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#383
Friend Or Foe?

Published:

Apr 17, 2021

Author:

Posted In:

Crypto, CVC

Published:

Apr 17, 2021

Author:

Corporate venture investing is a familiar concept, with the likes of Microsoft, Salesforce and Google having dominated the CVC landscape in the past. However, there are a whole new host of names that are taking this world by storm - and while this is in theory good for the tech industry as a whole, rising concerns about competition and potential conflicts of interest (e.g. investing in a company where your own investors are also major shareholders) have undoubtedly surfaced.

Stripe, Coinbase, Slack and Snowflake are some of the most noteworthy new(er) players in the space, with Stripe most recently leading a $50m round in Ramp, valuing the company at $1.6b. Stripe primarily invests in early-stage companies and according to Crunchbase, has made 33 such investments since its founding in 2010 (others include Fast, Monzo, Rapyd, and Paystack - the latter which it acquired).

Coinbase created a VC arm in 2018 with the goal of backing other promising crypto startups, and has invested in over 100 companies to date. In a sign of the opportunity it sees in the current market, 19 of those investments took place in the first quarter of 2021 alone. The non-fintech focused venture funds have been similarly active, with capital primarily being deployed in companies that have strategic value.

There are several reasons why CVC activity has remained so robust, and why newer players are entering the space at such a rapid pace. First, these investments provide insight into new technology and ideas - no matter how successful a startup may be, they always want to stay ahead of the game. Second, partnerships are important, especially when they come with access to new markets. Third, it is important to establish ties to promising startups early as they may become very attractive acquisition targets down the road. And fourth (but not least), there is potential for large financial returns.

While these CVCs may be the new kids on the block relatively speaking, they have certainly made their presence known, helping to drive CVC funding volumes to record highs in 2020 (+24% v. 2019). The big question going forward will be if founders actually want them on their cap tables - and will they continue to be friends or foes....

Portfolio News

01
Flutterwave

Ocrolus bets on human-in-the-loop infrastructure to automate fintech loan analysis process - The marriage of machines and humans is often the driver of business innovation, but for Ocrolus, it is more than that – it is the core of the final products it offers. In this interview, Ocrolus co-founder and CEO Sam Bobley discusses the evolution of its services, how the startup’s technology complements the robotic process automation system, the company’s pricing model, and its prospects for the market. Read more

Transparency, diversity make Vestwell a "Best Fintech to Work For" - Congratulations to portfolio company Vestwell, which was named the No. 3 "Best Fintech to Work For" by American Banker. The efforts that helped distinguish them in this year's rankings are in the areas of transparency, diversity, employee engagement in decisions and flexibility, including letting people bring their dogs to work. Read more

Flutterwave and Forter partner to reduce merchant fraud in African markets - The partnership, the first of its kind in Africa, will enable merchants to accurately identify legitimate buyers from fraudsters, resulting in increased transaction approvals and reduced friction in the purchasing experience, all without the fear of fraud. Read more

Friend Or Foe?

Coinbase’s VC disclosure underscores tight bonds of crypto investors - Coinbase’s public listing documents revealed an unusual set of circumstances for a startup: Its venture arm, Coinbase Ventures, had acquired stakes in a handful of companies partially owned by some of Coinbase’s own major investors, including Andreessen Horowitz and Union Square Ventures. Such disclosures are the side effect of a growing trend in venture capital. Well-funded startups such as Stripe, taking a page from older tech companies such as Google and Salesforce, are becoming increasingly active VC investors. Read more

Spend management startup Ramp confirms $115m raise at a $1.6b valuation - What to make of Stripe on the Ramp cap table? Stripe itself has a corporate card and spend management product, and was picky when one of its backers put capital into a company that it construed as a rival. According to Glyman, the decision to take investment from Stripe came down to whether his team wanted to work with the larger company — they did — and whether they trusted the payments giant. He decided to. Stripe did not receive a board seat as part of its investment. Read more

"Non-traditional" investors fueled growth in Q1 venture mega deals - Pitchbook defines the “non-traditional” segment as comprising any investor not from a traditional VC fund, including VC arms of corporations, sovereign wealth funds, limited partners (LPs), investment banks, and others. Their research attributes the shift in new participants to the ever-longer venture lifecycle, allowing well-capitalized non-traditional investors to access opportunities out of reach to most traditional funds, due to fund-size constraints. Read more

The 2020 Global CVC Report - CVC-backed funding soared to an all-time high of $73.1b in 2020, increasing 24% from 2019, despite the overall decline in CVC-backed deals. Additionally, GV, Salesforce Ventures, and Intel Capital again topped the list of most active CVCs. New to the top 10 in 2020 were Qualcomm Ventures, Lenovo Capital and Incubator Group, and the Slack Fund. Read more

Industry News

Coinbase fetches $85b valuation in market debut - Coinbase Global Inc. fetched an $85b valuation in its stock market debut Wednesday, a watershed moment for an industry that began a decade ago as an experiment in digital money. Shares of Coinbase, the first major bitcoin-focused company to test the U.S. public market, opened at $381 on the Nasdaq Global Select Market. They rose as high as $429.54 in the first few minutes of trading and ended the session at $328.28. Coinbase went public through a direct listing under the ticker symbol COIN. Read more

SPAC hot streak put on ice by regulatory warnings - Investors are cooling to one of the hottest bets on Wall Street as new regulatory scrutiny of special-purpose acquisition companies cuts the flood of new issues to a trickle while share prices tumble. Critical comments from regulators appear to be scaring off some investors and new offerings. Until last month, roughly five new SPACs hit the stock market every business day in 2021. In the past 14 days, 12 new SPACs have started trading, SPAC Research data show. Read more

2021 saw more inflows to stocks than the past 12 years combined - Money flowing to stocks globally in just the past five months ($576b) has exceeded the inflow seen over the prior 12 years by well over $100b, according to data from Bank of America Global Research. Read more

Jack Ma’s Ant Group bows to Beijing with company overhaul - In a statement, the People’s Bank of China said Ant representatives were summoned to a meeting Monday with four regulatory agencies that also included the country’s banking, securities and foreign-exchange overseers. It said a “comprehensive, viable rectification plan” for Ant has been formulated under the regulators’ supervision over the past few months. Read more

There’s a single New Jersey deli doing $35,000 in sales valued at $100m in the stock market - Hedge fund manager David Einhorn warned of dangers for retail investors that he sees in the market, and one of his main examples was a tiny New Jersey deli called Hometown International with a market capitalization of more than $100m. Einhorn’s highlighting of Hometown comes as politicians, regulators and high-profile investors have publicly fretted about the boom in certain types of stocks over the past year. Read more

Fintech Wise in talks with regulators over direct UK listing - Wise, the fintech formerly known as TransferWise, is in discussions with British financial regulators about going public via a direct listing, in what would be a landmark deal for the UK market. Read more

You want to invest responsibly? Wall Street smells opportunity! - In the first quarter of 2021, exchange-traded ESG portfolios listed in the U.S. took in $14.8b in new money. More than half their total assets of $86.2b have flowed in since the beginning of 2020. Last year, sustainable portfolios in the US took in nearly one-fourth of all new money across ETFs and mutual funds alike. Read more

Apple Music reveals how much it pays when you stream a song - Apple Music told artists it pays a penny per stream, roughly double what Spotify, pays music-rights holders per stream. Spotify pays an average of about one-third to one-half penny per stream, though its larger user base generates many more streams. Apple’s payments come out of monthly subscription revenue from users. Read more

Chinese students pay agents $12,000 for shot at Wall Street - Getting a shot at a coveted investment banking or finance job is a cutthroat, and sometimes controversial, business in China. Career consulting firms have mushroomed in recent years, enlisting what they say are thousands of finance professionals to help open doors to students who can afford it. Firms are charging $12,000 or more to help students land internships and eventually jobs at Wall Street powerhouses such as Goldman Sachs Group Inc. and Citigroup Inc. Read more

How payment processor Stripe became Silicon Valley’s hottest startup - The pandemic threatened to clobber Stripe. Instead, it turbocharged the company. Stripe’s revenue last year rose nearly 70%, to about $7.4b, according to people with knowledge of the company’s finances. Other startups might have flashier apps or more recognized brands, but Stripe showed that it is better to be a workhorse than a show pony. Read more

Trustly announces plan for Nasdaq Stockholm IPO - Swedish payments company Trustly has become the latest fintech start-up to announce its intention to list on the stock market, seeking a valuation of about $9b. The announcement comes as investor interest in payments groups is surging, with Stripe in the US and Sweden’s Klarna, both unlisted, tripling their valuations in recent weeks. Read more

Microstrategy will now pay board of directors in Bitcoin as treasury grows to nearly 100K BTC - The company will now pay non-employee directors in bitcoin, citing its commitment to the cryptocurrency “given its ability to serve as a store of value, supported by a robust and public open-source architecture, untethered to sovereign monetary policy.” Read more

Russia pushes ahead with digital ruble - The Bank of Russia has set out plans to build a prototype digital ruble by the end of the year. The bank has opted for a two-tier retail model which assumes it is both the issuer of digital rubles and operator of the platform. Read more

Scramble to complete property deals shows scope for digital disruption - In early March, tens of thousands of English homebuyers were still scrambling to complete their purchases before a Covid relief measure on property tax expired. It left Rishi Sunak, the UK chancellor of the exchequer, with little choice: his so-called stamp-duty “holiday” would have to be extended. For advocates of “proptech”, Sunak’s intervention proved a point: property transactions, both commercial and residential, are in desperate need of disruptive digitisation. It could make life easier for everyone: buyers, sellers, tenants and landlords. Read more

Massachusetts regulators seek to revoke Robinhood's license; brokerage sues - The case is the first enforcement action brought under a state fiduciary rule that took effect in September that raised the investment-advice standard for brokers. Read more

BBVA offers a sustainable alternative for all of its products in Spain - BBVA has fulfilled its commitment to offer a sustainable alternative for its products in Spain – both for individuals and companies. Read more

ID regulations hinder digital onboarding in Mexico - Digital onboarding has accelerated financial inclusion in Mexico, but regulation “still has room for improvement,” say fintech and regulatory experts. Read more

Square seeks Irish SMEs to test early access program before launch in late 2021 - Square has announced an Early Access Program in Ireland, offering exclusive access to an integrated suite of tools to sell in-person and online. This limited-space programme is now seeking SMEs across Ireland who want access to Square’s comprehensive solution. Read more

Select Financings

Appzone - Nigeria based developer of software for financial institutions raised $10m in Series A funding led by CardinalStone Capital Advisers. Read more

Better.com - New York based digital mortgage lender raised $500m in new funding led by Softbank. Read more

Clearcover - Chicago based car insurance startup raised $200m in Series D funding led by Eldridge. Read more

ConsensSys - New York based Etherium startup studio raised $65m in new funding from investors including J.P. Morgan, Mastercard and UBS. Read more

Enso Finance - Zurich based social trading platform for decentralized finance raised $5m in new funding led by Polychain Capital and Beacon. Read more

Hatch - San Francisco based neobank for SMBs raised $20m in new funding from Kleiner Perkins, Foundation Capital and SVB. Read more

Level - New York based maker of financial products for employers raised $27m in Series A funding led by Khosla Ventures and Lightspeed Venture Partners. Read more

Netstars - Japan based QR code payments company raised $61m in new funding led by KKR. Read more

Routable - San Francisco based B2B payments company raised $30m in Series B funding led by Sam Altman and Jack Altman. Read more

Sunday - Atlanta based restaurant payment app raised $24m in Seed funding led by Coatue. Read more

The Zebra - Austin based insurance comparison site raised $150m in Series D funding led by an unnamed investor. Read more

Wage - San Francisco based payroll data sharing company raised $5m in Seed funding led by Gradient Ventures. Read more

Curated News with Context

Delivered every Monday, the weekly newsletter, produced by our team, provides a tightly edited rundown of global fintech news, along with a bit of our original analysis.

#383 Friend Or Foe?