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Creating a prediction machine for the financial markets

By Walter Thompson
Fayze Bouaouid Contributor
Fayze Bouaouid is co-founder and CEO of financial intelligence application Springbox AI. He has a Master's of Science in Banking and Finance and nearly two decades of experience in banking and asset management.

Artificial intelligence and machine-learning technologies have evolved a lot over the past decade and have been useful to many people and businesses, especially in the realm of finance, banking, investment and trading.

In these industries, there are many activities that machines can perform better and faster than humans, such as calculations and financial reporting, as long as the machines are given the complete data.

The AI tools being built by humans today are becoming another level more robust in their ability to predict trends, provide complex analysis, and execute automations faster and cheaper than humans. However, there has not been an AI-powered machine built yet that can trade on its own.

There are many activities that machines can perform better and faster than humans, such as calculations and financial reporting, as long as the machines are given the complete data.

Even if it was possible to train such a system that could replace human judgment, there would still be a margin of error, as well as some things that are only understandable by human beings. Humans are still ultimately responsible for the design of AI-based prediction machines, and progress can only happen with their input.

Data is the backbone of any prediction machine

Building an AI-based prediction machine initially requires an understanding of the problem being solved and the requirements of the user. After that, it’s important to select the machine-learning technique that will be implemented, based on what the machine will do.

There are three techniques: supervised learning (learning from examples), unsupervised learning (learning to identify common patterns), and reinforcement learning (learning based on the concept of gamification).

After the technique is identified, it’s time to implement a machine-learning model. For “time series forecasting” — which involves making predictions about the future — long short-term memory (LSTM) with sequence to sequence (Seq2Seq) models can be used.

LSTM networks are especially suited to making predictions based on a series of data points indexed in time order. Even simple convolutional neural networks, applicable to image and video recognition, or recurrent neural networks, applicable to handwriting and speech recognition, can be used.

With software markets getting bigger, will more VCs bet on competing startups?

By Alex Wilhelm

This morning I covered three funding rounds. One dealt with the no-code/low-code space, another focused on the OKR software market, and the last dealt with a company in the consumer investing space. Worth a combined $420 million, the investments made for a contentedly busy morning.

But they also got me thinking about startup niches and competition. Back in the days when inside rounds were bad, SPACs were jokes and crypto a fever dream, there was lots of noise about investors who declined to place competing bets in any particular startup market.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


This rule of thumb still holds up today, but we need to update it. The general sentiment that investors shouldn’t back competing companies is still on display, as we saw Sequoia walk away from a check it put into Finix after it became clear that the smaller company was too competitive with Stripe, another portfolio company.

But as startups get more broad and stay private longer, the space into which VCs can invest may narrow — especially if they have a big winner that stays private while building both horizontally and vertically (like Stripe, for example).

Does that mean Sequoia can’t invest elsewhere in fintech? No, but it does limit their investing playing field.

Which is dumb as hell. Nothing that Sequoia could invest in today is really going to slow Stripe’s IPO, unless the company decides to not go public for a half-decade. Which would be lunacy, even for today’s live-at-home-with-the-parents startup culture that leans towards staying private over going public.

As expected, stock trading service Public raises $220M at unicorn valuation

By Alex Wilhelm

The day before Robinhood goes under the the Congressional hammer, domestic rival Public.com announced this morning that it has closed a $220 million funding round at a $1.2 billion valuation. News of the round was first broken by TechCrunch. Further reporting colored in the lines concerning the investment’s size and valuation range.

Confirming the funding news today, Public added a fresh metric to the mix, namely that it has reached one million members – over the course of just 18 months post-launch, the company was quick to point out.

That means that Public’s backers – its latest round was put together by prior investors, including Greycroft, Accel, Tiger Global, Inspired Capital and others – values the company at around $1,200 per current “member.” Whether or not that feels rich, we leave to you to decide.

But with rising interest in the savings and investing space – some data here — and Robinhood’s revenues growing to a run rate of more than $800 million in Q4 2020 and looking even better at the start of 2021, it’s not hard to see why investors are backing Public. It’s even easier if you believe that Robinhood’s brand has undergone material harm from its woes during the GameStop saga.

The pair, along with a host of other fintech services that offer savings and investing products, have been buoyed by a secular shift in banking away from the physical world (in-person shopping, bank branches, plastic cards) to the digital (neo-banks, ecommerce, virtual cards). Robinhood shook up the trading world with zero-cost investing, fitting neatly into the mobile and virtual banking future that is being built. And Public has taken that model a step further by dropping payment for order flow (PFOF), a method revenue generation in which companies like Robinhood get a small fee for sending their users’ trades to one particular market maker or another.

TechCrunch recently joked that it seems like “there is infinite money for stock-trading startups,” in light of the anticipated Public round, which has now has arrived. Let’s see who is next to take home a big check.

Inside Rover and MoneyLion’s SPAC-led public debuts

By Alex Wilhelm

If we are not careful, every entry of this column could consist of SPAC news.

Special purpose acquisition companies, or blank-check companies, whatever you prefer to call them, are enormous business today. But they aren’t the only thing going on, and we’ll get to other things shortly. Consider this an apology for having written about SPACs twice in two days.

Yesterday, we considered the rise of the VC-led SPAC and whether venture capital groups that offer seed-through-SPAC money will wind up with advantage in the market over firms that specialize on any particular startup stage. Sticking to the blank-check theme, this morning we’re looking into two SPAC-led deals, namely those involving Rover and MoneyLion.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


We’re doubling up to prevent more SPAC-related posts. And we’ve selected Rover because Chewy, another pet-themed entity, is an already-public company. As both were venture-backed, we may be able to contrast their trading performance post-debut. Sadly, Chewy is focused on pet e-commerce while Rover is more centered around pet services, but they may prove close enough for some loose comparisons.

And why chat about MoneyLion? Because it’s a heavily venture-backed fintech startup, one that TechCrunch has covered extensively. If its SPAC-assisted vault into the public markets goes well, it could smooth the same path forward for myriad other yet-private fintechs sitting atop a mountain of raised capital.

So this is a SPAC post, but as we’ll largely be looking at the financial health of two companies that we’ve heard about for ages and never got to see inside of, I hope you join me all the same.

We’re starting with the Rover investor presentation, before zipping over to MoneyLion’s own.

Rover

Rover is merging with Nebula Caravel Acquisition Corp., which is affiliated with True Wind Capital. The deal gives Rover an anticipated market cap of around $1.6 billion, with around $300 million in cash on its books.

So, how attractive is this new unicorn? You can find its investor deck here, if you want to read along as we peek.

First up, the company stresses rising use of digital services in the last year thanks to the pandemic and the fact that pet ownership is growing. Both of which are true. We’ve seen the accelerating digital transformation for both companies and consumers. And if you’ve tried to adopt a pet lately, you’ve seen how few are left waiting for forever homes.

With those things behind it, you might be wondering why Rover is pursuing a SPAC-led debut as well. If its market is hot and it has previously raised venture capital, why not just go public via an IPO? Because 2020 was tough on the company.

Revenue dipped from $95 million in 2019 to just $48 million last year. Bookings fell from 4.2 million to 2.4 million over the same time frame, leading to gross booking value falling from $436 million in 2019 to $233 million in 2020. Why? Because everyone was stuck at home. With their pets. A situation that limited demand for Rover-delivered pet services.

Bitcoin briefly breaks the $50,000 barrier as Coinbase’s direct listing looms

By Alex Wilhelm

The hodl-crew are having quite the moment as bitcoin passed the $50,000 mark earlier today for the first time. Data pegs the peak at just over $50,500.

The price of bitcoin, the world’s best-known cryptocurrency, has historically proven a reasonable proxy for consumer interest in the cryptocurrency space, and for trading activity amongst blockchain-based assets. Bitcoin’s price has retreated since the milestone, and is now worth just over $49,000.

Bitcoin has been on a tear this year, rising from around the $30,000 mark at the start of 2021 to its recent $50,000 milestone, a gain or around 66%. Looking back a year and the gains are even more impressive, with the price of bitcoin rising from around $10,000 a year ago to its current price, a gain of 400%.

Luckily for investors and believers in other decentralized tokens, it’s not just bitcoin that is enjoying a valuation updraft. Cardano, one of the most highly-valued blockchain assets, is up around 28% in the last week according to CoinMarketCap. Its total value is nearing the $8 billion mark.

Companies built atop the burgeoning cryptocurrency space could be enjoying a boom as the price of bitcoin advances; as trading activity and consumer interest tend to rise along with the price of bitcoin, and companies like Coinbase make money from trading activity and consumer use, 2021 is starting off strongly.

Coinbase has filed to go public, and intends to pursue a direct listing in short order.

What’s driving the price of bitcoin and its sister-tokens up in the short-term? In a market melt-up its hard to point fingers with any accuracy. But broadly speaking if it feels that nearly every asset class is setting new all-time records, so why not bitcoin as well?

After pausing the business, Fronted finally launches to offer loans to cover rent deposits

By Steve O'Hear

Fronted, the London-based fintech aiming to make life easier for renters, including lending the cash needed for a deposit, has finally launched.

In March, its founders took the decision to “hibernate” the nascent business after the first lockdown and with the pandemic taking hold. But, now with regulatory approval from the FCA and rents falling in London, the startup is officially opening.

“We had a lot of great momentum and then when lockdown came it was like getting headshot from across the map,” Fronted co-founder and CEO Jamie Campbell tells me. “It was when we heard that people weren’t able to move [that] we knew it would be impossible to find early testers for the product and that is when we decided to look at different options. We knew lockdown would delay launching and the furlough scheme gave us options and time. In the end, it was an easy decision and, looking back, it was the right one”.

Founded by Campbell, Simon Vans-Colina and Anthony Mann — former employees at Bud, Monzo and Apple, respectively — and backed by Passion Capital, Fronted is using open banking and other financial technology to offer a credit product designed to finance deposits directly. The pitch is that Fronted can lend more cheaply than existing options, such as credit cards, pay-day lenders and overdrafts, or insurance-backed membership schemes. And, crucially, at lower risk.

“Renting sucks — anyone who rents knows it,” Campbell told me last year. “There are so many problems to solve and we intend to tackle them all bit by bit. But first, we are going to pay people’s rent deposits for them so they can pay us back in bite-size manageable amounts”.

To be able to apply for a Fronted rental deposit loan, you’ll need to be U.K. citizen, have a bank account with more than six months of transaction data and minimum income of £12,000. You are then asked to securely link your bank account data to Fronted via open banking, in order to assess your affordability beyond a simple credit score.

“We believe [this] is a fairer way to determine whether or not someone qualifies for a deposit from us,” explains Campbell. “We are confident we are launching with a fair approach. We don’t, for instance, turn people away who are on benefits or furloughed”.

Fronted loans last 12 months and carry a 12.5% interest rate. However, there are no early repayment fees. Once a loan is agreed, the startup sends the money directly to the estate agent to be placed in the U.K.’s Deposit Protection Scheme, meaning that the loan never touches the renter’s hands (or wallet).

Meanwhile, the timing looks good. Fronted says that 60% of all renters have no savings and are therefore not in a great position to move. Meanwhile, rents are falling as much as 12% in London, meaning that renters could save huge amounts of money simply by moving.

“Deposits are a huge impediment to social mobility; the amount of people who don’t move because they don’t have the money on hand is staggering,” adds the Fronted CEO, noting customers don’t just include those that have already found a place, but also those who are still looking.

“People who haven’t found a place, they are coming to us to see what deposit they could get and then going to find a property… For those people, we give them a maximum which is valid for 30 days so they can shop around knowing they have Fronted in their back pocket”.

Multiplayer fintech, and the muddled world of startup data

By Natasha Mascarenhas

There’s always a fintech angle, even on Valentine’s Day.

This week, I covered Zeta, a new startup working on joint finances for modern couples. It aims to take away the money chores of a relationship, from splitting the bill at dinner to requesting rent through a payment app every month.

Aditi Shekar, the co-founder, gave me some notes about why the ongoing popularity of Venmo is validation for the company, instead of competition.

Here’s what I learned:

The success of Zeta hinges on the idea that people want to share their finances in an ongoing and meaningful way, and that the world of finance is ready to shift from individualism to collectivism earlier and louder. It sounds daunting, but we already know that social finance is big, as shown by apps like Venmo and Splitwise, and phenomena like the GameStop saga from just a few weeks ago.

Other startups have taken notice too, entering the world of multiplayer fintech, a term that categorizes socially focused and consumer-friendly financial services. Braid, a group-financing platform, is trying to make transactions work for various entities, from shared households to side hustles to creative projects.

Money is emotional and complex, and the opportunity within the multiplayer fintech reflects just that. The next wave of products will be able to straddle the line of comfort to successfully get adoption, and cultural shift to successfully deliver a truly collaborative cash experience.

(And in case that wasn’t enough Valentine’s Day content for you, here’s one more piece about a new dating app for gamers).

In the rest of this newsletter, we’ll talk about the new career path to CEO, our favorite startups from Techstars Demo Day and the latest SPAC you should probably know about. As always, you can find me on Twitter @nmasc_ or e-mail me at natasha.m@techcrunch.com. Want this in your inbox each week? Sign up here.

Data on startups is dreadful

Data about startups is helpful to understand directional trends and how the flow of capital works and changes over time. But as ventures as an asset class grows and the documentation around raises gets thornier, the data can sometimes be missing a big chunk of what’s actually happening on the scenes.

Here’s what to know per Danny Crichton and Alex Wilhelm: PSA: most aggregate VC trend data is garbage and Are SAFEs obscuring today’s seed volume are two pieces that explain some of the reasons why the numbers might be flawed today. The good news is that the government is also in the dark about funding data; the bad news is that without good tracking, we don’t know how progress is being made.

Etc: Shameless plug for you to tip us on Secure Drop, TechCrunch’s submission system for any news you think is important to share. You can stay anonymous.

Image via Getty Images / Sadeugra

The new CEO

Amazon founder and CEO Jeff Bezos announced weeks ago that he was shifting into an executive chairman role and AWS CEO Andy Jassy would take over as chief executive. In this analysis, our enterprise cloud reporter Ron Miller explores the question: is overseeing cloud operations the new path to CEO?

Here’s what to know, per Andrew Bartels, an analyst at Forrester Research:

“In both cases, these hyperscale business units of Microsoft and Amazon were the fastest-growing and best-performing units of the companies. [ … ] In both cases, cloud infrastructure was seen as a platform on top of which and around which other cloud offerings could be developed,” Bartels said. The companies both believe that the leaders of these two growth engines were best suited to lead the company into the future.

Etc: Ember names former Dyson head as consumer CEO as the startup looks beyond the smart mug, and Monzo, the British challenger bank nearing 5 million customers, has recruited a new US CEO.

AWS CEO Andy Jassy and Microsoft CEO Satya Nadella

Image Credits: Amazon / Microsoft

A triple-hitter Demo Day

TechCrunch covered favorites from Techstars’ three Demo Days, which were focused on Chicago, Boston and workforce development. Make sure to dig into the startups yourself to form your own opinions, but if you care what stood out to us, here’s what we ended up with.

Here’s what to know: The reason I love Demo Days is that it’s a fast way to understand what the next wave of startups and entrepreneurs are thinking about. In this year’s cohorts, we saw an exclusive sneaker marketplace, flexible life insurance and a part-time childcare platform that helps parents cover random gaps in their childcare schedule.

Etc: Without desks and a demo day, are accelerators worth it?

Image Credits: Paper Boat Creative (opens in a new window) / Getty Images

Public markets fly high

Archer Aviation, the electric aircraft startup targeting the urban air mobility market, is teaming up with United Airlines to become a publicly traded company via, you guessed it, a SPAC.

Here’s what to know per Kirsten Korosec, our transportation editor:

The agreement to go public and the order from United Airlines comes less than a year after Archer Aviation came out of stealth. Archer was co-founded in 2018 by Adam Goldstein and Brett Adcock, who sold their software-as-a-service company Vettery to The Adecco Group for more than $100 million. The company’s primary backer was Lore, who sold his company Jet.com to Walmart in 2016 for $3.3 billion. Lore was Walmart’s e-commerce chief until January.

Etc: Bumble priced and Nigeria’s IROKO plans to go public on the London Stock Exchange.

Use cloud foam to dollar sign

Around TC

Across the week

Seen on TechCrunch

Seen on Extra Crunch

@Equitypod: Does SoftBank have 20 more DoorDashes?

SoftBank earnings always give key insights about how a heavyweight in venture capital is performing (and the bonanza always comes with a healthy share of content and memes). This week on Equity, we couldn’t resist nerding out about it:

Of course, if SoftBank isn’t your jam, there was a whole host of other news we chatted about, from Reddit’s latest raise to DoorDash buying a salad robot. Listen here.

Until next week,

N

 

The only take about the future of media is that media is the future

By Alex Wilhelm

Hello and welcome back to Equity, TechCrunch’s venture-capital-focused podcast, where we unpack the numbers behind the headlines.

This week we — Natasha and Danny and Alex and Grace — had more than a little to noodle over, but not so much that we blocked out a second episode. We try to stick to our current format, but, may do more shows in the future. Have a thought about that? equitypod@techcrunch.com is your friend and we are listening.

Now! We took a broad approach this week, so there is a little of something for everything down below. Enjoy!

Like we said, it’s a lot, but all of it worth getting into before the weekend. Hugs from the team, we are back early Monday.

Equity drops every Monday at 7:00 a.m. PST and Thursday afternoon as fast as we can get it out, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts.

Digital securities platform iSTOX closes $50 million Series A to make private equity accessible to more investors

By Catherine Shu

Oi Yee Choo, chief commercial officer of digital securities platform iSTOX

Oi Yee Choo, chief commercial officer of digital securities platform iSTOX

iSTOX, a digital securities platform that wants to make private equity investment more accessible, has added new investors from Japan to its Series A round, bringing its total to $50 million. Two of its new backers are the government-owned Development Bank of Japan and JIC Venture Growth Investments, the venture capital arm of Japan Investment Corporation, a state-backed investment fund.

Other participants included Juroku Bank and Mobile Internet Capital, along with returning investors Singapore Exchange, Tokai Tokyo Financial Holdings and Hanwha Asset Management.

Founded in 2017 and owned by blockchain infrastructure firm ICHX, iSTOX’s goal is to open private capital opportunities, including startups, hedge funds and private debt, that are usually limited to a small group of high-net-worth individuals to more institutional and accredited investors. (It also serves accredited investors outside of Singapore, as long as they meet the country’s standards by holding the equivalent amount in assets and income.) iSTOX’s allows users to make investments as small as SGD $100 (about USD $75.50) and says it is able to keep fees low by using blockchain technology for smart contracts and to hold digital securities, which makes the issuance process more effective and less costly.

iSTOX’s Series A round was first announced in September 2019, when the company said it had raised an undisclosed amount from Thai investment bank Kiatnakin Phatra Financial Group while participating in the Monetary Authority of Singapore (MAS) FinTech Regulatory Sandbox. The Singaporean government has been especially supportive of blockchain technology, launching initiatives to commercialize its use in fintech, data security, logistics and other sectors.

iSTOX completed the sandbox program in February 2020, and was approved by the MAS for the issuance, custody and trading of digitized securities. The new funding will be used for geographical expansion, including in China, where it already has an agreement in the city of Chongqing, and Europe and and Australia, where it is currently working on issuance deals. iSTOX also plans to add new investment products, including private issuances that investors can subscribe to in “bite-size portions.”

In a press statement, iSTOX chief commercial officer Oi Yee Choo said, “Capital markets are transforming rapidly because of advancements in technology. The regulator MAS and our institutional investors have been far-sighted and progressive, and they support the change wholeheartedly.”

The company is among several Asia-based fintech platforms that want to democratize the process of investing. For retail investors, there are apps like Bibit, Syfe, Stashaway, Kristal.ai and Grab Financial’s investment products.

Since iSTOX works with accredited and institutional investors, however, its most direct competitors include the recently-launched DBS Digital Exchange, which is also based in Singapore. iSTOX’s advantage is that it offers more kinds of assets. Right now, it facilitates the issuance of funds and bonds, but this year, it will start issuing private equity and structured products as well. The company’s securities are also fully digitized, which means they are created on the blockchain, instead of being recorded on the blockchain after they are issued, which means iSTOX is able to offer faster settlement times.

Fintech startup Vise brings on Andrew Fong (formerly Dropbox) as CTO

By Jordan Crook

Vise, a fintech firm that focuses on helping financial advisors rather than automating them out of existence, has today announced that its bringing on Andrew Fong as its Chief Technology Officer.

Fong hails from Dropbox, where he served as VP of Infrastructure Engineering. He actually started out as a Site Reliability Engineer at Dropbox back in 2012 climbing the ranks to Engineering Director, and then Senior Director of Engineering – Head of Infrastructure before becoming to vice president.

Before Dropbox, Fong was an engineer at YouTube and Aol.

Vise brought on Fong to scale up its technical team following its most recent fundraise, a $45 million in Series B led by Sequoia Capital. In total, Vise has raised $63 million since launching on the TC Disrupt stage in 2019.

You can check out the video of their demo here.

Vise uses AI to support financial advisors in their relationships with clients, giving them the ability to justify and explain (with data) the reason for making this or that investment, as well as the ability to customize a portfolio quickly.

Top of mind for Fong is scaling up the engineering department from 20 people to 75 by the end of the year, and Fong explained that diversity, equity and inclusion must be front and center in that endeavor.

“Vise is in the early stages of building out its engineering organization,” Fong told TechCrunch. “It’s imperative that we weave in DEI as a first principle to our recruiting at this stage and ensure we are maturing our processes with DEI in mind.”

At Dropbox, Fong started out as a team leader building a team of 40 and by the time he left, led a team of more than 250 people. He explained that he learned a lot during that 8+ year period, and made a lot of mistakes, and was eager to see how that knowledge could be reapplied at a different firm.

“What would it be like to do this again with the knowledge I have now?” asked Fong. “What things would I do differently? How would I improve upon it? How can I actually take that knowledge and leverage it in a way that helps others in the industry or my peers at Vise? Can I provide a perspective that they don’t necessarily have today?”

Fong was first connected with Vise while he was still at Dropbox. He spoke to Vise cofounder Runik Mehrotra on an explanatory call, and remembers feeling like no matter where his path took him, he wanted to stay connected to Mehrotra and Vise.

“This is somebody that just has something about him,” he said of Mehrotra. “There’s just like an ‘it’ factor that made me feel like I wanted to work with him.”

Fong says that recruiting during COVID, with extremely limited face-to-face contact, is one of the biggest challenges ahead for both himself and Vise in general.

Singapore-based Volopay raises $2.1 million seed round to build a “financial control center” for businesses

By Catherine Shu

Volopay, a Singapore-based startup building a “financial control center” for businesses, announced today it has raised $2.1 million in seed funding. The round was led by Tinder co-founder Justin Mateen, and included participation from Soma Capital, CP Ventures, Y Combinator, VentureSouq, the founders of Razorpay, Antler and other angel investors.

The funding will be used on hiring, product development, strategic partnerships and Volopay’s international expansion. It plans to launch operations in Australia later this month. The company currently has about 100 clients, including Smart Karma, Dathena, Medline, Sensorflow and Beam.

Launched in 2019 by Rajith Shaiji and Rajesh Raikwar, Volopay took part in Y Combinator’s accelerator program last year. It was created after chief executive officer Shaji, who worked for several fintech companies before launching Volopay, became frustrated by the process of reconciling business expenses, especially with accounting departments located in different countries. Shaiji and Raikwar also saw that many companies, especially startups and SMEs, struggled to track different kinds of spending, including subscriptions and vendor payments.

Most of Volopay’s clients are in the tech sector and have about 15 to 150 employees. Volopay’s platform integrates multicurrency corporate cards (issued by Visa Corporate), domestic and international bank transfers, automated payments and expense and accounting software, allowing companies to save money on foreign exchange fees and reconcile expenses more quickly.

In order to speed up its development, Volopay integrated Airwallex’s APIs. Its corporate cards offer up to 2% cash back on software subscriptions, hosting and international travel, which Volopay says are the three top expense categories for tech companies, and it in November 2020, it launched a credit facility for corporate cards to help give SMEs more liquidity during the COVID-19 pandemic.

Compared to traditional credit products, like credit cards and working capital loans, Shaji said Volopay’s credit facility, which is also issued by Visa Corporate, has a more competitive fixed-free pricing structure that depends on the level of credit used. This means companies know how much they owe in advance, which in turn helps them manage their cashflows more easily. The average credit line provided by Volopay is about $30,000.

Since TechCrunch last covered Volopay in July 2020, it has grown 70% month on month in terms of total funds flowing through its platform, Shaji said. It also launched two new features: A bill pay feature that allows clients to transfer money domestically and internationally with low foreign exchange rates and transaction fees, and the credit facility. The bill pay feature now contributes about 40% to Volopay’s total payment volume, while the credit product makes up 30% of its card spending.

Shaji told TechCrunch that Volopay decided to expand into Australia because because not only is it a much larger market than Singapore, but “SMEs in Australia are very comfortable using paid digital software to streamline internal operations and scale their businesses.” He added that there is currently no other provider in Australia that offers both expense management and credit to SMEs like Volopay.

Updated to add Antler as an investor.

Stay gold, ‘Plaid for X’ startups

By Natasha Mascarenhas

A failed acquisition usually triggers the same series of questions: What does this mean for early-stage startups in the sector? Will a chilling effect occur and hurt valuations? Will VCs stop funding this category? How will the exit environment look going forward?

This week gave that narrative a bullish twist. Visa and Plaid announced that they have reached a mutual agreement to no longer pursue a merger. The $5.3 billion deal had been under antitrust scrutiny from the DOJ, and eventually ended amid these regulatory challenges.

Fintech VCs and startups alike reacted to the fallen deal with aggressive optimism about Plaid’s future as an independently-owned fintech startup.

The most common arguments?

  • Plaid’s price in this current moment is far beyond $5.3 billion, so now that it is a free bird it will pursue a much larger exit
  • Plaid will go public through SPAC because it is in charge of its own destiny.
  • And my favorite: One day, Plaid will buy Visa.

In an interview with TechCrunch, Plaid CEO Zach Perret wouldn’t give too many details on the future (and whether a SPAC is involved), but he did say he has new ‘clarity’ going forward.

The fact that fintech is bullish on the future of fintech isn’t quite surprising. I will say that while one deal can never make or break a sector, a flopped merger certainly can surface the current temperature in the market. Startups Weekly readers will remember last week’s edition about how P&G’s decision not to acquire Billie could hurt DTC exit opportunities. Fintech seems unbothered and, in fact, celebratory. The only counterargument I got, via Twitter DM, is that it could set a bad precedent on big fintech mergers.

“Or maybe…corporations learn from this and look to make riskier acquisitions earlier in a company’s lifecycle because they know that if they let the company get too big they’ll lose the chance,” Rami Essaid, founder of Finmark, told me.

Only in 2021 could a $5.3 billion break-up and a DOJ investigation be considered a blessing. Rock on, ‘Plaid for X’ startups.

Before we go on, make sure to follow me on Twitter for my bad jokes and early-stage startup coverage. You can also always reach me at natasha.m@techcrunch.com.

Columbus is the new Miami which is new the San Francisco

I hope that sub-hed gave you a headache, because that’s exactly what debates about where the best place to start a company do to me. The rise of Work From Anywhere has emboldened VCs to leave San Francisco for markets such as Miami or Austin in search of the next unsung hero of their portfolios.

For investors, though, the financial benefit of moving to an emerging market might not be apparent within months, but instead years. Venture is a long game (at least most of the time).

Here’s what to know, per Silicon Valley editor Connie Loizos: Drive Capital, a venture capital firm based in Columbus, Ohio, and started by two ex-Sequoia investors now has over $1.2 billion in assets. But before it had breakout companies like Root and Olive AI, Drive had to play the unusual role of investing in a region without key investing infrastructure.

Etc: Founding partner Chris Olsen explained how they set up their roots:

“We’ve had to spend a lot of time going into the universities and putting new seed managers in business and helping them fundraise and sort of building all of this infrastructure from scratch so that the next entrepreneur is out here [versus moves away], and it works. In our first year, we had inbound interest from 1,800 [startups], then it went to about 3,000 and now it’s up to about 7,000, which is more than I’ve heard any other venture firms say that they see in California. And I don’t think it’s because we’re great. I think that’s more [a reflection of the] scale of the opportunity that’s here now. One of the things that we would love to see more of is more venture capitalists coming here, because there’s certainly more opportunity than we can invest in.”

Ideal paper world powered with alternative wind and solar energy. environmental concept.

Image Credits: Paula Dani/ABlse (opens in a new window) / Getty Images

The CFO Tech Stack

If you want to start a company, go to a startup and look where employees are still using an Excel sheet. The best products are the ones fueled by frustrations, right?

Here’s what to know per managing editor Danny Crichton: For a trio of Palantir alums, 15 collective years at the now-public government tech company showed a huge gap in technology for CFOs. So, they started Mosaic, a techstack to help financial officers better communicate and perform their jobs.

Etc: Co-founder Bijan Moallemi describes the mistake other platforms are making:

“Everyone wants to be strategic, but it’s so tough to do because 80% of your time is pulling data from these disparate systems, cleaning it, mapping it, updating your Excel files, and maybe 20% of [your time] is actually taking a step back and understanding what the data is telling you.”

GettyImages 946391800

Image via Getty Images / alashi

The future of consumer hardware startups beyond Peloton

Are wearables still exciting? Is consumer hardware ever going to get easier to pull off? What was the strategy that made Peloton so successful?

These questions and more are answered in the latest consumer hardware-focused Extra Crunch Survey, which brings together VCs from SOSV, Lux Capital, Shasta Ventures, and more.

Here’s what to know: Everyone is studying the Peloton success recipe. But the big question for consumer hardware startups is if the at-home fitness market’s boom is translating to other use cases.

Etc: Cyril Ebersweiler of SOSV noted that supply chain distribution disruption during COVID-19 has been difficult for category startups, but the need for innovative solutions has never been more clear.

“Everybody is waiting for new and mind-blowing experiences, and I guess we’ve all experienced the shortcomings or the magic of some IoT products over the shelter-in-place [orders]. Spatial and ambient technologies that work well will be in demand (audio or visual), while “holographic Skype” will invade households thanks to Looking Glass.”

Also: In another investor survey, five VCs weighed in on the future of cannabis in 2021.

3D render, visualization of a man holding virtual reality glasses, electronic device, head surrounded by virtual data with neon green grid. Player one ready for the VR game. Virtual experience.

Pop goes the public market

We had yet another noisy week of privately-held startups going public to a Very Warm Wall Street reception. The most opulent story of the week was definitely Affirm’s debut, which doubled its already-increased price when it started to officially trade.

Here’s what to know, per our resident IPO reporter Alex Wilhelm, who writes The Exchange:

Etc:

GettyImages 1155292858

NEW YORK, NEW YORK – JUNE 11: PayPal Co-Founder & Affirm CEO Max Levchin visits “Countdown To The Closing Bell” at Fox Business Network Studios on June 11, 2019 in New York City. (Photo by John Lamparski/Getty Images)

Around TechCrunch

Extra Crunch Live is returning in a big way in 2021. We’ll be interviewing VC/founder duos about how their Series A deals went down, and Extra Crunch members will have the chance to get live feedback on their pitch deck. You can check out our plans for ECL in 2021 right here, or hit up this form to submit your pitch deck. Episodes air every Wednesday at 3pm ET/12pm PT starting in February.

And if you’re feeling extra generous, take this survey to help shape the future of TechCrunch

Across the week

Seen on TechCrunch

Glassdoor: Best tech companies to work for in 2021

Signal’s Brian Acton talks about exploding growth, monetization and WhatsApp data-sharing outrage

Two-year-old NUVIA sells to Qualcomm for $1.4 billion

Loop launches out of stealth to make auto insurance more equitable

Nuclear fusion tech developer General Fusion now has Shopify and Amazon founders backing it

Seen on Extra Crunch

Lessons from Top Hat’s acquisition spree

12 ‘flexible VCs’ who operate where equity meets revenue share

Dear Sophie: What’s the new minimum salary required for H-1B visa applicants?

Equity (and a bonus Equity)

The news keeps coming so we keep recording. This week, the trio chatted about the Plaid-Visa deal, but also about the Palantir mafia‘s next big bet. In early-stage news, I covered a fintech accelerator that pivoted into an edtech accelerator and a new startup coming out of Austin that makes car insurance more equitable. We also debated SPACs for a bit, and Danny was…optimistic?

Listen to our episode, follow the pod on Twitter, and if you so please, tune into our bonus Equity episode that just came out today. It’s an episode dedicated entirely to the barrage of payments and e-commerce funding that came out this week.

Until next week,

Natasha 

Plaid CEO touts new ‘clarity’ after failed Visa acquisition

By Alex Wilhelm

Yesterday, we spoke with Plaid CEO and co-founder Zach Perret after news broke that Visa no longer plans to buy his company for $5.3 billion.

The deal was heralded in early 2020 as a sign of the growing importance of fintech startups. Then it failed to close, eventually running into a lawsuit from the U.S. Department of Justice. A few months later, the acquisition was dropped.

Sentiment in the market changed since the transaction was announced. As TechCrunch reported yesterday, there’s a good deal of optimism to be found amongst investors and others that Plaid will eventually be worth more than the price at which the Visa deal valued it.

What follows is a summary of our conversation with Perret, digging into a number of topics we felt most were pressing in the wake of Plaid’s unshackling.

Now what?

First and upfront: it does not appear that Plaid is racing to the public markets via a blank-check company, or SPAC, a question several readers asked on Twitter. Our impression from our chat regarding near-term liquidity via the public markets is that those with their hopes up have them up a few years too early.

TechCrunch asked Perret how it feels to be free from his erstwhile corporate boss.

He said that the last few years have been a “rollercoaster,” adding that when they made the choice to sell, it made sense at the time from mission, and delivery perspectives — Visa wanted to accomplish similar things and could give his company access to a wide network of potential customers.

Upgrade launches checking accounts and debit cards

By Romain Dillet

Fintech startup Upgrade has been positioning itself as a neobank. And yet, the company has mostly been focused on personal loans and more recently credit cards. You couldn’t just replace your bank account with Upgrade. Upgrade is adding two important missing pieces of the puzzle with checking accounts and debit cards.

With today’s launch, Upgrade competes more directly with other challenger banks, such as Chime, N26 and others. You can open a checking account, control it from a mobile app, send and receive money from that account.

There are no monthly fees and no minimum account balance. Under the hood, Cross River Bank provides FDIC-insured checking accounts.

You also get a debit card with your checking account. When it comes to ATM withdrawals, Upgrade will reimburse ATM fees for its most loyal customers up to five times a month. You need to maintain a minimum balance or set up direct payroll deposit for that feature.

Debit card payments on subscriptions and common everyday expenses let you earn 2% cash back. Eligible purchases include convenience stores, gas stations, restaurants, food deliveries, etc. Your earn 1% on other debit charges.

Rewards on debit card transactions are somewhat uncommon. Most financial companies focus on credit card rewards as the interchange fees on credit card transactions are much higher. Debit cards don’t generate as much interchange revenue.

“Neobanks in particular cannot pay high rewards (or any rewards at all) on debit cards because the interchange fee is often their only source of revenue,” Upgrade CEO Renaud Laplanche told me in an email.

And interchange fees can add up if you manage to attract millions of customers. According to The Information, Chime generated more than $600 million in revenue last year thanks to interchange fees.

The company still plans to generate the vast majority of its revenue from credit products. “Our strategy is to monetize our base through credit,” Laplanche said.

Upgrade also offers a credit card with 1.5% cash back on all purchases. If, for one reason or another, you can’t pay your monthly balance payment, the company helps you combine monthly charges into installment plans that you can pay back over 24 to 60 months. You pay down your balance at a fixed rate with equal monthly payments. Upgrade customers who use the company’s checking account will get lower rates on Upgrade loans.

You can also get a personal loan from Upgrade without a credit card or a checking account. And maybe you’ll end up discovering Upgrade’s other products after signing up to a personal loan.

Image Credits: Upgrade

Grab Financial Group raises $300 million Series A led by Hanhwa Asset Management

By Catherine Shu

Grab Financial Group said today it has raised more than $300 million in Series A funding, led by South Korean firm Hanhwa Asset Management, with participation from K3 Ventures, GGV Capital, Arbor Ventures and Flourish Ventures.

The Financial Times reports that the funding values Grab Financial, a subsidiary of ride-hailing and delivery giant Grab, at $3 billion. Both K3 Ventures and GGV Capital were early investors in Grab, which was founded in 2012.

Back in February 2020, Grab announced it had raised $856 million in funding to grow its payment and financial services. That news came during speculation that Grab and Gojek, one of it top rivals, were finally getting closer to a merger after lengthy discussions.

But the Grab-Gojek talks stalled, and Gojek is now reportedly in talks to merge with Indonesia e-commerce platform Tokopedia instead. According to Bloomberg, the combined company would be worth $18 billion, making it a more formidable rival to Grab.

In its funding announcement, Grab Financial Group said its total revenues grew more than 40% in 2020, compared to 2019. This driven by strong consumer adoption of services like AutoInvest, an investment platform that allows users to invest small amounts of money at a time through the Grab app and insurance products. Grab Financial announced the launch of several financial products for consumers and SMEs in August 2020.

Usagea of digital financial services by consumers and SMEs in Southeast Asia increased during the COVID-19 pandemic. According to a report published by Google, Temasek and Bain & Company in November, usage of banking apps and online payments, remittances, insurance products and robo-advisor investment platforms all grew in 2020, and the region’s financial services market may be reach $60 billion in revenue by 2025.

A consortium between Grab-Singtel was also among several firms awarded a full digital-banking license by the Monetary Authority of Singapore in December 2020.

In a press statement, Hanhwa Asset Management chief executive officer Yong Hyun Kim said, “We expect GFG to continue its expontential growth on the back of an innovative business model which supports the changing broader lifestyle of consumers, as well as its highly synergistic relationship with Grab, the largest Southeast Asian unicorn.”

Adorable Fish Bots Get Schooled in How to Swarm

By Matt Simon
Meet Bluebot, a friendly swimming robot with big camera eyes. Put a few in a tank together and they’ll collaborate to complete surprisingly complex tasks.

Affirm doubles after starting to trade despite strong IPO pricing

By Natasha Mascarenhas

Today shares of Affirm, a buy-now-pay-later unicorn, started trading above $90 per share, far above its $49 per-share IPO price, a figure that was already miles above the company’s early expectations.

The pop comes after Affirm raised its pricing range earlier this week, to $41 to $44 per share, up from an initial range of $33 to $38 per share. To see the company double from its raised price implies strong demand for its shares, a thin float, or both.

Affirm’s explosive debut comes on the heels of similarly strong results from DoorDash, C3.ai and Airbnb. Those companies’ debuts were so strong that Roblox delayed its IPO, later swapping a traditional IPO for a direct listing to get around the pricing issue.

Today’s IPO shows that the same dynamics that were at play in those IPOs have persisted into 2021. More public debuts are expected in Q1, including Coinbase, another well-known unicorn. Other names like Robinhood, Bumble and others are in the wings.

Affirm’s first-day performance will certainly raise eyebrows from regular critics of the traditional IPO process. But the company did raise more money than it perhaps anticipated, and is having a raucous first-day’s trading, so it’s hard to fret too much for the company. If its share price is still as high in a month as it is today, perhaps it was as underpriced as some will claim.

Fintech

Affirm’s pricing brings a green splash to a busy week for fintech giants. Yesterday, Visa’s $5.3 billion acquisition of Plaid failed to go through due to regulatory concerns. While the fallen deal could have a chilling effect on fintech startups, Plaid told TechCrunch that it saw 60% customer growth in 2020, bringing it to more than 4,000 clients. Plaid’s next step, per many in the VC and tech community, will be even bigger than its once-planned $5.3 billion dollar exit.

Some tweets here to give you a sense of the momentum around fintech right now:

Imo, give a few years, they'll acquire Visa.

— Shani Majer (@ClicWill2) January 12, 2021

January of 2021 feels not very much different from January of 2020 for fintech

Funding rounds announced by Blend, Mx (Utah!), Modern Treasury, Relay Payments (Atlanta!), Rapyd Payments, Checkout, Curve, Rho, Reggora etc

Plaid news! Affirm IPO! Walmart-Ribbit!

— Sar Haribhakti (@sarthakgh) January 13, 2021

Crazy week in fintech, but it’s only Wednesday….
💔@Plaid / @Visa Breakup
🛒@Walmart getting into fintech
🛍@Affirm pricing at ~$15B
🌪@blendlabsinc raising $300m @ $3.3B
Ⓜ@mX raising $300m
🏃‍♂️@RapydPayments raising $300m @ $2.5B
🚛Relay Payments raising $43mm

— ashleypaston (@ashleypaston) January 13, 2021

Affirm’s pop and Plaid’s forward-looking attitude show that the exit market for fintech feels both optimistic and energetic.

Indonesian investment platform Ajaib gets $25 million Series A led by Horizons Venture and Alpha JWC

By Catherine Shu

Ajaib Group, an online investment platform that says it now runs the fifth-largest stock brokerage in Indonesia by number of trades, announced it has raised a $25 million Series A led by Horizons Ventures, the venture capital firm founded by Li Ka-Shing, and Alpha JWC. Returning investors SoftBank Ventures Asia, Insignia Ventures and Y Combinator also participated in the round, which was made in two closes.

Founded in 2019 by chief executive officer Anderson Sumarli and chief operating officer Yada Piyajomkwan, Ajaib Group focuses on millennials and first-time investors, and currently claims one million monthly users. It has now raised a total of $27 million, including a $2 million seed round in 2019.

Stock investment has a very low penetration rate in Indonesia, with only about 1.6 million capital market investors in the country, or less than 1% of its population (in comparison, about 55% of Americans own stocks, according to Gallup data).

The very low penetration rate, coupled with growing interest in the capital market among retail investors during the pandemic, has spurred VC interest in online investment platforms, especially ones that focus on millennials. Last week, Indonesian investment app Bibit announced a $30 million growth round led by Sequoia Capital India, while another online investment platform, Bareksa, confirmed an undisclosed Series B from payment app OVO last year.

Ajaib Group’s founders said it differentiates as a low-fee stock trading platform that also offers mutual funds for diversification. Bibit is a robo-advisor for mutual funds, while Bareksa is a mutual fund marketplace.

In an email, Sumarli and Piyajomkwan told TechCrunch that the stock investment rate is low in Indonesia because it is typically done by high net-worth individuals who use offline brokers and can afford high commissions. Ajaib Group was launched in 2019 after Sumarli became frustrated by the lack of investment platforms in Indonesia where he could also learn about stock trading.

Inspired by companies like Robinhood in the United States and XP Investimentos in Brazil, Ajaib Group was created to be a mobile-first stock trading platform, with no offline brokers or branches. It appeals to first-time investors and millennials with a simple user interface, in-app education features and a community where people can share investment ideas and low fees.

Since people prefer to invest small amounts when trying out the app for the first time, Ajaib requires no minimums to open a brokerage account. Piyajomkwan said “we typically see investors triple their investment amount within the second month of investing with Ajaib.”

Ajaib Group’s platform now includes Ajaib Sekuritas for stock trading and Ajaib Reksadana for mutual funds. The company says that Ajaib Sekuritas became the fifth-largest stock brokerage in Indonesia by number of trades just seven months after it launched in June 2020.

The Indonesian government and Indonesia Stock Exchange have launched initiatives to encourage more stock investing. Some of Ajaib Group’s Series A will be used for its #MentorInvestai campaign, which works with the government to educate millennials about investing and financial planning. The round will also be spent on expanding Ajaib’s tech infrastructure and products, and to hire more engineers.

Ajaib may eventually expand into other Southeast Asian markets, but for the near future, it sees plenty of opportunity in Indonesia. “Ajaib was built with regional aspiration, having two founders from the two biggest capital markets in Southeast Asia, Indonesia and Thailand,” Piyajomkwan said. “But for the immediate term, we are focused on Indonesia as investment penetration is still low and there are many more millennial investors we can serve.”

 

What’s going on with fintech venture capital investment?

By Alex Wilhelm

Over the next few weeks, the venture capital industry will compile and release data concerning its Q4 2020 performance, capping a year that saw the world of private capital freeze, thaw and burn.

But we can get a peek at a critical part of the VC universe early, thanks to a preview of global fintech investment results from CB Insights. The dataset deals with worldwide investments into fintech companies from the start of October through December 12th.


The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.


Given that the last two weeks of the year are not famous for productivity, the dataset we have should prove representative for this critical slice of the venture capital market. (For our look at the third-quarter fintech VC market, head here.)

To be honest, I didn’t plan on writing up this data when I first dug into it; I was prepping for later releases, hoping to ground myself ahead of the full numbers. However, the collected results aligned with several themes that cropped up during 2020, making it a representative capstone of sorts concerning the year’s venture capital market. So it was too interesting to not unpack.

What happened to fintech venture capital investment in Q4 and 2020? Some startup stages and regions did well, but amidst the good news, one of the hotter domestic segments of startup land is not set to have a good global year. Let’s get into the numbers.

A final warning: although these results are missing a few weeks’ worth of inputs, we believe these numbers will prove more than directionally accurate when all results are tallied and released by the various organs of venture data tracking.

North America and Europe shine, Asia falls

Using numbers that include projections for the rest of 2020, it’s clear that the fintech venture capital world is not equally distributed. If you are reading this in the United States, for example, or the UK, you might be surprised to learn that CB Insights expects global fintech venture capital deal and dollar volume to fall in 2020. Surely not, with all the neobank and trading-platform deals we saw?

Yes, actually, because while fintech investment has risen in dollar terms in both North America and Europe, huge declines in Asia have overshadowed results in the other two regions. Here’s the clip of the preview chart:

Via CB Insights

Venmo adds a check-cashing feature, waives fees for stimulus checks

By Sarah Perez

Venmo this morning announced it will begin to offer a new check-cashing service, “Cash a Check,” in the Venmo mobile app. The feature, which is being rolled out to select users starting today, can be used to cash printed, payroll and U.S. government checks, including the new stimulus checks, the company says. Though typically there will be fees associated with the Cash a Check feature, Venmo says these are being waived on stimulus funds for a limited time.

To be eligible to use Cash a Check, Venmo customers will need to have either Direct Deposit or a Venmo Debit Card enabled on their account, location services turned on, and a verified email address.

Customers who gain access to the feature will then be able take a picture of their endorsed check and send it to the Venmo app to review, much like they would if cashing a check in a mobile banking app. The check will be reviewed in a few seconds, though in special circumstances, the review may take several minutes or even up to an hour before the approval decision is made.

If approved, the money will be immediately transferred to the customer’s Venmo account.

Venmo will temporarily waive fees on stimulus checks rolling out now and over the next couple of weeks, but eventually 1% fees will apply to any government or payroll check cashed in the app with a pre-printed signature, with a minimum fee of $5.00. Other checks, including hand-signed payroll and government checks, will have a 5% check-cashing fee, or $5.00 minimum, according to PayPal’s terms.

At launch, the Cash a Check service is provided by partners First Century Bank, N.A. and Ingo Money, Inc. Ingo Money already offers a similar feature to Venmo parent company, PayPal, to allow users to cash checks in the PayPal app. 

“We’re always looking for new ways to make it easier for our community to access and manage their money, especially as people continue to experience financial hardships amidst the global pandemic,” said Darrell Esch, Venmo SVP and GM, in a statement about the new service.

“We know that with health and safety top of mind for many, having a safe way to access stimulus payments is essential for many of our customers, especially those who are receiving paper checks and traditionally would have to visit a physical check-cashing location,” he said. “By introducing the Venmo Cash a Check feature, we are not only enabling our customers to access their money quickly and safely from the comfort of their own homes but are also waiving all fees for cashing government-issued checks to ensure customers can use their stimulus funds to pay for the things they need most,” he added.

The company’s move into check cashing doesn’t make the peer-to-peer payment app an alternative to online banking, however. Instead, it serves largely as a way for Venmo to benefit from the influx of stimulus payments that are rolling out now to its U.S. users.

Fintech companies have been scrambling to prove their worth to customers by offering faster and easier access to stimulus payments. Banking startups like Current and Chime, for example, began sending out payments to customers ahead of other traditional banking institutions.

In addition, the stimulus funds can help boost Venmo’s bottom line beyond just the fees it charges. As Venmo users gain access to their stimulus payments or payroll in the app, they may then use that money to make transactions with online merchants or with their Venmo debit card. This transactions allow Venmo to make money through transaction fees, as well.

Venmo said the feature is rolling out now to mobile app users on iOS and Android. The company recommends users download the latest version of the app and update to the latest operating system on their mobile device for the best performance.

❌