round. That’s what Spanish startup StudentFinance pulled off a couple of weeks ago. Today, we are taking a closer look at the pitch deck the company used to make that happen.

We’re looking for more unique pitch decks to tear down, so if you want to submit your own, here’s how you can do that. 

Slides in this deck

StudentFinance shared a slightly redacted slide deck; it removed sensitive revenue, cost and unit economics slides. Everything else is as pitched.

  1. Cover slide
  2. Mission slide
  3. Opportunity slide
  4. Problem slide
  5. Solution slide
  6. Value proposition slide part 1
  7. Value proposition slide part 2
  8. Business model slide
  9. Technology slide
  10.  Metrics slide
  11.  Road map slide (labeled “expansion” slide)
  12.  Geographic expansion slide (labeled “expansion” slide)
  13.  Growth history and trajectory slice (labeled “expansion” slide)
  14.  Team slide
  15.  Contact slide

Three things to love

To raise a $41 million round, a company needs solid traction and a huge market. I’m unsurprised to see that those parts of the story, in particular, were very well covered.

Clear, bold mission

Student Finance mission slide

[Slide 2] Off to a solid start. Image Credits: StudentFinance (opens in a new window)

Company-building is future-building, and being able to have a clear vision for the future is a crucial part of that. StudentFinance’s second pitch deck slide sets the tone for what’s about to come: It’s a BHAG, as it’s called in the industry —a big, hairy, audacious goal. StudentFinance has great clarity about what they are building and who they are building it for, and it really helps investors co-dream with the founders.

This slide invites investors to join the journey, something all startups should do when pitching. What is the big goal, the big change you want to see in the world? Bring that to life, and you’ve made a great first impression.

A clearly formulated problem space

[Slide 4] Gotta love a clear problem. Image Credits: StudentFinance

The company goes from a great mission to discussing what the opportunity looks like. From there, it moves on to this slide, talking about the three big problems getting in the way of a global, comprehensive approach to upskilling. Having a clear, well-articulated problem statement goes a long way toward helping an investor get a feeling for how big, how serious and how urgent the problem is. Ideally, it should also hint at how prevalent the problem is (i.e., how many people are experiencing it).

Breaking down the problem into three easy-to-grasp segments like this is particularly elegant. Funding is an obvious one‚ people are worried about money — but finding jobs and getting career guidance are less obvious slices of this challenge at first glance. Bringing it to life by using the short example questions underneath helps humanize the problem. All very well done.

Promising early metrics

For a company raising more than $40 million, I would have expected pretty beefy metrics. Of course, I have nothing to benchmark it against, so I don’t know if these metrics are actually good or great, but the investors must have seen something. The win here, though, is identifying and reporting on metrics that seem key to the company:

[Slide 10] Metrics, metrics, metrics. Image Credits: StudentFinance

Some crucial numbers are missing here, and in any other circumstance, I would give the founders a hard time.

You can tell a lot from a company’s metrics — both the KPIs themselves, of course, but also the figures that a company believes are key to its growth. StudentFinance overlaps these metrics on the UN sustainable development goals, which is a great way to signal how it can be a force for good in the world. Again, elegantly done.

The number of people reskilled and the value of tuition fees are both crucial numbers (although I can’t figure out what ISA stands for, so perhaps there’s an opportunity for a tweak there). Job creation, salary generation and finding that half of the folks who go through the program land jobs are all key indicators that make a lot of sense.

Some crucial numbers are missing here, and in any other circumstance, I would give the founders a hard time, but the team already let me know that “sensitive revenue, cost and unit economics slides” had been removed — and those are exactly the type of metrics that I would like to see here.

In the rest of this teardown, we’ll take a look at three things StudentFinance could have improved or done differently, along with its full pitch deck!

Pitch Deck Teardown: StudentFinance’s $41M Series A deck by Haje Jan Kamps originally published on TechCrunch

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For fintechs in 2022, the bigger the exit, the larger the decline in value

While the public market correction has been widespread, tech and fintech stocks have seen the largest declines, according to a recent report.

Specifically, the Fintech Index — which tracks the performance of emerging, publicly traded financial technology companies — was down a staggering 72% in 2022, according to F-Prime Capital’s State of Fintech 2022 report. After hitting a peak of $1.3 trillion in late 2021, the F-Prime Fintech Index slid to $397 billion by the end of 2022.

Currently, the Fintech Index comprises 55 companies across B2B SAAS, payments, banking, wealth and asset management, lending, insurance and proptech.

“The biggest shift in 2022 was that public investors for the first time got to weigh in on fintech stocks,” said David Jegen, managing partner of F-Prime Capital. “That was probably not super great timing considering the broad macroeconomic impact on tech.”

The fact that so many fintech companies even went public was a big deal in and of itself, Jegen said. “We had 10 years of exciting fintech disruption, all of it led by private investors,” he said. “So 2021 was huge because the IPO window was open when we had a really mature cohort of fintech companies.”

Indeed, 75 fintech companies went public in 2021, meaning 2022 was the first year that F-Prime could even put together a Fintech Index.

Notably, the decline was especially pronounced for the 10 largest exits during the peak years of 2020-2021. In other words, the bigger the exit, the larger the decline. The cumulative market cap decline for the top 10 recent exits totaled over $220 billion; Coinbase, NuBank, Robinhood, SoFi, Affirm and Wise all saw their valuations tumble.

For fintechs in 2022, the bigger the exit, the larger the decline in value by Mary Ann Azevedo originally published on TechCrunch

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Better.com’s SPAC gets a lifeline but remains on life support

Digital mortgage lender Better.com’s SPAC deal with Aurora Acquisition Corp. recently got a new lease on life, extending its timeframe to close the transaction through the end of Q3 2023. Without the extension the transaction would have had to close by today.

Further investigation has turned up an interesting fact in the interim: Even if the Better.com SPAC combination closes, the transaction has been all but neutered from a cash perspective. From the company’s pursuant SEC filing (emphasis TechCrunch):

In connection with the vote to approve the Extension Proposal, the holders of 25,751,449 Class A ordinary shares properly exercised their right to redeem their shares for cash at a redemption price of $10.2178 per share, for an aggregate redemption amount of approximately $263,123,592. As such, approximately 92.6% of the Class A ordinary shares were redeemed and approximately 7.4% of the Class A ordinary shares remain outstanding. After the satisfaction of such redemptions, the balance in Aurora’s trust account will be approximately $20,931,627.

Per the company’s original deal presentation, its tie-up Aurora Acquisition would provide around $278 million to the combined company, which the deck noted “assumes Sponsor backstop of 100% of the shares redeemed by existing AURC shareholders pre-closing.”

As Better.com ran headfirst into a climate of higher interest rates and operational issues — its layoffs are now legendary for their callousness and blowback — it did manage to secure a portion of the other capital that was earmarked for the deal. That $750 million infusion, half of a planned $1.5 billion PIPE, or private investment into public equity, provided Better.com with a stronger balance sheet. That said, November 2021 is far in the past.

Better.com’s SPAC gets a lifeline but remains on life support by Mary Ann Azevedo originally published on TechCrunch

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7 investors reveal what’s hot in fintech in Q1 2023

The global downturn has impacted every sector, but fintech bore the brunt of it as public-market valuations fell off a cliff last year.

However, it appears that even though VCs are proceeding more cautiously than before and taking their time with due diligence, they are still investing.

CB Insights recently found that two of the largest global VC firms, Sequoia Capital and Andreessen Horowitz, actually backed more fintech companies in 2022 than any other category. In both cases, about 25% of their overall investments went into fintech startups.

And, while global fintech funding slid by 46% to $75.2 billion in 2022 from 2021, it was still up 52% compared to 2020 and made up 18% of all funding globally, proving that investors still have faith in fintech’s future.

You could even say some are bullish: “If anything, I expect our investment pace to increase this year as early-stage fintech companies prioritize operational discipline and product differentiation,” said Emmalynn Shaw, managing partner of Flourish Ventures.

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The tougher conditions created in the past year has resulted in down (and smaller) rounds, M&A, and an emphasis on fundamentals. Gone are the days of investing on a whim.

But for Ansaf Kareem, venture partner at Lightspeed, the tough times can be seen as a good thing because they often create the best companies. “If you study previous compression periods in the ecosystem (e.g., 2008 and 2000), not only have we seen outstanding companies being formed, we’ve also witnessed great venture firm performance during these windows,” he said.

“The last two years in the venture ecosystem were an anomaly, but I believe we are coming back to a healthy ‘normal.’ Diligence cycles have extended, better relationships with founders can be formed, investors can enter new spaces with more preparation, and a thoughtful approach to early-stage venture capital can emerge,” Kareem added.

Challenging market conditions drive a sense of discipline and perspective that can be a gift. Emmalyn Shaw, managing partner, Flourish Ventures

So whether you’re seeking to raise your first round or your third, make sure you focus on fundamentals, save cash and don’t shy away from raising a down round if you think your idea may change the world, several investors said.

“Grow in a way that’s smart and sustainable for the long run,” advises Michael Sidgmore, a partner at Broadhaven Ventures. “We can’t control the macro environment, and today’s geopolitical climate means that there may always be the threat of exogenous shocks on the market. But the markets will bounce back at some point. So just grow in a manner that lets you focus on unit economics and profitability so that you can control your own destiny no matter what market we are in.”

To help TechCrunch+ readers understand what fintech investors are looking for right now (and what they’re not!) as well as what you should know before approaching them, we interviewed seven active investors over the last couple of weeks.

Spoiler alert: B2B payments and infrastructure remain on fire and most investors expect to see more flat and down rounds this year. Plus, they were gracious enough to share some of the advice they’re giving to their portfolio companies.

We spoke with:

Charles Birnbaum, partner, Bessemer Venture Partners

Many people are calling this a downturn. How has your investment thesis changed over the last year? Are you still closing deals at the same velocity?

We continue to invest in great companies regardless of the market. However, many entrepreneurs have opted to remain heads down and build more efficiently instead of testing this new valuation environment.

While our investment theses are always evolving, the shift in the macro environment has not changed which areas we are most excited about.

Do you expect to see more down rounds in 2023? Are you seeing more companies raising extensions or down rounds compared to 2021 and 2022?

We do expect more flat and down rounds to come later this year as runway tightens for many companies that raised more than two years ago.

Private market valuations, at any point in time, are not only a reflection of a team’s hard work and progress, but are also impacted by the financing environment.

What are you most excited about in the fintech space? What do you feel might be overhyped?

We see tremendous opportunity for innovation in the world of B2B payments. The infrastructure groundwork laid by modern developer platforms over the past decade and the upcoming catalysts in the real-time payments world, with the launch of FedNow, could spark much faster adoption.

We are excited to see how entrepreneurs leverage these tools to enhance our archaic B2B payments ecosystem.

Consumer fintech businesses without long-term, durable customer acquisition advantages are overhyped and will continue to struggle to live up to the lofty expectations set by investors over the past several years.

We’re expecting to see significant consolidation across the consumer fintech landscape this year.

What criteria do you use when deciding which companies to invest in? Would you say you are conducting more due diligence?

We look deep into all areas of innovation, including fintech, and focus on startups that align with our theses. We try to predict where there will be opportunities for seismic innovation before we find the entrepreneur. This helps us with diligence, as we work to understand the market before we make any investments.

We also work hard to perform due diligence on every investment opportunity we pursue by spending significant time with the company, with a deep market study, and as many references as possible on the teams we back.

Have fintechs gotten close to growing into their 2021 valuations? How many will not manage the task in 2023?

Given the sharp run up in valuation over the past few years in the private market and the precipitous fall in the public market over the past year, it is difficult to say how many companies have grown into 2021 valuations.

For the top tier of companies that were able to raise larger rounds, the reality is they don’t need to answer that question for quite some time.

What advice are you giving to your portfolio companies?

The most important thing for me is to not give the same advice across different companies. There is no one-size-fits-all solution. Every business is at a different point along their journey to find product-market fit, prove the sustainability of a business model, execute on a repeatable go-to-market motion, etc.

Rethinking growth targets, in light of the rising cost of capital, to focus more on efficiency in this environment is a consistent thread in board meetings these days.

How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?

From my experience, you often have to find the most exciting companies and earn the right to invest. We are always reaching out proactively to founders building in the areas where we have active investment theses.

We are also always looking at exciting opportunities that come in through referrals from entrepreneurs we work with or have worked with in the past, and other investors in the ecosystem. We do our best to review and evaluate inbound messages we receive.

Aunkur Arya, partner, Menlo Ventures

Many people are calling this a downturn. How has your investment thesis changed over the last year? Are you still closing deals at the same velocity?

We’re definitely seeing the reset we expected to see after a decade of operating in a macro environment where the cost of capital was near zero. It’s a difficult but very healthy reshuffling of the deck.

I’d say that our core theses within fintech have largely remained the same: we’re investing in developer infrastructure and embedded finance APIs, vertical banking, end-to-end consumer and business financial services, and the Office of the CFO. We’re also looking at thoughtful enterprise applications of AI that intersect with each of these segments of our fintech thesis.

We continue to avoid balance-sheet heavy businesses that take undue risk to generate revenue, and ultimately look less like pure technology companies and more like insurance companies or lenders. These are the first businesses to suffer during a downturn because they’re heavily indexed to the macro environment.

We were less active in 2022, but are already seeing an uptick in deal flow in fintech in the first few months of 2023.

7 investors reveal what’s hot in fintech in Q1 2023 by Mary Ann Azevedo originally published on TechCrunch

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Edtech reacquaints itself with fintech

Amy Jenkins left her post at Outschool, a marketplace for live online classes for kids, when the company decided to focus more on consumers and less on the enterprise — a shift that included numerous rounds of layoffs at the richly backed education unicorn.

Now, Jenkins is the COO of Meadow, a platform that aims to make it easier for college students to pay tuition and for universities to stay compliant with financial transparency requirements. Meadow recently announced that it raised $3.5 million in venture funding — a round that Jenkins said, to her surprise, came together pretty quickly over six weeks. Plus, the round was three times the size of the founding team’s original target.

Part of the startup’s win may have been in the framing of its vision beyond traditional edtech.

“I think a lot of our investors would look at us as an edtech company that is in the higher education space, and that there’s an incredible opportunity there to think about,” Jenkins said. “When students are entering college, they’re really at the beginning of their financial life. And we can support them and prepare them from the beginning.” The company’s early products help students better calculate the cost of attending college, balancing different factors like housing and financial aid.

Jenkins said that being a hybrid company, toeing the line between edtech and fintech, did help with closing investors. Many of Meadow’s investors cut checks in the fintech space, “but also consumer, and also social impact — so we were able to hit all of those themes for these investors in terms of high potential working in this fintech space but really having a consumer lens because we’re thinking so deeply about what students need.”

Meadow isn’t alone in balancing two sectors as a competitive advantage in fundraising: Once-crypto-specific companies are shifting their pitch to be more fintech-focused, and some health tech companies are leaning on well-known financial instruments as a disruptor. “Every company is a fintech company” is a common adage, but in today’s environment, the reasoning behind that shift may be more around survival and savviness than serendipity.

Edtech reacquaints itself with fintech by Natasha Mascarenhas originally published on TechCrunch

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Want to buy an EV or heat pump? New coin will help you defray the costs

Buy an electric car. Invest in a heat pump. Install an induction stove. They’re all measures that people can take to reduce their daily carbon emissions, and they’re all pretty significant cash outlays.

Over the next three decades, as the world lurches toward net zero emissions, expenditures like these will be unavoidable. For many people, they’ll happen when its time to swap out a car or when the old stove dies. Others will want to move more quickly. But no matter what, the experience can give a person sticker shock.

In the long run, though, many of those expenses can save people money. EVs are cheaper to own and operate after several years despite higher upfront costs. Induction stoves and heat pumps may cost more than natural gas equivalents, but they allow people to eliminate the monthly expense of a gas hookup.

Now, fintech startup Future wants to tip the scales further, TechCrunch has exclusively learned. The Techstars Boston alum currently offers a debit card that incentivizes climate-friendly purchasing behavior, and today it’s introducing a way to let people sell their own carbon credits.

Buying an EV? Switching to induction? Installing solar? A different reduction that’s similarly verifiable? FutureCoins will let people track each metric ton of carbon they save and either sell it or retire it (meaning no one can use it to offset their emissions). The coins, which will be tracked on a to-be-determined public blockchain, will sell at an initial price of $90 per metric ton.

“Part of what we want to do is make it crystal clear to consumers that carbon has a price. It’s valuable,” co-founder at CEO Jean-Louis Warnholz told TechCrunch. “Every action that you take — and you don’t see it — but somebody is paying that price. The price is external, and we’re basically bringing it front and center to consumers to inform everyday decisions.”

Warnholz was inspired to start Future when he was thinking about how to reduce his household’s carbon emissions. The easiest and most obvious answer would be to buy offsets, which are most often tree-planting schemes. He quickly soured on the idea, though.

“I realized that I could either figure out how to credibly plant over 7,000 trees and make sure that they thrive, they don’t burn and they don’t get cut down. Or I could just take decisive steps to reduce my carbon footprint and save money at the same time.”

He chose the latter. He bought an EV, installed solar panels and started buying devices, clothing and more secondhand.

Want to buy an EV or heat pump? New coin will help you defray the costs by Tim De Chant originally published on TechCrunch