Posted In:

IPO, Affirm, BNPL, Lending


#370
Caterpillars To Butterflies

Published:

Jan 16, 2021


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Posted In:

IPO, Affirm, BNPL, Lending

Published:

Jan 16, 2021


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Fintech 1.0 online lenders have been trying to revamp their public markets perception for some time (see SoFi’s Ferrari Engine - Apr 2020). Under the hood, they’ve transformed themselves and the metamorphosis is beginning to come to fruition.

Fintech 2.0 lenders are having their moment. Affirm’s first week as a public company saw its valuation skyrocket by 100% to $30b, SoFi’s SPAC values it at $8.65b, and Upstart is trading up 100% since its IPO last month.

This is a long cry from the somber public performance of the first-generation of lenders - who at some point were trading at 90% since their respective IPOs or have had to sell themselves (see Kabbage With No Baggage - Aug 2020).

It's a pretty wholesale shift - from the old cohort (competing on APR - come get a loan and never come back) versus the new cohort (higher engagement, multi-product platforms, focused on point of sale and embedded products with multiple revenue streams).

These lenders have had more time and cohorts to stress-test their inputs, strengthening their underwriting models. Moreover, a wave of increased connectivity (APIs to payroll, accounting, etc.) and contextualized data sources have helped accelerate these improvements.

Let's hope this new cohort don't, metaphorically, get their beards caught in the flywheel of their at pos financed home exercise bike!

Portfolio News


The mortgage firehose of 2020: A catalyst for fintech - Matt Levinson is featured in portfolio company Ocrolus' guest blog series, Investor Insights, explaining why 2021 is the year to finally digitize mortgage - the most painful financial transaction many of us have experienced. In this blog post, he lays out the thesis for Mortgage 2.0, answers "why now," and reviews the landscape of startups innovating in the space. Read more

Visa abandons planned acquisition of Plaid after DOJ challenge - The Justice Department lawsuit revealed a high level of concern at Visa about the possibility of disruption in payments and the impact that would have on the company. The lawsuit alleged that Plaid is planning to create an alternative payments platform that wouldn’t rely on debit cards. The government alleged that Visa’s CEO described the deal as an “insurance policy” to neutralize a threat to the company’s debit business. Read more

NYDIG announces acquisition of Digital Assets Data - Congratulations to portfolio company NYDIG on its acquisition of Digital Assets Data, a leading data, research, and analytics company building enterprise-grade software and data feeds. The acquisition adds to NYDIG’s best-in-class platform for institutions, hedge funds, high net worth investors, and banks looking to unlock the full potential of Bitcoin as an asset class and comes amidst a more than 10x increase in NYDIG clients in 2020 and continued acceleration across its franchises. Read more

Caterpillars To Butterflies


Affirm IPO highlights rapid growth of ‘buy now, pay later’ industry - Affirm kicked off trading on the Nasdaq on Wednesday, amid what has turned out to be a good year for “buy now, pay later” companies. Shares of Affirm, the first major tech IPO of 2021, popped in early trading Wednesday, jumping 100 percent from the $49 per share open to just over $100 per share before closing out the day at $97.24 per share, valuing the company at $23.6b. Read more

Time to tighten rules on ‘buy now pay later’ operators? - During the lockdown, millions of people have turned from paying by debit or credit card to making online purchases by a fast-growing new method — buy now and pay later "BNPL". But with roughly six companies, led by Klarna and Clearpay, now offering this service there is mounting concern about whether BNPL encourages people to buy things that they can’t afford. Read more

Market trends in the ecommerce financing, consumer credit, and BNPL industry - The pandemic's impact and BNPL's overall rise in popularity will lead the industry to rack up $680b in transaction volume worldwide in 2025. That forecasts a compound annual growth rate (CAGR) of 13.23% from the $285b the industry was estimated to record in 2018. While some BNPL solutions are available in-store, they are native to ecommerce checkout, making them more widely available when shopping online. And with ecommerce sales climbing an estimated 44.4% year-over-year (YoY) in Q2 2020, more consumers may choose to use BNPL solutions more regularly, if they haven't already. Read more

Affirm, SoFi herald potential boom in new fintech listings - A confluence of factors have helped to create the current opportunity, which include high multiples for stocks, tailwinds for digital financial services adoption during the pandemic, and low interest rates. Many startups are now in a position to seize the moment. Over the last three years, fintech funding has trended toward bigger deals for later-stage companies, leading to a buildup of startups that are primed to go public. Read more

Industry News


Morgan Stanley buys 10% stake in MicroStrategy to up Bitcoin exposure - Morgan Stanley have increased their stake in MicroStrategy by almost 500% from Q3 2020, indicating a massive vote of confidence for Michael Saylor. Since Saylor’s investments, MicroStrategy’s share performance has generally followed the price of Bitcoin. Morgan Stanley’s latest investment could thus be the bank’s attempt to profit from BTC’s high watermarks without being a HODLer. Read more

American Family Insurance to acquire small business insurtech Bold Penguin - Madison, Wisconsin-based American Family Insurance is acquiring insurtech company Bold Penguin that serves small businesses. Bold Penguin's digital exchange is used by insurance agents, brokers and other distributors to match, quote and bind policies from a range of insurers. Financial details of the transaction were not disclosed. Read more

Revolut applies to become a UK bank - The company holds client cash under a so-called “e-money” license. A full banking license would allow it to offer things like overdraft lending and loans. Customers would also be covered by the Financial Services Compensation Scheme (FSCS), which provides government protection on deposits of up to £85,000. Read more

Lost passwords lock millionaires out of their Bitcoin fortunes - Of the existing 18.5m Bitcoin, around 20 percent — currently worth around $140b — appear to be in lost or otherwise stranded wallets, according to the cryptocurrency data firm Chainalysis. Wallet Recovery Services, a business that helps find lost digital keys, said it had gotten 70 requests a day from people who wanted help recovering their riches, three times the number of a month ago. Read more

Walmart to create fintech start-up with investment firm behind Robinhood - Walmart said Monday that it’s creating a fintech start-up with Ribbit Capital, with plans to develop unique and affordable financial products for Walmart employees and customers. The startup will be majority-owned by Walmart and its board will include several company executives. It said it will also name independent industry experts to the board and may acquire or partner with other fintech companies. Read more

Stripe stops processing payments for Trump campaign website - The financial-technology company handles card payments for millions of online businesses and e-commerce platforms, including Mr. Trump’s campaign website and online fundraising apparatus. Stripe is cutting off the president’s campaign account for violating its policies against encouraging violence, the people said. Read more

NCR’s $1.7b Cardtronics bid signals appeal of ATM, debit network - NCR is looking to buy Cardtronics, in a deal that takes place amid recent news that Apollo Global and Hudson Executive Capital, private equity firms, were also gunning for Cardtronics. The PE firms would reportedly pony up $35 a share, and the NCR proposal would offer $39 per Cardtronics share, which would be equivalent to about $1.7b. Read more

Intercontinental Exchange’s cryptocurrency venture to go public through a SPAC - The venture, called Bakkt, is expected to have a valuation of $2.1b after completing the merger with VPC Impact Acquisition Holdings. As part of the deal, Bakkt will raise an additional $532m from VPC’s funds and a concurrent capital raise. That will support development and marketing of the Bakkt App, which is envisioned as a tool to let people manage their holdings of various digital assets. Read more

Investment in financial services using blockchain poised for growth in 2021 - Blockchain experts say 2021 is poised to see better adoption and venture capital investment in the space. They point to more financial services apps built using blockchain technology, along with more widespread acceptance of cryptocurrency, as bolstering the favorable forecasts. Read more

Millions of stimulus payments for TurboTax customers and others sent to wrong accounts - $600 was wired across 100m transactions - yet 13m people may have not reviewed their stimulus payment. Earlier this week, the IRS attributed the error to the speed at which the new law required the agency to issue the second round of Economic Impact Payments. Read more

Fitch to buy CreditSights in bid to bolster debt research - Fitch Group, the parent company of the namesake credit rating agency, has agreed to buy the debt research company CreditSights in the latest bout of consolidation among providers of financial information. Read more

Goldman Sachs inches closer to offering Marcus checking accounts - Last year, Goldman said it was seeking to gather $125b in consumer deposits with a goal of $700m in pretax income from the business. The bank plans to issue debit cards into mobile wallets, and for offerings that provide customers with real-time access to their spending data. Read more

Anchorage granted US's first national crypto bank charter - Anchorage will have conditional authorization to operate as a trust institution nationally. The charter is the first of its kind, part of an idea of a "fintech charter" stretching back to the Obama years, but which has been accelerated under the leadership of Acting Comptroller Brian Brooks, formerly of Coinbase's legal team. However, the actual agreement between Anchorage and the OCC specifies a point that has been central to the debate around the fintech charter; namely, that the new species of banks will not hold deposits. Read more

Vanguard’s assets hit record $7t - Investors poured a record $210b last year into Vanguard’s exchange traded fund arm, which secured more than a quarter of the ETF industry’s entire global cash inflows in 2020. It lost some assets after relinquishing a handful of institutional clients in China and Australia. Read more

Get ready for self-driving banks - In 1961, Popular Science magazine envisioned self-driving cars. The reality arrived sooner than anyone anticipated, before safety regulators could adapt, and autonomous vehicles brought new risks that legacy rules never considered. Banking is headed down the same road. And it’s being driven by the technology behind decentralized finance, or DeFi. Read more

Remote-work boom during Covid-19 pandemic draws real-estate startups - Many young professionals who left major cities plan to return eventually, fueling demand for furnished short-term housing. Well funded start-ups are stepping in to help fill the gap. Read more

Winklevoss twins consider taking Gemini crypto exchange public - An IPO, direct listing or even a merger with a SPAC would be the latest attempt by early advocates of Bitcoin such as the Winklevoss brothers to unlock their digital wealth. Coinbase, the biggest U.S. cryptocurrency exchange, filed in December with the SEC to go public. Bakkt, the cryptocurrency platform majority-owned by Intercontinental Exchange, plans to go public through a merger with a blank-check firm. Read more

Select Financings


Arca - Los Angeles based digital asset management startup raised $10m in Series A funding led by RRE Ventures. Read more

Blend - San Francisco based digital lending platform raised $300m in Series G funding led by Coatue and Tiger Global. Read more

Checkout.com - London based online payments platform raised $450m in Series C funding led by Tiger Global. Read more

Clark - Germany based digital insurance platform raised €69m in Series C funding led by Tencent. Read more

Curve - London based over-the-top banking platform that consolidates all bank cards into a single smart card and app raised $95m in Series C funding led by IDC Ventures, Fuel Venture Capital, and Vulcan Capital. Read more

Enfusion - Chicago based investment management SaaS platform raised $150 million in new funding from Iconiq Growth. Read more

Grab Financial - Singapore based financial services group raised $300m in Series A funding led by Hanwha Asset Management. Read more

Jedox - Germany based provider of financial modeling and analytics software raised over $100m in new funding led by Insight Partners. Read more

La Haus - Colombia based real estate tech startup raised $35m in Series B funding led by Greenspring Associates. Read more

LendingPoint - Georgia based fintech platform that provides financing origination tools for e-commerce, point-of-sale, lending institutions and consumers raised $125m in new funding led by Warburg Pincus. Read more

Modern Treasury - San Francisco based provider of payment operations software raised $38m in Series B funding led by Altimeter Capital. Read more

MoMo - Vietnam based e-wallet company raised $100m in Series D funding led by Warburg Pincus and Goodwater Capital. Read more

Mosaic - San Diego based strategic finance platform raised $18.5m in Series A funding led by General Catalyst. Read more

Moss - Berlin based payments platform and credit card for SMBs raised €21m in Series A funding led by Valar Ventures. Read more

MX - Utah based data platform for banks, credit unions and fintech companies raised $300m in Series C funding led by TPG Capital. Read more

Rapyd - London based fintech-as-a-service platform raised $300m in Series D funding led by Coatue. Read more

Relay Payments - Atlanta based payments startup in the transportation, logistics, and supply chain industries raised $43m in new funding led by Addition. Read more

Rho - New York based digital banking platform raised $15m in Series A funding led by M13 Ventures. Read more

X1 Card - San Francisco based credit card startup that bases decisions on income raised $12m in new funding led by Spark Capital. Read more


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