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Payments, Sofi


#331
SoFi’s Ferrari Engine

Published:

Apr 11, 2020


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Posted In:

Payments, Sofi

Published:

Apr 11, 2020


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Putting a Ferrari engine in a Fiat doesn’t make it a Ferrari – but it definitely does improve its performance, as the Fiat Dino once proved.

Publicly traded alternative lenders have been facing immense market pressure, with Lending Club, Ondeck, and Funding Circle all down ~90% since IPO. SoFi’s $1.2b acquisition of Galileo definitively adds horsepower and diversifies revenue ahead of their inevitable IPO. This acquisition is not dissimilar from Lending Club’s acquisition of Radius Bank earlier this year.

As with replacing an engine on a car, the acquisition may have lingering issues. Galileo powers a range of products including payment processing, account setup, direct deposit, early paycheck, and bill pay for a number of challenger banks all of whom are likely competitive with SoFi.

Galileo crossed $100m in ARR and $53b in annualized payments in March – but it remains to be seen whether their customers will consider alternative software providers. SoFi plans to operate Galileo as an arm’s length company akin to AWS, the cloud computing company operated by Amazon and used by many of its competitors.

While no financial details were disclosed, it is widely speculated the majority of the purchase price was in the form of SoFi shares. Shareholders of the combined entity are now betting on the success of integrating a 19-year old engine!

Portfolio News


Four years in, Vestwell makes its big move - The recordkeeping industry hasn't been touched in over 30 years, so portfolio company, Vestwell, is "swapping a Model T for a Tesla" by building one from scratch with a purpose-built digital recordkeeper for 401(k) plans. Read more

Antler calling for startups tackling Covid-19: April 15th Deadline - Portfolio company Antler is looking to fund startups to across Mitigation (e.g. masks, contact tracing, surveillance, data infrastructure), Medical Equipment (e.g. test kits, protective devices, ventilators), Remote Health (e.g. telehealth, remote patient monitoring, symptom checkers) and Digital Tools (e.g. remote work, smart delivery, e-learning). Apply now!

Plaid gives lenders access to small business payroll data amidst SBA PPP time crunch - Plaid is building a product that speeds the payroll portion of emergency loan applications from days to a matter of minutes, relieving much of the manual work currently being done. Read more

SoFi’s Ferrari Engine


Consolidation continues in the fintech industry with SoFi purchasing Galileo. - The deal is comprised of $75m in cash, $250m in seller financing debt and $875m in company stock, according to people familiar with the negotiations who asked not to be named because details were not disclosed. Read more

This Fiat Dino is your cheap entry into Ferrari power - For $36k, you can own a Ferrari-powered classic. The Dino is the result of a particular problem Enzo Ferrari encountered in 1967, which had engine restrictions and hence had to sell 500 engines to Fiat. Read more

SoFi acquiring Galileo in $1.2b deal, resulting in a ‘4x’ return for investor Accel - Last October, Accel led a $77m Series A in Galileo. The startup was profitable and previously bootstrapped for 19 years. Sources familiar with the transaction say the transaction represents an impressive “4x” return for Accel. Read more

Industry News


PayPal, Intuit QuickBooks approved to take part in SBA emergency loan program - PayPal and Intuit are among the first non-bank, fintech companies to be approved for the program. The SBA published guidelines for non-bank lenders to apply as approved lenders on Wednesday evening (application form). Read more

Missed rent payments cascade across the real estate industry - Just 69% of renters paid their rent by April 5, compared to 81% who paid by March 5, according to data from 13m units published by the National Multifamily Housing Council. Roughly 15m households—about 30% of mortgage borrowers—could miss payments. Read more

Supply-chain finance is a new risk in crisis - S&P Inc. called supply-chain finance a “sleeping risk” that can “mask episodes of financial stress.” A prime concern is that the banks or other lenders may yank the financing from struggling companies, cutting off a source of cash at a time when it needs it most. Read more

Will coronavirus be the death of cash? - In a dramatic shift to digital, it has been predicted that 30% of the UK population could move permanently away from using cash because of coronavirus. Early signs of this are ATM withdrawals across the UK have more than halved. Read more

Goldman Sachs launches installment loan business with JetBlue - The bank quietly released a website for something called MarcusPay this week, allowing users to break up big-ticket purchases into monthly payments. Loans ranging from $750 to $10,000 are repaid over 12 or 18 months at a fixed rate of 10.99% to to 25.99%, with no fees apart from interest. Read more

Most insurers won’t touch coronavirus coverage for businesses. In China, it’s easy to get - Since February, dozens of Chinese property-and-casualty insurers have rolled out new policies or expanded existing ones to provide compensation when workers contract Covid-19. Read more

Now the banks’ problem is too much cash - The US Fed has succeeded in flooding the market with cash. U.S. commercial bank deposits grew by more than $420b from the end of February to March 18—an extraordinary amount that puts March on track for a year’s worth of deposit growth. Read more

Move fast, make things — UK fintech’s response to the coronavirus crisis continues - The U.K.’s fintech’s response to the coronavirus pandemic so far might best be described as “move fast, and make things,” as multiple and sometimes impromptu teams roll out financial technology solutions to help combat the crisis. Read more

Visa teams with startup Fold for Bitcoin rewards on new card - Mounting evidence indicates that Visa is warming up to crypto after a rocky start - and a new partnership with startup Fold will now allow Visa users to earn BTC as a reward next to familiar incentives like airline miles. Read more

Vodacom and Safaricom acquire M-Pesa to accelerate mobile money services in Africa - M-Pesa is Africa's largest payments platform with some 40m users in Kenya, Tanzania, and other African countries. It processes over a billion transactions every month, according to Vodacom. Read more

LatAm digital banking gets Covid-19 push - Banks’ digital channels in Latin America are getting a sharp boost from coronavirus social distancing. But it remains unsure whether this can become a long-term trend. Read more

Select Financings


iCapital Network – New York based alternative investing platform raised $146m in venture funding at an $860m valuation led by Ping An. Read more

Neat - Hong Kong-based challenger bank for SMBs raised $11m in Series A funding led by Pacific Century Group. Read more

Paidy - Japanese consumer online payments startup raised a $48m Series C round extension led by ITOCHU. Read more

Perch - Boston based acquirer of Amazon FBA (fulfillment by Amazon) businesses raised $8m in funding led by Spark Capital. Read more

Phos - UK based software-only PoS for merchants raised €1.3m in Seed funding led by New Vision 3. Read more

Podium - Utah based messaging and payments SaaS startup raised $125m in Series C funding at a $1.5b valuation led by Y Combinator's Continuity Fund. Read more

Sila - Portland, Oregon based ACH Payments API raised $7.7m in Seed funding led by Madrona Venture Group and Oregon Venture Fund. Read more

SourceDay - Austin based supply chain management software startup raised $12.5m in Series B funding led by Baird Capital. Read more

Yapily - London based opening banking API has raised $13m in Series A funding led by Lakestar. Read more


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