Chamath Palihapitiya speaks to SPAC concerns, from fees to disclosures to quality

It was almost exactly two years ago that a special purpose acquisition vehicle (SPAC) spearheaded by investor Chamath Palihapitiya took public the space tourism company Virgin Galactic. It was the first human spaceflight company to trade on the NYSE — or any exchange, for that matter — and it was so successful, with the company’s shares trading higher and higher for so many months afterward, that it almost immediately kicked off the SPAC frenzy.

Consider that in the first three months of this year alone, SPACs raised $87.9 billion, exceeding the total issuance in all of 2020, according to data from SPAC Research. So far, according to SPAC Insider, 450 blank check companies have been successfully formed, compared with 15 just 10 years ago.

Palihapitiya has been among the biggest beneficiaries of the craze. Called the “Pied Piper of SPACs” by The New Yorker and the “King of SPACs” by Bloomberg, he has formed at least 10 blank check companies and publicly shared plans to raise many more. (On the “All-In Podcast” that he co-hosts, Palihapitiya last year revealed he had reserved the symbols from “IPOA” to “IPOZ” on the NYSE.)

Of course, whenever market activity grows too feverish, retail investors get bruised. Indeed, after a number of companies taken public via blank check companies were discovered to have fudged some of their numbers — in June, for example, Lordstown Motors admitted it did not have binding orders from customers for its electric Endurance pickup truck after all — fears have grown that SPACs don’t feature enough disclosures and that they mostly benefit the people organizing them, like Palihapitiya, who joined us last week to talk about that concern and others.

NBA Top Shot creator on the NFT craze and why Ethereum still isn’t consumer friendly

Roham Gharegozlou has been betting on the potential success of NFTs for years. This year, it happened.

Gharegozlou and the team at his startup, Dapper Labs, shipped the blockchain world’s first popular game, CryptoKitties, back in 2017. The startup then launched NBA Top Shot late last year, and it promptly caught fire and brought worldwide attention to the crypto collectibles space.

We caught up with the Dapper Labs CEO at TechCrunch Disrupt 2021 last week to discuss the challenges facing the crypto space, the future of Ethereum and how quickly NFTs blew up this year.

“I knew it would be fast, but NBA Top Shot went from 4,000 to 400,000 users in a matter of weeks,” Gharegozlou said.

Top Shot’s success has made Dapper Labs a venture darling — the company announced a $250 million funding round last week, reaching a reported $7.6 billion valuation. The massive valuation is not just a bet on the continued success of Top Shot, it’s also a nod to the potential of the platform that Dapper Labs is building for other consumer-minded blockchain developers. The startup has built its own blockchain, called Flow, sidestepping the popular Ethereum blockchain, which the vast majority of successful NFT platforms live on today. Dapper Labs is betting that won’t be the case for long.

“For the first year or year and a half of Dapper Labs, we spent about $30 million trying to build on Ethereum. We built Dapper Wallet — the user experience you see on Top Shot, we tried building it on top of Ethereum,” he says. “We realized there are multiple issues. There’s cost, there’s scale, there’s throughput, there’s all these things, but fundamentally, it’s all about user experience. The user experience that you build for when you’re designing a protocol and blockchain for financially sophisticated traders or very hardcore DeFi things, those aren’t the same trade-offs that you want when you’re building for consumer applications.”

SEC Regional Director Erin Schneider talks SPACs, Coinbase and what startups could do better

If startups were looking for more specifics about crypto lending, new rules by which blank-check companies might have to abide, or whether the SEC views NFTs (non-fungible tokens) as securities, they didn’t get any this week from Erin Schneider, the regional director of the SEC’s powerful San Francisco office.

While speaking at TechCrunch Disrupt 2021, Schneider — whose team has helped wring settlements out of Theranos, Elon Musk and, more recently, the app analytics company App Annie — was clear from the outset that she was limited in what she could say.

She did, however, share insight into her personal thinking about a range of these issues, which, given her position, seems very much worth listening to (watch the full interview with Schneider below).

For starters, we asked Schneider about Coinbase’s now-shelved crypto lending product, and why BlockFi, a crypto lending company, has been grappling with state regulators that want it to stop offering its own interest-bearing products (the SEC — a federal agency — put the kibosh on Coinbase’s plans).

Schneider said startups should expect to abide by both federal regulations and state regulations, which can differ widely depending on the state. But she also used the question to answer something she wasn’t asked: Can financial products like Coinbase’s proposed offering confuse consumers? Her answer to this was, no surprise, resoundingly affirmative.

I do think over the last couple years, we’ve seen companies that started out calling [themselves] very disruptive, but they’re starting to add on features that look very similar to traditional financial structures, and especially in that sort of situation, the risk for investor confusion is high. [So] any regime, via the state or a federal regime, is going to look very closely at how these companies are advertising their products and what regimes they are subject to, because I do think there’s potential for investor risks and investor confusion.

Koa is helping African consumers make better money moves

While Delilah Kidanu grew up in Nairobi, Kenya, mobile money platform M-Pesa was the go-to fintech platform for her and most Kenyans.

The Safaricom-owned product provides basic access to financial services like sending and receiving money and purchasing airtime. Yet, some Kenyans still lack other digital financial services from savings to investments.

Last year, people in the country saved up to $13 billion, and more than 70% of them used informal saving groups and cooperatives to do this.

Based on her experience, Kidanu teamed up with Alexis Roman and Bubunyo Nyavor last year to start Koa to help Kenyans save and invest their money better. She is the COO of the company, while Roman and Nyavor act as the CEO and CTO, respectively.

Koa is one of 20 companies competing for $100,000 and the Disrupt cup in this week’s TechCrunch Disrupt Startup Battlefield competition.

In an interview with TechCrunch, Roman said when the team began market research to understand how Kenyans saved, they were intrigued to discover that many people were dissatisfied with the current traditional saving options.

Apart from being offline models, savings with microfinance banks, cooperatives and informal saving groups have manual, expensive and opaque processes.

“It was shocking that when we spoke to people, and they told us their experience in their cooperatives and savings groups, we wondered why they aren’t better alternatives,” Roman said. “People often use access as a keyword when describing the problem behind how financial services are used. But for us, we think access is not the problem; it is how easy or efficient it is to access the service. It was this obvious observation that made us start Koa.”

Digitally, some banks offer savings products to Kenyans. But Koa still sees an opportunity because banks are generally a less popular savings destination for an average Kenyan evident in the aforementioned stats.

The founders are banking that it will be different with Koa. Its first product is a savings app that allows consumers to deposit, save and earn interest on their money. When users log into the app, they can begin to create savings goals in different pockets, a replica of what exists offline — where they would normally save across different informal savings groups for various reasons

But despite this huge opportunity, Koa has had to battle with two challenges.

First, infrastructure, which is a necessity for the company so it can take deposits. In Kenya, a fintech startup would typically need to partner with a financial institution. But collaboration between banks and fintech in Kenya is quite exasperating and even lags that of Nigeria, a country riddled with its own set of regulatory challenges.

The second issue Koa faced was trust, an area in which informal savings groups and cooperatives have excelled by relying on word of mouth.  

That said, Koa has been able to scale past both challenges. After securing some partnerships and engaging the necessary regulatory bodies to take deposits, Koa can now make it easy for Kenyans to make deposits without having them go through the lengthy traditional KYC process.


Image Credits: Koa

Since beta launching in April 2021, the company has onboarded around 5,000 customers who use its savings product. But with savings being the lowest-hanging fruit for fintech apps, Roman says the plan for Koa is to offer more products along the line.

For one, Roman sees promise in offering embedded finance and banking-as-a-service tools that would enable startups to launch fintech products at a faster pace. And given Koa’s entry point with savings, Roman believes the company is poised to build the rails of digital financial services in the country.

Ultimately the plan is to become a digital banking platform that offers other services like lending and investments.

“While we offer direct to consumer savings apps, we can then turn around and go to other companies to help them offer savings or other financial products to their customers. They wouldn’t have to go through all the struggles and burdens through regulatory hoops if we can help them achieve that,” he said. “In the long run, we want to become a digital financial institution.”

Alongside savings, Koa also provides financial and educational content for users to help with engagement. Users on the platform have now saved more than $40,000 and Roman says the company is heading toward a double-digit growth week-on-week in both users and deposits. Koa also recently raised an undisclosed pre-seed investment from angel investors across Africa, Europe and the U.S.

Before starting Koa, Roman previously led strategy at Helium Health, one of Africa’s well-funded health tech startups. Kidanu worked with MEST Africa, a pan-African incubator and accelerator, as well as a business lead. Nyavor, on the other hand, was a serial engineering lead at various African tech companies.

“I’m bullish on our team. I’m really excited about working with these people who are all very focused on customers and how we can provide the best experience for them. I think that’s a differentiator for us in the market,” said the CEO.


Coinbase to propose a federal regulatory framework for crypto to U.S. officials within the next month

Cryptocurrency trading platform Coinbase wants to help guide any emerging regulation on exchanges like itself, for obvious reasons, and in an interview with TechCrunch Editor-in-Chief Matthew Panzarino at TechCrunch Disrupt 2021 on Tuesday, Coinbase CEO and founder Brian Armstrong revealed it’s preparing a draft regulatory framework for consideration by federal lawmakers which it aims to distribute sometime within the next month.

“Coinbase wants to be an advisor and a helpful advocate for how the US can can create that sensible regulation,” Armstrong said in the interview. “In fact, there’s a proposal that we’re putting out at the end of this month, or maybe early next month, that is our proposed regulatory framework.”

Regulators typically seek industry feedback when forming new rules, particularly in industries where the pace of technological advancements mean that progress in the market has far outpaced the development of new, and amendment of existing, regulation. Armstrong said that he has in fact been asked multiple times for such a proposal.

“When I go to DC, I’ve met with a number of people in government, and they typically will ask us ‘Well, do you have a draft, do you have a proposal of something we could try to shop around about how this could be regulated federally?’,” he said. “Because right now, Coinbase has, you know, 50 different state regulators for money transmission licenses, 50 for lending licenses, you know, FINCEN, and SEC, and CFTC, and IRS and Treasury and OFAC.”

Armstrong clearly would prefer if there were an overarching federal framework that would alleviate the burden of dealing with independent state-by-state rules and agencies. But he also did seem aware that any proposal they put forward will definitely be just a single piece of a larger puzzle, which will include input from other industry entities working in crypto as well as guidance from existing related regulation.

“We have a proposal that we actually want to put out there that could help maybe create at least one idea about how to move forward,” he said. “But this is going to require input from a lot of people, and that willingness [on the part of lawmakers] to kind of engage with private industry and learn about what the opportunity is here.”

Coinbase recently clashed with the SEC after teasing the launch of a ‘Lend’ product that would allow its users to stake their crypto holdings in exchange for a return in the form of yearly interest. The SEC threatened to sue over the product since it signalled that this would represent a security, and be regulated as such, and Coinbase quietly walked back its plans to debut the product for now shortly after making public the SEC’s threat and articulating its lack of comprehension about the potential regulatory backlash.

Tatum lets you interact with blockchains using API calls

Meet Tatum, a blockchain infrastructure startup that wants to make it much easier to develop your own blockchain-based product. The company operates a platform-as-a-service product so that you don’t have to manage your own nodes and learn how to interact with each client. Tatum is participating in TechCrunch’s Startup Battlefield at TechCrunch Disrupt.

While blockchain development was quite easy at first, it quickly became much more complicated as new blockchains emerged. There are now dozens of different blockchains. Some examples of popular blockchains are Bitcoin, Ethereum, Stellar, Litecoin, etc.

If you want to interact with a blockchain directly, you have to run a client on a server. This is the easy part, as it basically comes down to spinning up a Linux server, installing a package and running this client. Once you have a node up and running, you can query the blockchain, initiate a transaction and run dapps — decentralized applications based on smart contracts.

What if you want to build a product that supports multiple blockchains and multiple cryptoassets? You have to start from scratch again and learn how the client works. Each client has different commands and returns different results.

Some companies have been working on ways to make this easier. For instance, cloud hosting services, such as Amazon Web Services and Microsoft Azure, let you run a managed node so that you don’t have to manage the cloud server that runs the client. But they don’t support a ton of blockchains and you still have to become a blockchain expert.

Other companies go one step further. They run a node for you and let you interact with the node using API calls. Interacting with the blockchain feels like using the REST API of your favorite SaaS product. For instance, Alchemy or Infura makes it easier to get started with Ethereum development.

Tatum’s differentiating factor is that it isn’t limited to Ethereum. You can use the exact same API calls to interact with multiple blockchains. When you know how to send assets from one wallet to another using Tatum, you know how to do it across 20 different blockchains.

“Blockchain is like the internet in 1997. We’re trying to bring the developer experience that developers have today to the blockchain space,” Tatum co-founder and CEO Jiri Kobelka told me.

With Tatum, developers can basically code once and deploy everywhere. For instance, if there’s a new blockchain that seems more effective for your smart contracts and you want to build the next version of your decentralized app on this new blockchain, you can reuse parts of your code base.

Tatum doesn’t want to make a bet on a specific blockchain; the startup considers itself as blockchain-agnostic. Developers can build crypto wallets, exchanges, NFT marketplaces, NFT in-game assets, decentralized identity products and more. There are 10,000 developers using Tatum right now, and the startup can see that more and more people are interested in NFT-related projects, as they represent 60% to 70% of Tatum’s usage right now.

Kobelka has a background in banking infrastructure. “I’ve spent over 15 years in banking as a technical core banking expert,” he told me. That’s why the team has developed a built-in compliance engine. This way, you can accept customers in different countries and comply with local regulations depending on the location of your customers.

Overall, Tatum opens up blockchain development to a new set of developers who are more familiar with web development and integrations with third-party services that offer API endpoints. And given the current interest in blockchain development, Tatum could become a popular development platform for the next generation of blockchain products.

Flow chart diagram

Image Credits: Tatum


Nigerian fintech Hervest wants to bring financial inclusion to more African women

After years of working in marketing for a number of financial services companies, Solape Akinpelu came to a conclusion: There was an “alarmingly low adoption” by women for financial services in her home country of Nigeria and all of Africa as a whole.

“I could see women living the reality around me,” Akinpelu recalls. “These women could not make sound financial decisions. Some of these women that do not even know that they could do better with their money.”

She found that the problem is particularly acute for women living in rural areas, especially those working on farms.

Nigerian fintech Hervest wants to bring financial inclusion to more African women. Founder Solape Akinpelu

Image Credits: Hervest

So in August 2020, she teamed up with Yomi Ogunleye to found Lagos, Nigeria-based Hervest, a startup that describes itself as “an inclusive fintech company” serving underserved and excluded women in Africa through a gender lens. The company presented today at the Startup Battlefield.

Broadly speaking, Hervest aims to bridge the $42 billion gender finance gap for urban and last-mile women in the country with an emphasis on women in agriculture. 

The startup, she said, provides familiar access to savings, fund transfers, impact investment, financial insights and tools to underserved women while offering blended finance to smallholder female farmers in underserved African communities. Put simply, it offers a way to invest in female farmers while seeing a return on that investment, and giving the farmers the financial literacy, education and opportunities they might not have otherwise had access to.

“We want to address the gender gap in Africa by giving access to savings, impact investment and credit to women, regardless of who they are and where they live,” she said.

Today, just over one year after Akinpelu started the company, over 4,000 women are on the Hervest platform.

Earlier this year, Hervest raised a friends and family funding round of $100,000. The company plans to use the capital to add to its nine-person team, strengthen its digital infrastructure and accelerate marketing efforts. It started operations as a distributed company and still mostly operates as one.

Before becoming CEO at Hervest, Akinpelu’s last role was head of marketing for capital market conglomerate Mersitem, and prior to that, she worked in marketing for various financial brands.

The experiences gave her insight into the need to provide more access to financial services for women. And the COVID-19 pandemic and resulting economic crisis, Akinpelu believes, have only emphasized the vulnerability of low-income women.

“This makes financial inclusion ever more critical as a means for women to recover from the global crisis and build resilience in the long term,” she told TechCrunch.

While starting with Nigeria, where Akinpelu says is home to over 57 million working women, Hervest has plans to roll out its platform into other West and East African countries in 2022.

“The problem we’re solving is an African finance gender gap, not just Nigerian,” Akinpelu said.

To get the word out, Hervest has relied on referrals and partnerships with co-operatives and social media. The company has a live app on iOS and Android and recently launched a desktop application.

According to its website, Hervest says that its cooperative members “can earn as high as 25% annualized returns while strengthening the financial capacity of female farmers” through access to capital, trainings and markets. What this means, Akinpelu said, women with disposable income pool funds together as credit (impact investment) for small holder women farmers  as a cooperative.

“In addition, women also get to create automatic savings plan towards their personal goals. Picture an ‘inclusive neobank for women,” she told TechCrunch. “To assure our stakeholders, our funds are held in trust by a trustee firm, FBNQuest Trustees Limited. This is an added layer of accountability and transparency of our funds management.”

By investing in these women, Hervest aims to provide growth opportunities towards specific crops, grain banking, livestock and provision of digitized e-extension services to female small-scale farmers in rural areas.