Sunday was a big day in fintech: Afterpay has agreed to merge with Square. This agreement sets two of the most admired financial technology companies in recent history on a path to becoming one.
Afterpay and Square have the potential to build one of the world’s most important payments networks. Square has built a very significant merchant payment network, and, via Cash App, a thriving high-growth consumer payment service. However, these two lines of business have historically not been integrated. Together, Square and Afterpay will be able to weave all of these services together into a single integrated experience.
Afterpay and Cash App each have double-digit millions of consumers, and Square’s seller ecosystem and Afterpay’s merchant network both record double-digit billions of payment volume per year. From the offline register and the online checkout flow to sending money in just a few taps, Square and Afterpay will tell a complete story of next-generation economic empowerment.
As Afterpay’s only institutional venture investor, I wanted to share some perspective on how we got here and what this merger means for the future of consumer finance and the payments industry.
Afterpay and Square have the potential to build one of the world’s most important payments networks.
Every five to 10 years, the global payments industry undergoes a critical innovation cycle that determines the winners and losers for the next several decades. The last major transition was the shift to NFC-based mobile payments, which I wrote about in 2015. The major mobile OS vendors (Apple and Google) cemented their position in the global payments stack by deftly bridging the needs of the networks (Visa, Mastercard, etc.) and consumers by way of the mobile devices in their pockets.
Afterpay sparked the latest critical innovation cycle. Conceived in a living room in Sydney by a millennial, Nick Molnar, for millennials, Afterpay had a key insight: Millennials don’t like credit.
Millennials came of age during the global mortgage crisis of 2008. As young adults, they watched their friends and family lose their homes by overextending on mortgage debt, bolstering their already lower trust for banks. They also have record levels of student debt. Therefore, it’s no surprise that millennials (and Gen Z right behind them) strongly prefer debit cards over credit cards.
But it’s one thing to recognize the paradigm shift and quite another to do something about it. Nick Molnar and Anthony Eisen did something, ultimately building one of the fastest-growing payments startups in history on their core product: Buy now, pay later … and never any interest.
Afterpay’s product is simple. If you have $100 in your cart and choose to pay with Afterpay, it will charge your bank card (typically a debit card) $25 every two weeks in four installments. No interest, no revolving debt and no fees with on-time payments. For the millennial consumer, this meant they could get the primary benefit of a credit card (the ability to pay later) with their debit card, without the need to worry about all the bad things that come with credit cards — high interest rates and revolving debt.
All upside, no downside. Who could resist? For the early merchants, virtually all of whom relied on millennials as their key growth segment, they got a fair trade: Pay a small fee above payment processing to Afterpay, get significantly higher average order values and conversions to purchase. It was a win-win proposition and, with lots of execution, a new payment network was born.
Image Credits: Matrix Partners
Afterpay went somewhat unnoticed outside Australia in 2016 and 2017, but once it came to the U.S. in 2018 and built a business there that broke $100 million net revenues in only its second year, it got attention.
Klarna, which had struggled with product-market fit in the U.S., pivoted their business to emulate Afterpay. And Affirm, which had always been about traditional credit — generating a significant portion of their revenue from consumer interest — also noticed and introduced their own BNPL offering. Then came PayPal with “Pay in 4,” and just a few weeks ago, there has been news that Apple is expected to enter the space.
Afterpay created a global phenomenon that has now become a category embraced by mainstream players across the industry — a category that is on track to take a meaningful share of global retail payments over the next 10 years.
Afterpay stands apart. It has always been the BNPL leader by virtually every measure, and it has done it by staying true to their customers’ needs. The company is great at understanding the millennial and Gen Z consumer. It’s evident in the voice, tone and lifestyle brand you experience as an Afterpay user, and in the merchant network it continues to build strategically. It’s also evident in the simple fact that it doesn’t try to cross-sell users revolving debt products.
Most importantly, it’s evident in the usage metrics relative to competition. This is a product that people love, use and have come to rely on, all with better, fairer terms than were ever available to them than with traditional consumer credit.
Image Credits: Afterpay H1 FY21 results presentation
I’ve been building payment companies for over 15 years now, initially in the early days of PayPal and more recently as a venture investor at Matrix Partners. I’ve never seen a combination that has such potential to deliver extraordinary value to consumers and merchants. Even more so than eBay + PayPal.
Beyond the clear product and network complementarity, what’s most exciting to me and my partners is the alignment of values and culture. Square and Afterpay share a vision of a future with more opportunity and fewer economic hurdles for all. As they build toward that future together, I’m confident that this combination is a winner. Square and Afterpay together will become the world’s next generation payment provider.
Shares of Square are up this morning after the company announced its second-quarter earnings and that it will buy Afterpay, an Australian buy now, pay later (BNPL) player in a $29 billion deal. As TechCrunch reported this morning, Afterpay shareholders will receive 0.375 shares of Square in exchange for their existing equity.
Shares of Afterpay are sharply higher after the deal was announced thanks to its implied premium, while shares of Square are up 7% in early-morning trading.
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Over the past year, we’ve written extensively about the BNPL market, usually from the perspective of earnings from companies in the space. Afterpay has been a key data source, along with the yet-private Klarna and U.S. public BNPL outfit Affirm. Recall that each company has posted strong growth in recent periods, with the United States arising as a prime competitive market.
Most recently, consumer hardware and services giant Apple is reportedly preparing a move into the BNPL space. Our read at the time was that any such movement by Cupertino would impact mass-market BNPL players more than niche-focused companies. Apple has a fintech base and broad IRL payment acceptance, making it a potentially strong competitor for BNPL services aimed at consumers; BNPL services targeted at particular industries or niches would likely see less competition from Apple.
From that landscape, let’s explore the Square-Afterpay deal. We want to know what Afterpay brings to Square in terms of revenue, growth and reach. We also want to do some math on the price Square is willing to pay for the company — and what that might tell us about the value of BNPL and fintech revenues more broadly. Then we’ll eyeball the numbers and try to decide if Square is overpaying for Afterpay.
As with most major deals these days, Square and Afterpay released an investor presentation detailing their argument in favor of their combination. Let’s dig through it.
Square is a two-part company. It has a large consumer business via Cash App, and it has a large business division that offers payments tech and other fintech services to corporate customers. Recall that Square is also building out banking services for its business customers and that Cash App also serves some banking and investing functionality for consumers.
It’s no secret that the technology for easy business-to-business payments has not yet caught up to its peer-to-peer counterparts, but Yaydoo thinks it has the answer.
The Mexico City-based B2B software and payments company provides three products, VendorPlace, P-Card and PorCobrar, for managing cash flow, optimizing access to smart liquidity, and connecting small, midsize and large businesses to an ecosystem of digital tools.
Sergio Almaguer, Guillermo Treviño and Roberto Flores founded Yaydoo — the name combines “yay” and “do” to show the happiness of doing something — in 2017. Today, the company announced the close of a $20.4 million Series A round co-led by Base10 Partners and monashees.
Joining them in the round were SoftBank’s Latin America Fund and Leap Global Partners. In total, Yaydoo has raised $21.5 million, Almaguer told TechCrunch.
Prior to starting the company, Almaguer was working at another company in Mexico doing point-of-sale. His large enterprise customers wanted automation for their payments, but he noticed that the same tools were too expensive for small businesses.
The co-founders started Yaydoo to provide procurement, accounts payable and accounts receivables, but in a simpler format so that the collection and payment of B2B transactions was affordable for small businesses.
Image Credits: Yaydoo
The idea is taking off, and vendors are adding their own customers so that they are all part of the network to better link invoices to purchase orders and then connect to accounts payable, Almaguer said. Yaydoo estimates that the automation workflows reduced 80% of time wasted paying vendors, on average.
Yaydoo is joining a sector of fintech that is heating up — the global B2B payments market is valued at $120 trillion annually. Last week, B2B payments platform Nium announced a $200 million in Series D funding on a $1 billion valuation. Others attracting funding recently include Paystand, which raised $50 million in Series C funding to make B2B payments cashless, while Dwolla raised $21 million for its API that allows companies to build and facilitate fast payments.
The new funding will enable the company to attract new hires in Mexico and when the company expands into other Latin American countries. Yaydoo is also looking at future opportunities for its working capital business, like understanding how many invoices customers are setting, the access to actual payments, and how money flows out and in so that it can provide insights on working capital funding gaps. The company will also invest in product development.
The company has grown to over 800 customers, up from 200 in the first quarter of 2020. Its headcount also grew to 100 from 30 during the same time. In the last 12 months, over 70,000 companies have transacted on the Yaydoo network, and total payment volume grew to hundreds of millions of dollars.
Yaydoo is a SaaS subscription model, but the new funding will also enable the company to create a pool of potential customers with a “freemium” offering with the goal of converting those customers into the subscription model as they grow, Almaguer said.
Rexhi Dollaku, partner at Base10 Partners, said the firm saw the way B2B payments were becoming modernized and “was impressed” by the Yaydoo team and how it built a complicated infrastructure, but made it easy to use.
He believes Latin America is 10 years behind in terms of B2B payments but will catch up sooner than later because of the digital transformation going on in the region.
“We are starting to see early signs of the network being built out of the payments product, and that is a good indication,” Dollaku said. “With the funding, Yaydoo will be also able to provide more financial services options for businesses to address a working fund gap.”
With the rise of Open Banking, PSD2 Regulation, insurtech and the whole, general fintech boom, tech investors have realized there is an increasing place for dedicated funds which double down on this ongoing movement. When you look at the rise of banking-as-a-service offerings, payments platforms, insurtech, asset management and infrastructure providers, you realize there is a pretty huge revolution going on.
European fintech companies have raised $12.3 billion in 2021 according to Dealroom, but the market is still wide open for a great deal more funding for B2B fintech startups.
So it’s no surprise that B2B fintech-focused Element Ventures has announced a $130 million fund to double down on this new fintech enterprise trend.
Founded by financial services veterans Stephen Gibson and Michael McFadgen, and joined by Spencer Lake (HSBC’s former vice chairman of Global Banking and Markets), Element is backed by finance-oriented LPs and some 30 founders and executives from the sector.
Element says it will focus on what it calls a “high conviction investment strategy,” which will mean investing in only around a handful of companies a year (15 for the fund in total) but, it says, providing a “high level of support” to its portfolio.
So far it has backed B2B fintech firms across the U.K. and Europe, including Hepster (total raised $10 million), the embedded insurance platform out of Germany which I recently reported on; Billhop (total raised $6.7 million), the B2B payment network out of Sweden; Coincover (total raised $11.6 million), a cryptocurrency recovery service out of the U.K.; and Minna (total raised $25 million), the subscription management platform out of Sweden.
Speaking to me over a call, McFadgen, partner at Element Ventures, said: “Stephen and I have been investing in B2B fintech together for quite a long time. In 2018 we had the opportunity to start element and Spencer came on board in 2019. So Element as an independent venture firm is really a continuation of a strategy we’ve been involved in for a long time.”
Gibson added: “We are quite convinced by the European movement and the breakthrough these fintech and insurtech firms in Europe are having. Insurance has been a desert for innovation and that is changing. And you can see that we’re sort of trying to build a network around companies that have those breakthrough moments and provide not just capital but all the other things we think are part of the story. Building the company from A to C and D is the area that we try and roll our sleeves up and help these firms.”
Element says it also will be investing in the U.S. and Asia.
In a blockbuster deal that rocks the fintech world, Square announced today that it is acquiring Australian buy now, pay later giant Afterpay in a $29 billion all-stock deal.
The purchase price is based on the closing price of Square common stock on July 30, which was $247.26. The transaction is expected to close in the first quarter of 2022, contingent upon certain closing conditions. It values Afterpay at more than 30% premium to its latest closing price of A$96.66.
Square co-founder and CEO Jack Dorsey said in a statement that the two fintech behemoths “have a shared purpose.”
“We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles,” he said in the statement. “Together, we can better connect our Cash App and Seller ecosystems to deliver even more compelling products and services for merchants and consumers, putting the power back in their hands.”
The combination of the two companies would create a payments giant unlike any other. Over the past 18 months, the buy now, pay later space has essentially exploded, appealing especially to younger generations drawn to the idea of not using credit cards or paying interest and instead opting for the installment loans, which have become ubiquitous online and in retail stores.
As of June 30, Afterpay served more than 16 million consumers and nearly 100,000 merchants globally, including major retailers across industries such as fashion, homewares, beauty and sporting goods, among others.
The addition of Afterpay, the companies’ statement said, will “accelerate Square’s strategic priorities” for its Seller and Cash App ecosystems. Square plans to integrate Afterpay into its existing Seller and Cash App business units, so that even “the smallest of merchants” can offer buy now, pay later at checkout. The integration will also give Afterpay consumers the ability to manage their installment payments directly in Cash App. Cash App customers will be able to find merchants and buy now, pay later (BNPL) offers directly within the app.
Afterpay’s co-founders and co-CEOs Anthony Eisen and Nick Molnar will join Square upon closure of the deal and help lead Afterpay’s respective merchant and consumer businesses. Square said it will appoint one Afterpay director to its board.
Shareholders of Afterpay will get 0.375 shares of Square Class A stock for every share they own. This implies a price of about A$126.21 per share based on Square’s Friday close, according to the companies.
Will there be more consolidation in the space? That remains to be seen, and Twitter is all certainly abuzz about what deals could be next. Here in the U.S., rival Affirm went public earlier this year. On July 30, shares closed at $56.32, significantly lower than its opening price and 52-week-high of $146.90. Meanwhile, European competitor Klarna — which is growing rapidly in the U.S. — in June raised another $639 million at a staggering post-money valuation of $45.6 billion.
No doubt the BNPL fight for the U.S. consumer is only heating up with this deal.
PayPal’s plan to morph itself into a “superapp” has been given a go for launch.
According to PayPal CEO Dan Schulman, speaking to investors during this week’s second-quarter earnings call, the initial version of PayPal’s new consumer digital wallet app is now “code complete” and the company is preparing to slowly ramp up. Over the next several months, PayPal expects to be fully ramped up in the U.S., with new payment services, financial services, commerce and shopping tools arriving every quarter.
The company has spoken for some time about its “superapp” ambitions — a shift in product direction that would make PayPal a U.S.-based version of something like China’s WeChat or Alipay or India’s Paytm. Like those apps, PayPal aims to offer a host of consumer services under one roof, beyond just mobile payments.
In previous quarters, PayPal said these new features may include things like enhanced direct deposit, check cashing, budgeting tools, bill pay, crypto support, subscription management, and buy now, pay later functionality. It also said it would integrate commerce, thanks to the mobile shopping tools acquired by way of its $4 billion Honey acquisition in 2019.
So far, PayPal has continued to run Honey as a standalone application, website and browser extension, but the superapp could incorporate more of its deal-finding functions, price-tracking features and other benefits.
On Wednesday’s earnings call, Schulman revealed the superapp would have a few other features as well, including high-yield savings, early access to direct deposit funds and messaging functionality outside of peer-to-peer payments — meaning you could chat with family and friends directly through the app’s user interface.
PayPal hadn’t announced its plans to include a messaging component until now, but the feature makes sense in terms of how people often combine chat and peer-to-peer payments today. For example, someone may want to make a personal request for the funds instead of just sending an automated request through an app. Or, after receiving payment, a user may want to respond with a “thank you,” or other acknowledgment. Currently, these conversations take place outside of the payment app itself on platforms like iMessage. Now, that could change.
“We think that’s going to drive a lot of engagement on the platform,” said Schulman. “You don’t have to leave the platform to message back and forth.”
With the increased user engagement, the company expects to see a bump in average revenue per active account.
Schulman also hinted at “additional crypto capabilities,” which were not detailed. However, PayPal earlier this month increased the crypto purchase limit from $20,000 to $100,000 for eligible PayPal customers in the U.S., with no annual purchase limit. The company also this year made it possible for consumers to check out at millions of online businesses using their cryptocurrencies, by first converting the crypto to cash then settling with the merchant in U.S. dollars.
Though the app’s code is now complete, Schulman said the plan is to continue to iterate on the product experience, noting that the initial version will not be “the be-all and end-all.” Instead, the app will see steady releases and new functionality on a quarterly basis.
However, he did say that early on, the new features would include the high-yield savings, improved bill pay with a better user experience, and more billers and aggregators, as well as early access to direct deposit, budgeting tools and the new two-way messaging feature.
To integrate all the new features into the superapp, PayPal will undergo a major overhaul of its user interface.
“Obviously, the [user experience] is being redesigned,” Schulman noted. “We’ve got rewards and shopping. We’ve got a whole giving hub around crowdsourcing, giving to charities. And then, obviously, buy now, pay later will be fully integrated into it. … The last time I counted, it was like 25 new capabilities that we’re going to put into the superapp.”
The digital wallet app will also be personalized to the end user, so no two apps are the same. This will be done using both artificial intelligence and machine learning capabilities to “enhance each customer’s experiences and opportunities,” said Schulman.
PayPal delivered an earnings beat in the second quarter with $6.24 billion in revenue, versus the $6.27 billion Wall Street expected, and earnings per share of $1.15, versus the $1.12 expected. Total payment volume from merchant customers also jumped 40% to $311 billion, while analysts had projected $295.2 billion. But the company’s stock slipped due to a lowered outlook for Q3, impacted by eBay’s transition to its own managed payments service.
In addition, PayPal gained 11.4 million net new active accounts in the quarter, to reach 403 million total active accounts.
Despite their rich engineering talent, Blockchain entrepreneurs in the EU often struggle to find backing due to the dearth of large funds and investment expertise in the space. But a big move takes place at an EU level today, as the European Investment Fund makes a significant investment into a blockchain and digital assets venture fund.
Fabric Ventures, a Luxembourg-based VC billed as backing the “Open Economy” has closed $130 million for its 2021 fund, $30 million of which is coming from the European Investment Fund (EIF). Other backers of the new fund include 33 founders, partners, and executives from Ethereum, (Transfer)Wise, PayPal, Square, Google, PayU, Ledger, Raisin, Ebury, PPRO, NEAR, Felix Capital, LocalGlobe, Earlybird, Accelerator Ventures, Aztec Protocol, Raisin, Aragon, Orchid, MySQL, Verifone, OpenOcean, Claret Capital, and more.
This makes it the first EIF-backed fund mandated to invest in digital assets and blockchain technology.
EIF Chief Executive Alain Godard said: “We are very pleased to be partnering with Fabric Ventures to bring to the European market this fund specializing in Blockchain technologies… This partnership seeks to address the need [in Europe] and unlock financing opportunities for entrepreneurs active in the field of blockchain technologies – a field of particular strategic importance for the EU and our competitiveness on the global stage.”
The subtext here is that the EIF wants some exposure to these new, decentralized platforms, potentially as a bulwark against the centralized platforms coming out of the US and China.
And yes, while the price of Bitcoin has yo-yo’d, there is now $100 billion invested in the decentralized finance sector and $1.5 billion market in the NFT market. This technology is going nowhere.
Fabric hasn’t just come from nowhere, either. Various Fabric Ventures team members have been involved in Orchestream, the Honeycomb Project at Sun Microsystems, Tideway, RPX, Automic, Yoyo Wallet, and Orchid.
Richard Muirhead is Managing Partner, and is joined by partners Max Mersch and Anil Hansjee. Hansjee becomes General Partner after leaving PayPal’s Venture Fund, which he led for EMEA. The team has experience in token design, market infrastructure, and community governance.
The same team started the Firestartr fund in 2012, backing Tray.io, Verse, Railsbank, Wagestream, Bitstamp, and others.
Muirhead said: “It is now well acknowledged that there is a need for a web that is user-owned and, consequently, more human-centric. There are astonishing people crafting this digital fabric for the benefit of all. We are excited to support those people with our latest fund.”
On a call with TechCrunch Muirhead added: “The thing to note here is that there’s a recognition at European Commission level, that this area is one of geopolitical significance for the EU bloc. On the one hand, you have the ‘wild west’ approach of North America, and, arguably, on the other is the surveillance state of the Chinese Communist Party.”
He said: “The European Commission, I think, believes that there is a third way for the individual, and to use this new wave of technology for the individual. Also for businesses. So we can have networks and marketplaces of individuals sharing their data for their own benefit, and businesses in supply chains sharing data for their own mutual benefits. So that’s the driving view.”
It’s pretty easy for individuals to send money back and forth, and there are lots of cash apps from which to choose. On the commercial side, however, one business trying to send $100,000 the same way is not as easy.
Paystand wants to change that. The Scotts Valley, California-based company is using cloud technology and the Ethereum blockchain as the engine for its Paystand Bank Network that enables business-to-business payments with zero fees.
The company raised $50 million Series C funding led by NewView Capital, with participation from SoftBank’s SB Opportunity Fund and King River Capital. This brings the company’s total funding to $85 million, Paystand co-founder and CEO Jeremy Almond told TechCrunch.
During the 2008 economic downturn, Almond’s family lost their home. He decided to go back to graduate school and did his thesis on how commercial banking could be better and how digital transformation would be the answer. Gleaning his company vision from the enterprise side, Almond said what Venmo does for consumers, Paystand does for commercial transactions between mid-market and enterprise customers.
“Revenue is the lifeblood of a business, and money has become software, yet everything is in the cloud except for revenue,” he added.
He estimates that almost half of enterprise payments still involve a paper check, while fintech bets heavily on cards that come with 2% to 3% transaction fees, which Almond said is untenable when a business is routinely sending $100,000 invoices. Paystand is charging a flat monthly rate rather than a fee per transaction.
Paystand’s platform. Image Credits: Paystand
On the consumer side, companies like Square and Stripe were among the first wave of companies predominantly focused on accounts payable and then building business process software on top of an existing infrastructure.
Paystand’s view of the world is that the accounts receivables side is harder and why there aren’t many competitors. This is why Paystand is surfing the next wave of fintech, driven by blockchain and decentralized finance, to transform the $125 trillion B2B payment industry by offering an autonomous, cashless and feeless payment network that will be an alternative to cards, Almond said.
Customers using Paystand over a three-year period are able to yield average benefits like 50% savings on the cost of receivables and $850,000 savings on transaction fees. The company is seeing a 200% increase in monthly network payment value and customers grew two-fold in the past year.
The company said it will use the new funding to continue to grow the business by investing in open infrastructure. Specifically, Almond would like to reboot digital finance, starting with B2B payments, and reimagine the entire CFO stack.
“I’ve wanted something like this to exist for 20 years,” Almond said. “Sometimes it is the unsexy areas that can have the biggest impacts.”
As part of the investment, Jazmin Medina, principal at NewView Capital, will join Paystand’s board. She told TechCrunch that while the venture firm is a generalist, it is rooted in fintech and fintech infrastructure.
She also agrees with Almond that the B2B payments space is lagging in terms of innovation and has “strong conviction” in what Almond is doing to help mid-market companies proactively manage their cash needs.
“There is a wide blue ocean of the payment industry, and all of these companies have to be entirely digital to stay competitive,” Medina added. “There is a glaring hole if your revenue is holding you back because you are not digital. That is why the time is now.”
Shares in Zomato, a Gurgaon-based food delivery company and first of India’s consumer tech startups to go public, closed up 64.7% in its debut day of trading in Mumbai, delivering a key insight into the appetite investors have for the world’s second largest internet market’s burgeoning startup ecosystem.
Zomato’s shares traded all day above the issue price of 76 Indian rupees ($1) and surged as high as 138.9 Indian rupees ($1.87). The 12-year-old firm ended day one of trading on BSE in Mumbai at 125.2 Indian rupees ($1.68), securing a market cap of $13.2 billion, up from about $5 billion valuation it had attained in private markets during the startup’s fundraise earlier this year.
The startup’s $1.3 billion initial public offering was 40 times subscribed last week.
Friday’s milestone of Zomato has equally been significant for the rest of the industry as startup founders and investors closely watched the performance. India’s Twitter timeline on Friday was flooded with well wishes and celebratory messages from industry colleagues.
Ashish Dave, India head of Mirae Asset, a backer of Zomato, said the listing and performance of Zomato today has delivered the missing piece of liquidity in Indian startup ecosystem.
“This validates that we can generate large IPOs, which then makes our startups more attractive for global LPs. It also gives Indian investors a chance to participate in the India tech journey rather than from watching it from sidelines,” he told TechCrunch, adding that retail investors of this generation will finally find a way to get in on the action with the brands they recognize and have grown with.
"But I hope that the fact that we are here, inspires millions of Indians to dream bigger than we ever have" https://t.co/sM1Z2Q1sES
— Lizzie Chapman (@ChapmanLizzie) July 23, 2021
— Upasana Taku (@UpasanaTaku) July 23, 2021
@zomato IPO is just a sneak peak into the India's tech renaissance.
Our country will be the talent, tech and transformation capital of the world.
For many, it's BAU. For they know, this is just the advent of the beginnings.
Here's to an exciting decade! Back to work now :)
— Tejeshwi Sharma (@tejeshwi_sharma) July 23, 2021
— Aloke Bajpai (@alokebajpai) July 23, 2021
butterfly effect moment today for India Tech sector.@zomato ipo is the match that lights the fire; and the effects will persist for a decade or two.
what a time to be here in this market, in tech industry, and this peer group of makers.
— miten sampat (@miten) July 23, 2021
Home run for @zomato IPO and a fantastic moment for the Indian startup ecosystem. Congratulations to the founders, investors, and the team!
Hope to see many more such celebrations as more startups reach the IPO pitstop before taking off on more daring rides.
— Navin Madhavan (@madnavin) July 23, 2021
Series A, B, C…Z is all great.
But seeing your brand on the stock market ticker, must be the most incredible feeling.
— Bala Sarda (@balasarda) July 23, 2021
What a moment for everyone. Thank you Zomato https://t.co/Ik6WXO3zLc
— pj (@BeingPractical) July 23, 2021
Zomato chief executive Deepinder Goyal was quick to reciprocate. In a blog post, Goyal wrote, “Today is a big day for us. A new Day Zero. But we couldn’t have gotten here without the incredible efforts of India’s entire internet ecosystem. Jio’s prolific growth has set all of us up for unprecedented scale. Flipkart, Amazon, Ola, Uber, Paytm – have also over the years, collectively laid the railroads that are enabling companies like ours to build the India of the future.”
“They say it takes a village to raise a child, and we are no exception. Hundreds of people have selflessly played a part in making Zomato what it is today.”
Indian tech startups have raised a record amount of capital this year as some high-profile investors have doubled down in the South Asian market. Swiggy, Zomato’s chief rival in India, said earlier this week it had raised $1.25 billion from SoftBank’s Vision Fund 2 and Prosus among others at a valuation of $5.5 billion.
A handful of other firms are also preparing to publicly list within a few months. Financial services startups Paytm and MobiKwik filed for their initial public offerings earlier this month. Online insurance aggregator Policybazaar is expected to file its paperwork within a few weeks.
“I don’t know whether we will succeed or fail – we will surely, like always, give it our best. But I hope that the fact that we are here, inspires millions of Indians to dream bigger than we ever have, and build something way more incredible than what we can dream of,” wrote Goyal.
The payments space – amazingly – remains up for grabs for startups. Yes dear reader, despite the success of Stripe, there seems to be a new payments startup virtually every other day. It’s a mess out there! The accelerated growth of e-commerce due to the pandemic means payments are now a booming space. And here comes another one, with a twist.
WhenThen has built a no-code payment operations platform that, they claim, streamlines the payment processes “of merchants of any kind”. It says its platform can autonomously orchestrate, monitor, improve and manage all customer payments and payments ops.
The startup’s opportunity has arisen because service providers across different verticals increasingly want to get into open banking and provide their own payment solutions and financial services.
Founded 6 months ago, WhenThen has now raised $6 million, backed by European VCs Stride and Cavalry.
The founders, Kirk Donohoe, Eamon Doyle and Dave Brown are three former Mastercard Payment veterans.
Based “out of Dublin, CEO Donohoe told me: “We see traditional businesses embracing e-comm, and e-comm merchants now operating multiple business models such as trade supply, marketplace, subscription, and more. There is no platform that makes it easy for such businesses to create and operate multiple payment flows to support multiple business models in one place – that’s where we step in.”
He added: “WhenThen is helping ecommerce digital platforms build advanced payment flows and payment automation, in minutes as opposed to months. When you start to integrate different payment methods, different payment gateways, how you want the payment to move from collection through to payout gets very, very complex. I’ve been doing this for over a decade now, as an entrepreneur building different businesses that had to accept collect and pay payments.”
He said his founding team “had to build very complex payment flows for large merchants, airlines, hotels, issuers, and we just found it was ridiculous that you have to continue to do the same thing over and over again. So we decided to come up with WhenThen as a better way to be able to help you build those flows in minutes.”
Claude Ritter, managing partner at Cavalry said: “Basic payment orchestration platforms have been around for some time, focusing mostly on maximizing payment acceptance by optimizing routing. WhenThen provides the first end-to-end payment flow platform to equip businesses with the opportunity to control every stage of the payment flow from payment intent to payout.”
WhenThen supports a wide range of popular payment providers such as Stripe, Braintree, Adyen, Authorize.net, Checkout.com, etc., and a variety of alternative and locally preferred payment methods such as Klarna Affirm, PayPal, BitPay.
“For brave merchants considering global reach and operating multiple business models concurrently, I believe choosing the right payment ops platform will become as important as choosing the right e-commerce platform. Building your entire ecomm experience tightly coupled to a single payment processor is a hard correction to make down the line – you need a payment flow platform like WhenThen,” added Fred Destin, founder of Stride.VC.
Stripe, with its $95 billion valuation, has been taking on the payment landscape with a whole platform approach, bringing in dozens of adjacent services to snag a wider and deeper set of customers that use these services by way of APIs. But in the world of so-called “embedded finance” there still remains a lot of room for smaller players to bring a more sophisticated approach to the business of building complicated financial processes that can be integrated by third parties to carry out their own businesses, and today one of them is announcing some funding to support its own mission.
Dwolla, which provides an API that allows companies to build and facilitate fast payments, specifically with a focus on ACH (automated clearing house, or payments or transfers between banks or other financial institutions), has closed $21 million in funding, money that it will be using to continue building out the functionality of its service and specifically how it integrates and provides more of the responsiveness of card payments; hiring more talent; and starting the process of taking its rails to more markets outside of the U.S., most likely looking at Canada, the U.K. and Australia first.
Foundry Group is leading this round, with Park West Asset Management LLC, Union Square Ventures, Detroit Venture Partners, Firebrand Ventures and Next Level Ventures also participating. Jeremy Andrus, the CEO of Traeger, is also in the round as an individual investor. Other investors in the company include Andreesen Horowitz, High Alpha, Thrive Capital and Ludlow Ventures, and CEO Brady Harris in an interview said Dwolla would not be disclosing its valuation at the moment, but described it as “competitive in what’s happening with transactions and payments overall.”
Dwolla is based out of Des Moines, Iowa, and has been somewhat under the radar over the years. Since 2009 it had only raised just over $50 million before this round, a relatively modest amount for a fintech these days. This $21 million is its biggest-single round to date.
But it’s also been quietly seeing a lot of growth. In 2019, Dwolla processed $11 billion in gross payment volume over its platform. In 2020, that grew to $20 billion. This year it’s projected to be $30 billion, said Harris. Customers include both larger institutions and fintechs that want to incorporate faster and more efficient ACH-based payments into their own services without going through the grunt work of building them from the ground up, as well as businesses that want these also in their stack, with particular requirements around how they would like the white labelled and customised.
In total the company has some 3 million end users on its platform, which are channelled through some 500 customers using its services. Those customers include real estate companies, educational institutions, and retailers and brands like GOAT, Ibotta, and Rally. Some of those customers are bigger than you might think. Harris noted to me that one of its customers using the Dwolla API in a white-label service is a fintech that sees some $9 trillion in gross transactions. (Dwolla is under NDA so cannot disclose the name.) That 3 million number, Harris said, is currently growing by 1.5 million each quarter, so it’s really seeing a lot of transaction traffic right now.
As Harris describes it, while there are a lot of options out there in the market today for companies that want to incorporate payments and specifically bank transfer-based payments into their stack, Dwolla’s unique approach is that it’s made this particular service more efficient, and easily customizable for those that want to add more features into the process. (That could include more timing, incorporating a blended approach including card payments or other payment methods, or something else altogether.)
“ACH products are something that a consumer can pull off the shelf at a payments company like Stripe, but this is about creating more customization,” said Harris. “We get a lot of people who are mid integration with another provider but it can’t do it what they would like it to, and so they come to us. We like to think of ourselves as programmatic and flexible.”
This focus and mastery of its space has helped Dwolla’s star rise not just with customers but also investors.
PayPal-owned payments app Venmo will no longer offer a public, global feed of users’ transactions, as part of a significant redesign focused on expanding the app’s privacy controls and better highlighting some of Venmo’s newer features. The company says it will instead only show users their “friends feed” — meaning, the app’s social feed where you can see just your friends’ transactions.
Venmo has struggled over the years to balance its desire to add a social element to its peer-to-peer payments-based network, with the need to offer users their privacy.
A few years ago, the company was forced to settle a complaint with the FTC over its handling of privacy disclosures in the app along with other issues related to the security and privacy of user transactions. One of the concerns at the time was a setting that made all transactions public by default — a feature the FTC said wasn’t being properly explained to customers. As part of the settlement, Venmo had to inform both new and existing users how to limit the visibility of their transactions, among other changes.
However, privacy issues have continued to follow Venmo over the years. More recently, BuzzFeed News was able to track down President Biden’s secret Venmo account because of the lack of privacy around Venmo friend lists, for example. Afterwards, the company rolled out friend-list privacy controls to address the issue.
Image Credits: Venmo
In the newly updated app, Venmo will still highlight this friend-list privacy setting so users can choose whether or not they want to have their profile appear on other people’s friends’ lists. Users will also still be able to remove or add contacts from their friend list at any time, block people and set their transaction privacy either as they post or retroactively to public, private or friends-only. It’s unclear what advantage posting publicly has though, as the global, public feed is gone. Instead, public transactions would be visible to a users’ nonfriends only when someone visited their profile directly.
In addition to the privacy changes, Venmo’s redesign aims to make it easier for people to discover the app’s new features, the company says.
Now, a new bottom navigation option will allow users to toggle between their social feed, Venmo’s products like the Venmo Card and crypto, and their personal profile. The newly elevated “Cards” section will allow Venmo Credit and Debit cardholders to manage their cards and access their rewards and offers, as before. Meanwhile, the “Crypto” tab will let users learn and explore the world of crypto, view real-time trends and buy, sell or hold different types of cryptocurrencies.
Image Credits: Venmo
Venmo first added support for crypto earlier this year, following parent company PayPal’s move to do the same, and now offers access to Bitcoin, Ethereum, Litecoin and Bitcoin Cash. Before, the option appeared as a small button next to the “Pay or Request” button at the bottom of the screen, which contributed to Venmo’s cluttered feel.
The updated app will also include support for new payment types and expanded purchase protections, which Venmo announced last month, and said would arrive on July 20. Customers will now be able to indicate if their purchase is for “goods and services” when they transact with a seller, which will make the transactions eligible for Venmo’s purchase protection plan — even if the seller doesn’t have a proper “business” account.
Because this now charges sellers a 1.9% plus 10-cent fee, there had been some backlash from users who either misunderstood the changes or just didn’t like them. But the move could help boost Venmo revenue.
PayPal said in February that Venmo grew users 32% over 2020 to reach 70 million active accounts, and expects the app to generate nearly $900 million in revenue this year — likely in part thanks to this and other new initiatives, like its crypto transaction fees.
Image Credits: Venmo
Beyond the more functional changes and the privacy updates, Venmo’s redesign also modernizes the look-and-feel of the app itself, which had become a little dated and overly busy. As Venmo had expanded its array of services, the hamburger (three line) menu in the top right of the old version of the app had turned into a long list of options and settings. Now that’s gone. The app uses new iconography, an updated font, and lots of white space to make it feel fresh and clean.
The app’s changes also somewhat de-emphasize the importance of the social feed itself. Although it may still default to that tab, other options now have equal footing with tabs of their own, instead of being hidden away in a menu or in a smaller button.
Venmo says the redesigned Venmo app will begin to roll out today to select customers and will be available to all users across the U.S. over the next few weeks.
Hello and welcome back to TechCrunch’s China Roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.
A tectonic shift is underway in how Beijing regulates and accesses the troves of citizen data collected by its tech giants. More details of China’s new cybersecurity rules have recently come to light as Didi, the SoftBank-backed ride-sharing dominator in China, became the target of the Chinese government’s latest effort to heighten data protection. This week, we look at what this changing landscape means to Chinese tech firms wooing investors in the United States.
The new wave of discussion around China’s cybersecurity rules started with the bombshell dropped on Didi. Just two days after its $4 billion IPO in New York, the ride-hailing giant was hit with a probe by China’s Cybersecurity Review Office on July 2. Two days later, the same government agency ordered the Didi app, which has amassed nearly 500 million annual users, to be yanked because it was “illegally collecting user data.”
The Cybersecurity Review Office is an agency within the Cyberspace Administration of China, the country’s top internet regulator. It has existed for a few years but its roles were only made clear in April 2020 when China put forward its rules on internet security reviews.
Didi appears to be the first target of the department’s enforcement actions. A memo of an “expert meeting” shared among Didi’s investors, which TechCrunch reviewed, said the ride-hailing firm had failed to assure Beijing its data practices were secure before going public in New York. A major concern was that Didi’s data, if unguarded by Chinese laws, could be subject to scrutiny by U.S. regulators. But a Didi executive claimed that the firm stored all its China data locally and it is “absolutely not possible” that it passed data to the U.S.
Before long, the Cybersecurity Review Office was onto other players that could similarly compromise the data security of Chinese users. On July 5, it put SoftBank-backed truck-sharing platform Full Truck Alliance and recruiting site Boss Zhipin — both of which recently IPO’ed in the U.S. — under the same review process as it did with Didi.
The probes were just the beginning. On July 10, the Cybersecurity Review Office unveiled the draft of a revised version of the data security review rules passed last year. One of the major changes is that any business commanding over one million users is subject to security checks if it is seeking an overseas IPO.
Just as the U.S. government frets over Chinese companies commanding Americans’ data, as in the case of TikTok, China is now making sure that its citizen data stays onshore and protected from U.S. authorities. Foreign players operating in China have to comply, too. Giants like Apple and Tesla have pledged and moved to store their Chinese user data within the country.
The new data rule is no doubt a stumbling block for Chinese companies that want to list abroad. TikTok owner ByteDance indefinitely put on hold its plans of a U.S. listing after Chinese officials told it to address data security risks, according to a report by The Wall Street Journal. But how about incumbents like Alibaba that have traded their stocks on Wall Street for years? And do the revised rules apply to companies listing in Hong Kong, which is being increasingly integrated with mainland China?
Youth sports are an integral part of our communities, bringing families together and helping kids all over gain confidence and skills.
Most of us don’t think about all the work that goes into setting up, growing and maintaining these leagues. It’s a lot. Today, LeagueApps, which aims to be the operating system for youth sports organizations, announced it has raised $15 million in a Series B round of funding.
Existing investor Contour Venture Partners led the financing, which brings the company’s total funding since its 2010 inception to $35 million. Major League Baseball and Elysian Park Ventures, the private investment arm of the ownership group of the Los Angeles Dodgers, also participated in the round.
A slew of new and existing backers also put money in the round including Olympic Gold Medalists Julie Foudy and Swin Cash; NFL veteran Derrick Dockery; Peter J. Holt, chairman of Spurs Sports & Entertainment; Laura Dixon, founder & president of PRO Sports Assembly and investment management firm Hamilton Lane.
The New York-based company is working to help youth sports organizations, well, be better organized. It has developed registration and management software so that leaders of these sports organizations can better manage the process of running the leagues, communicate more effectively and collect payment more efficiently.
“We’ve built all the tools they need to power their programs,” said Brian Litvack, LeagueApps CEO & co-founder. Those tools include giving these leaders the means to do things like build a website, accept registrations, send messages to coaches and parents and help them share information with governing bodies or associations.
“Local sports organizers have an important role in the community to make sure that sports happens,” Litvack said.
Image Credits: LeagueApps
Rather than charging for its software, it charges a small fee upfront and then takes a percentage of any transactions that are conducted via its platform. So if its users don’t get paid, it doesn’t get paid.
That means the company, like many others, took a bit of a hit when the COVID-19 pandemic hit in 2020. But it’s since rebounded, and then some.
In the spring of 2021, the platform crossed the $2 billion in transactions processed mark, doubling the $1 billion mark it reached in the summer of 2019. From 2016 to 2019, LeagueApps saw 275% revenue growth. Today, over 3,000 sports organizations use LeagueApps as their operating system.
The company projects that it will process more than 4 million sports registrations in 2021.
In addition to its flagship software, the company’s NextUp platform is designed to provide organizers with opportunities for leadership development and networking. It also runs FundPlay, a philanthropic program focused on sports-based youth development programs in underserved communities.
As a parent with children playing sports, Contour Ventures’ Matt Gorin said he was drawn to invest in LeagueApps. In his view, the company is tackling a “large yet fragmented” market.
“I have seen firsthand just how important youth sports experiences, and the organizations that provide them, are to kids, families, and communities,” he said. “LeagueApps is unique in so many ways, particularly regarding its unparalleled approach and commitment to combining technology, community, customer service and impact for the maturing youth sports market.”
LeagueApps plans to use its new capital mainly to invest in product and engineering so that it can “provide more solutions” to youth sports organizations.
The fintech sector has been hugely successful (and hugely profitable) for much of the last decade, and even more so during the pandemic. But it might come as a surprise to learn that many in the industry believe that the story is just beginning and the sector is poised to achieve much more, with fintech’s next decade expected to be radically different from the last 10 years.
Long before the pandemic, the way in which banks were regulated was changing. Initiatives like Open Banking and the Revised Payment Services Directive (PSD2) were being proposed as a way to promote competition in the banking industry — allowing smaller challenger firms to break into a market that has long been dominated by corporate titans.
Now that these initiatives are in place, however, we’re seeing that their effect goes way beyond opening up a gap for challenger banks. Since open banking requires that banks make valuable data available via APIs, it is leading to a revolution in the way that small and mid-size enterprises (SMEs) are funded — one in which data, and not hard capital, is the most important factor driving fintech success.
In order to understand the changes that are sweeping fintech and reconfiguring the way that the industry works with small businesses, it’s important to understand open banking. This is a concept that has really taken hold among governmental and supranational banking regulators over the past decade, and we are now beginning to see its impact across the banking sector.
Allowing third parties access to the data held at banks will allow the true financial position of SMEs to be assessed, many for the first time.
At its most fundamental level, open banking refers to the process of using APIs to open up consumers’ financial data to third parties. This allows these third parties to design, build and distribute their own financial products. The utility (and, ultimately, the profitability) of these products doesn’t rely on them holding huge amounts of capital — rather, it is the data they harvest and contain that endows them with value.
Open-banking models raise a number of challenges. One is that the banking industry will need to develop much more rigorous systems to continually seek consumer consent for data to be shared in this way. Though the early years of fintech have taught us that consumers are pretty relaxed when it comes to giving up their data — with some studies indicating that almost 60% of Americans choose fintech over privacy — the type and volume shared through open-banking frameworks is much more extensive than the products we have seen up until now.
Despite these concerns, the push toward open banking is progressing around the world. In Europe, the PSD2 (the Payment Services Directive) requires large banks to share financial information with third parties, and in Asia services like Alipay and WeChat in China, and Tez and PayTM in India are already altering the financial services market. The extra capabilities available through these services are already leading to calls for the U.S. banking system to embrace open banking to the same degree.
If the U.S. banking industry can be convinced of the utility of open banking, or if it is forced to do so via legislation, several groups are likely to benefit:
By far the biggest beneficiary of open banking, however, will be SMEs. This is not necessarily because open-banking frameworks offer specific new functionality that will be useful to small and medium-sized businesses. Instead, it is a reflection of the fact that SMEs have historically been so poorly served by traditional banks.
SMEs are underserved in a number of ways. Traditional banks have an extremely limited ability to view the aggregate financial position of an SME that holds capital across multiple institutions and in multiple instruments, which makes securing finance very difficult.
In addition, SMEs often have to deal with dated and time-consuming manual interfaces to upload data to their bank. And (perhaps worst of all) the B2B payment systems in use at most banks provide very limited feedback to the businesses that use them — a lack of information that can cost businesses dearly.
Given these deficiencies, it’s not surprising that fintech startups are keen to lend to small businesses, and that SMEs are actively looking for novel banking products and services. There have, of course, already been some success stories in this space, and the kinds of banking systems available to SMEs today (especially in Europe) are leagues ahead of the services available even 10 years ago.
However, open banking promises to accelerate this transformation and dramatically improve the financial services available to the average SME. It will do this in several ways. Allowing third parties access to the data held at banks will allow the true financial position of SMEs to be assessed, many for the first time.
Via APIs, fintech companies will be able to access information on different types of accounts, insurance, card accounts and leases, and consolidate data from multiple countries into one overall picture.
This, in turn, will have major effects on the way that credit-worthiness is assessed for SMEs. At the moment, there is a funding gap facing many SMEs, largely because banks have been hesitant to move away from the “balance sheet” model of assessing credit risk. By using real-time analytics on an SME’s current business activities, banks will be able to more accurately assess this risk and lend to more businesses.
In fact, this is already happening in countries where open banking is well advanced – in the U.K., Lloyds’ Business ToolBox offers unlimited credit checks on companies and directors in addition to account transaction data.
Open banking will also allow peer comparison analytics far ahead of what we have seen until now. APIs can be used to provide SMEs real-time feedback on how they are performing within their market sector. Again, this ability is already available in the U.K., with Barclays’ SmartBusiness Dashboard offering marketing effectiveness tools as part of a customizable business dashboard.
These capabilities will be so useful to SMEs that they are likely to drive the popularity of any fintech product that offers them. For SMEs, this value will lie mainly in intelligent data-analytics-based insights, recommendations and automatic prompts that can be built on top of account aggregation.
Then, additional insights generated from these same monitoring tools could enable banks and alternative lenders to be more proactive with their lending — offering preapproved lines of credit, in a timely manner, to SMEs that would have previously found it difficult to access funding.
Crucially for the fintech sector, it’s almost a certainty that SMEs will be willing to pay fees for data-analytics-based value-added services that help them grow. This is why some startups in this space are already attracting huge levels of funding, and why open banking is at the heart of the relationship between tech and the economy.
So if fintech has had a good year, this is likely to be just the start of the story. Backed by open-banking initiatives, the sector is now at the forefront of a banking revolution that will finally give SMEs the level of service they deserve and unleash their true potential across the economy at large.
In case you’ve not been paying attention, we’ll say it again: The global venture capital industry is on fire. The second quarter of 2021 was the largest single three-month period on record for dollars invested.
The data coming in points to a worldwide boom. The United States’ startup market had a huge Q2, and investors don’t expect the pace to slow in the country. Europe is also having one hell of a year. Around the world, 2021 is shaping up to be a breakout year for venture investment into startups. And that’s after several years of growing, record-breaking results.
The Exchange explores startups, markets and money.
India is another good example of this trend. The country’s venture capital haul thus far in 2021 has nearly matched its 2020 total and is on pace for a record year. But as the third quarter gets underway, something perhaps even more important is going on: public-market liquidity.
The new trend is being spearheaded by Zomato, an Indian food delivery giant that could be valued at $8.6 billion in its public debut. Other major Indian unicorns are following it to the public markets, including fintech players like MobiKwik and Paytm, which is backed by Alibaba and its affiliate Ant Financial. The trio of companies could herald a rush of public offerings from Indian companies if their debuts prove lucrative and stable.
Today, The Exchange is taking a look at India’s recent venture capital results and digging more deeply into the country’s IPO pipeline, with help from VCs Kunal Bajaj of Blume Ventures and Manish Singhal of pi Ventures. We’ll also read the tea leaves when it comes to how Zomato’s IPO is performing thus far, and what we can learn from its early data. This will be fun!
For many of us, going to work these days no longer means going into a specific office like it used to; and today one of the startups that’s built a platform to help cater for that new, bigger world of employment — wherever talent might be — is announcing a major round of funding on the back of strong demand for its tools.
Remote, which provides tools to manage onboarding, payroll, benefits and other services for tech and other knowledge workers located in remote countries — be they contractors or full-time employees — has raised $150 million. Job van der Voort, the Dutch-based CEO and co-founder of New York-based Remote, confirmed in an interview that funding values Remote at over $1 billion.
Accel is leading this Series B, with participation also from previous investors Sequoia, Index Ventures, Two Sigma, General Catalyst and Day One Ventures.
The funding will be used in a couple of areas. First and foremost, it will go towards expanding its business to more markets. The startup has been built from the ground up in a fully-integrated way, and in contrast to a number of others that it competes with in providing Employer of Record services, Remote fully owns all of its infrastructure. It now provides its HR services, as fully-operational legal entities, for 50 countries has a target of growing that to 80 by the end of this year. The platform is also set to be enhanced with more tools around areas like benefits, equity incentive planning, visa and immigration support and employee relocation.
“We are doubling down on our approach,” Van der Voort said. “We try to fully own the entire stack: entity, operations, experts in house, payroll, benefits and visa and immigration — all of the items that come up most often. We want to to build infrastructure products, foundational products because those have a higher level of quality and ultimately a lower price.”
In addition, Remote will be using the funding to continue building more tools and partnerships to integrate with other providers of services in what is a very fragmented human resources market. Two of these are being announced today to coincide with the funding news: Remote has launched a Global Employee API that HR platforms that focus on domestic payroll can integrate to provide their own international offering powered by Remote. HR platform Rippling (Parker Conrad’s latest act) is one of its first customers. And Remote is also getting cosier with other parts of the HR chain of services: applicant tracking system Greenhouse now integrating with it to help with the onboarding process for new hires.
$150 million at a $1 billion+ valuation is a very, very sizable Series B, even by today’s flush-market standards, but it comes after a bumper year for the company, and in particular since November last year when it raised a Series A of $35 million. In the last nine months, customer numbers have grown seven-fold, with users on the platform increasing 10 times. Most interestingly, perhaps, is that Remote’s revenues — it’s packages start at $149 per month but go up from there — have increased by a much bigger amount: 65x, the company said. That basically points to the fact that engagement from those users — how much they are leaning on Remote’s tech — has skyrocketed.
Although there are a lot of competitors in the same space as Remote — they include a number of more local players alongside a pretty big range of startups like Oyster (which announced $50 million in funding in June), Deel, which is now valued at $1.25 billion; Turing; Papaya Global (now also valued at over $1 billion); and many more — the opportunity they are collectively tackling is a massive one that, if anything, appears to be growing.
Hiring internationally has always been a costly, time-consuming and organizationally-challenged endeavor, so much so that many companies have opted not to do it at all, or to reserve it for very unique cases. That paradigm has drastically shifted in recent years, however.
Even before Covid-19 hit, there was a shortage of talent, resulting in a competitive struggle for good people, in company’s home markets, which encouraged companies to look further afield when hiring. Then, once looking further afield, those employers had to give consideration to employing those people remotely — that is, letting them work from afar — because the process of relocating them had also become more expensive and harder to work through.
Then Covid-19 happened, and everyone, including people working in a company’s HQ, started to work remotely, changing the goalposts yet again on what is expected by workers, and what organizations are willing to consider when bringing a new person on board, or managing someone it already knows, just from a much farther distance.
While a lot of that has played out in the idea of relocating to different cities in the same country — Miami and Austin getting a big wave of Silicon Valley “expats” being two examples of that — it seems just a short leap to consider that now that sourcing and managing is taking on a much more international provide. A lot of new hires, as well as existing employees who are possibly not from the US to begin with, or simply want to see another part of the world, are now also a part of the mix. That is where companies like Remote are coming in and lowering the barriers to entry by making it as easy to hire and manage a person abroad as it is in your own city.
“Remote is at the center of a profound shift in the way that companies hire,” said Miles Clements, a partner at Accel, in a statement. “Their new Global Employee API opens up access to Remote’s robust global employment infrastructure and knowledge map, and will help any HR provider expand internationally at a speed impossible before. Remote’s future vision as a financial services provider will consolidate complicated processes into one trusted platform, and we’re excited to partner with the global leader in the quickly emerging category of remote work.”
And it’s interesting to see it now partnering with the likes of Rippling. It was a no-brainer that as the latter company matured and grew, that it would have to consider how to handle the international component. Using an API from Remote is an example of how the model that has played out in communications (led by companies like Twilio and Sinch) and fintech (hello, Stripe), also has an analogue in HR, with Remote taking the charge on that.
And to be clear, for now Remote has no plans to build a product that it would sell directly to individuals.
“Individuals are reaching out to us, saying, ‘I found this job and can you help me and make sure I get paid?’ That’s been interesting,” Van der Voort said. “We thought about [building a product for them] but we have so much to do with employers first.” One thing that’s heartening in Remote’s approach is that it wouldn’t want to provide this service unless it could completely follow through on it, which in the case of an individual would mean “vetting every major employer,” he said, which is too big a task for it right now.
In the meantime, Remote itself has walked the walk when it comes to remote working. Originally co-founded by two European transplants to San Francisco, the pair had first-hand experience of the paradoxical pains and opportunities of being in an organization that uses remote workforces.
Van der Voort had been the VP of product for GitLab, which he scaled from 5 to 450 employees working remotely (it’s now a customer of Remote’s); and before co-founding Remote CTO Marcelo Lebre had been VP of engineering for Unbabel — another startup focused on reducing international barriers, this time between how companies and global customers communicate.
Today, not only is the CEO based out of Amsterdam in The Netherlands and CTO in Lisbon, Portugal, but New York-based Remote itself has grown to 220 from 50 employees, and this wider group has also been working remotely across 47 countries since November 2020.
“The world is looking very different today,” Van der Voort said. “The biggest change for us has been the size of the organization. We’ve gone from 50 to more than 200 employees, and I haven’t met any of them! We have tried to follow our values of bringing opportunity everywhere so we hire everywhere as we solve that for our customers, too.”
If you follow startup news from Indonesia, you know that the country’s estimated 60 million small businesses are a hot target for tech companies. BukuKas and BukuWarung, for example, both recently raised large rounds to fuel their race to digitize SMEs’ operations. Founded in November 2020, Vara is focused specifically on making staff management easier for small businesses and their workers, replacing the notebooks or spreadsheets many relied on to keep track of payroll with an app called Bukugaji.
The company announced today it has raised $4.8 million in seed funding from Go Ventures, RTP Global, AlphaJWC, Sequoia Capital India’s Surge, FEBE Ventures and Taurus Ventures. Founded by Vidush Mahansaria and Abhinav Karale, who met while studying at the Wharton School at the University of Pennsylvania, Vara is part of the Surge accelerator program’s fifth cohort of startups. It says more than 100,000 small businesses are already using Bukugaji.
The app has features to track attendance, calculate salaries and worker loans and disburse payroll. Mahansaria told TechCrunch that Bukugaji is aimed at companies that have less than 30 employees. Many of them are in retail, food and beverage or labor-heavy service sectors like construction and transportation. Bukugaji has features for specific employee segments, like operational staff who usually work in shifts, or permanent staff whose paychecks are fixed over a specific time period.
“Before downloading and onboarding on Bukugaji, the vast majority of our users utilized notebooks to mark attendance and track payroll,” Mahansaria said. “A small portion used the notes features on their phones or simple Excel sheets.” Bukugaji is designed to be fully self-service, so businesses can download and start using the app on their own. Its main app is mobile only, but the platform also has a web version.
The businesses Bukugaji serves often have workers who are unbanked, meaning they don’t have access to a bank account or traditional financial services. Vara’s founders say many of them live paycheck to paycheck and this means they sometimes have to take out loans from their employers.
“Employees often request cash advances from their employers toward the end of the month, when they need the money the most because sometimes they can’t make ends meet,” said Mahansaria. “This has two outcomes: first, it ties up working capital for the employer. Second, it makes the employee increasingly reliant on the employer to meet emergency needs. It’s hard to break out of this cycle given the current limited accessibility to formal financial infrastructure for this market segment.”
Earned wage access (EWA) platforms are focused on solving this problem by giving employees on-demand access to wages, instead of having to wait for their paycheck. EWA companies are gaining traction around the world, including Wagely and GajiGesa in Indonesia. Vara doesn’t have immediate plans to add an EWA feature to Bukugaji, but it is something the company is thinking about as part of the value-additive services it will build into the platform.
“Owning end-to-end payroll and attendance gives us an information edge that is unparalleled for this labor segment,” Mahansaria said, noting that the data can enable companies to add things like benefits that their employees usually don’t have access to, and in turn give workers a digitally-verified work history.
In the near future, Bukugaji will add time-saving features like automated allowances and overtime, dashboard shortcuts, reminders and customizable reports. It also plans to allow employers to disburse salaries directly through the platform. Over the longer term, Bukugaji will offer data analytics to companies and their workers. For example, employees will also be able to see how their earnings have changed over time. Employers, meanwhile can spot trends in attendance and salary.
Though Vara may eventually expand into markets, Mahansaria said it is currently “razor-focused on Indonesia,” where SMEs account for about 60% of the country’s gross domestic product and employ the vast majority of its workforce.
Based in Sydney and Auckland, Dovetail is a full-service venture studio that works closely with founders who have a great idea, but may lack technical backgrounds. Dovetail helps them build companies from the ground up, preparing them for growth and more funding. Founded in 2014, Dovetail’s success stories include Afterpay, the Melbourne-headquartered unicorn that is one of the highest-profile players in the buy now, play later space, along with Klarna and Affirm.
“People can think of us as the technical co-founder, responsible for driving and executing product strategy, design and the development of scalable products,” Dovetail co-founder Nick Frandsen told TechCrunch.
Dovetail is currently raising a $10 million AUD (about $7.5 million USD) fund that will be used for seed, Series A and Series B rounds in 15 of the most promising companies that have gone through its venture studio program. As an investor, Dovetail has written check sizes ranging from $150,000 to $1 million AUD.
One of Dovetail’s goals is prepare startups to seek funding from other VCs; firms that have invested in Dovetail’s portfolio companies include Blackbird, Qantas and Wavemaker.
“By the time we need to make an investment decision, we would have worked collaboratively on a day-to-day basis with them for at least three months prior to a seed round and 12 months for a Series A. This means we’re essentially investing with the informational edge of a co-founder,” said Frandsen. “Another trait that makes Dovetail unique is that we share our ownership in our portfolio companies with the entire team. This further drives unity, dedication and a desire to succeed from our team.”
Dovetail began working with Afterpay in 2017, when the company had less than 40 employees. Frandsen said Afterpay’s founders, Nick Molnar and Anthony Eisen, were looking for a digital product development partner to build and scale their mobile and web apps. While both had deep experience in financial services, they came from non-technical backgrounds. That’s where Dovetail came into play, building out Afterpay’s tech platforms and helping launch its consumer-facing products.
Some other notable startups that have gone through its venture studio program are resource planning SaaS platform Runn; one-click invoicing tool Marmalade; Provider Choice, a management platform for providers in Australia’s National Disability Insurance Scheme; Landmarks ID, a privacy-compliant mobile location intelligence platform for marketers; and Fluenccy, a service that helps importers and exporters save money on foreign exchange.
Before they started Dovetail, Frandsen and co-founder Ash Fogelberg’s startup, ticketing and payments platform 1-Night, was acquired by TicketDirect in 2013.
Dovetail’s venture studio is sector-agnostic (though it has strong experience in fintech, SaaS and marketplaces), and works with startups that may not have a product yet, but have founders who “are ambitious, commercially-savvy and bring industry expertise from the field in which they are trying to solve a problem,” said Frandsen.
When deciding what founders to work with, Dovetail considers at the viability and growth potential of their idea.This includes looking at how well-suited founders are to the issue, if there is enough market potential for the startup to grow into a large company and how much competition there is.
Dovetail has a product agency that serves mostly U.S. companies, but its venture studio is currently focused on Australasian startups, with plans to expand into North America in the future.
“We are actively seeking industries that are large yet underappreciated by the startup community,” Frandsen said. “We’re looking for ideas. that require hard-earned industry experience and can’t easily be replicated by teams of young aspiring entrepreneurs.”
Mercuryo, a startup that has built a cross-border payments network, has raised $7.5 million in a Series A round of funding.
The London-based company describes itself as “a crypto infrastructure company” that aims to make blockchain useful for businesses via its “digital asset payment gateway.” Specifically, it aggregates various payment solutions and provides fiat and crypto payments and payouts for businesses.
Put more simply, Mercuryo aims to use cryptocurrencies as a tool for putting in motion next-gen, cross-border transfers or, as it puts it, “to allow any business to become a fintech company without the need to keep up with its complications.”
“The need for fast and efficient international payments, especially for businesses, is as relevant as ever,” said Petr Kozyakov, Mercuryo’s co-founder and CEO. While there is no shortage of companies enabling cross-border payments, the startup’s emphasis on crypto is a differentiator.
“Our team has a clear plan on making crypto universally available by enabling cheap and straightforward transactions,” Kozyakov said. “Cryptocurrency assets can then be used to process global money transfers, mass payouts and facilitate acquiring services, among other things.”
Image Credits: Left to right: Alexander Vasiliev, Greg Waisman, Petr Kozyakov / MercuryO
Mercuryo began onboarding customers at the beginning of 2019, and has seen impressive growth since with annual recurring revenue (ARR) in April surpassing over $50 million. Its customer base is approaching 1 million, and the company has partnerships with a number of large crypto players including Binance, Bitfinex, Trezor, Trust Wallet, Bithumb and Bybit. In 2020, the company said its turnover spiked by 50 times while run-rate turnover crossed $2.5 billion in April 2021.
To build on that momentum, Mercuryo has begun expanding to new markets, including the United States, where it launched its crypto payments offering for B2B customers in all states earlier this year. It also plans to “gradually” expand to Africa, South America and Southeast Asia.
Target Global led Mercuryo’s Series A, which also included participation from a group of angel investors and brings the startup’s total raised since its 2018 inception to over $10 million.
The company plans to use its new capital to launch a cryptocurrency debit card (spending globally directly from the crypto balance in the wallet) and continuing to expand to new markets, such as Latin America and Asia-Pacific.
Mercuryo’s various products include a multicurrency wallet with a built-in crypto exchange and digital asset purchasing functionality, a widget and high-volume cryptocurrency acquiring and OTC services.
Kozyakov says the company doesn’t charge for currency conversion and has no other “hidden fees.”
“We enable instant and easy cross-border transactions for our partners and their customers,” he said. “Also, the money transfer services lack intermediaries and require no additional steps to finalize transactions. Instead, the process narrows down to only two operations: a fiat-to-crypto exchange when sending a transfer and a crypto-to-fiat conversion when receiving funds.”
Mercuryo also offers crypto SaaS products, giving customers a way to buy crypto via their fiat accounts while delegating digital asset management to the company.
“Whether it be virtual accounts or third-party customer wallets, the company handles most cryptocurrency-related processes for banks, so they can focus more on their core operations,” Kozyakov said.
Mike Lobanov, Target Global’s co-founder, said that as an experiment, his firm tested numerous solutions to buy Bitcoin.
“Doing our diligence, we measured ‘time to crypto’ – how long it takes from going to the App Store and downloading the app until the digital assets arrive in the wallet,” he said.
Mercuryo came first with 6 minutes, including everything from KYC and funding to getting the cryptocurrency, according to Lobanov.
“The second-best result was 20 minutes, while some apps took forever to process our transaction,” he added. “This company is a game-changer in the field, and we are delighted to have been their supporters since the early days.”
Looking ahead, the startup plans to release a product that will give businesses a way to send instant mass payments to multiple customers and gig workers simultaneously, no matter where the receiver is located.