Fintech Highlights - 1/17/2022
Pinned to the Top
Regulation is coming for venture capital.
Evidence - Part 1: Reuters reports that the SEC "is seeking details about FTX investors' due diligence," including information on firm policies and if those policies were followed.
Evidence - Part 2: The SEC is working on a rule that would eliminate private funds from seeking indemnification for simple negligence, effectively making it easier for limited partners to sue.
What to know #1: The FTX-related inquiries are unlikely to amount to much, even if some VC fund managers did little more than blindly follow Sequoia Capital into the abyss.
- Limited partners are rarely promised specific due diligence procedures, or requirements that investments only go to startups with boards, CFOs, or similar sorts of corporate governance. LPs know this is a high-risk asset class, and that general partners often have little time to access the most popular deals. If they're dissatisfied, they vote with their feet during follow-on fundraising.
- Yes, there could be exceptions on FTX. Such as if any funds invested more than they were allowed, as a percentage of committed capital, or if they subsequently lied to investors about actions taken during diligence. But neither seems likely.
What to know #2: The negligence change, which is loudly opposed by venture's trade lobby, would matter much more to the industry than has FTX.
- Already, limited partners are allowed to sue for gross negligence, which covers reckless or purposeful acts. But expanding liability to simple negligence would effectively enable LPs to sue every time a deal goes bad.
- To be clear, most LPs wouldn't take advantage of this new ability; particularly large institutional investors who'd be scared of getting a litigious reputation that would preclude them from accessing other funds.
- But some smaller LPs, like high-net-worth individuals, are a different animal, and often represent a larger percentage of micro venture funds that would struggle to handle the legal bills and distraction. At worst, an LP variant of patent trolls could emerge.
The bottom line: The SEC has never really paid much attention to venture capital, which perhaps explains its clumsy efforts. But it clearly wants more oversight over this ever-growing asset class, in whatever form that may eventually take.
The BFD
African payments giant Flutterwave is weighing up buying Railsr.
The UK fintech specialises in embedded finance solutions, including banking services, credit cards and digital wallets.
Flutterwave, meanwhile, provides payment infrastructure for global merchants.
Why this is the BFD: Railsr is one of the first embedded financial services companies to achieve scale, after flexing post-Open Banking regulation in the UK. But the news comes after a disappointing Series C funding round last autumn, in which Railsr’s valuation dropped to $250m - well below that of their previous round.
The big picture: Off the back of another tumultuous year in fintech, wide-scale consolidation across the space is a pretty safe bet.Juniper Research has estimated that revenue from the embedded finance sector will exceed $183bn globally by 2027, which is why Railsr’s potential sale is such a hot property.
And with MFS Africa acquiring the US-based Global Technology Partners last year, perhaps we’ll soon see a wave of African fintechs stepping up their international M&A game. Never a dull moment in this industry.
M&A
Fidelity Investments acquired Shoobox, a Boston-based provider of automated equity management operations and financing software for private companies. Shoobox had raised over $10m from backers like Steve Papa and Salient Ventures. More here →
Remote payroll startup Deel acquired fintech Capbase for an undisclosed amount in a cash and stock deal, the companies shared with me exclusively. Last valued at $12 billion, Deel is one of the buzziest fintechs around, and its decision to pick up Capbase reflects its intent to enter the equity management space. More here →
Vouch, an insurtech focused on startups, acquired lending startup Level for an undisclosed amount. As reported by Life Insurance International: “Level has created a tech-driven underwriting process for early-stage fintech startups that is claimed to have brought new efficiency and speed to the debt-raising process. Vouch hopes to leverage Level’s expertise in developing underwriting technologies to underwrite and support complex insurance products. NOTE: Both Vouch and Level are Y Combinator alums. More here →
American Express announced that it has entered into an agreement to acquire Nipendo, a company that aims to automate and streamline business-to-business (B2B) payments processes for global businesses that has raised a known $12 million in funding. The credit card giant has been on “a multiyear journey…to really grow and expand capabilities in B2B payments.” “What we’re trying to do with Nipendo is add to that capability set and provide more value to suppliers who are trying to send invoices, interact with buyers and transact with data around B2B payments.” More here →
Pagaya (Nasdaq: PGY) acquired Darwin Homes, an Austin, Texas-based real estate investment management platform that had raised over $20m from firms like Canvas Ventures, Wave Capital, Pear VC, Khosla Ventures, Fifth Wall, TQ Ventures and Camber Creek. More here →
Abrigo, who provides compliance, credit risk and lending solutions acquired South Carolina-based Valuant, a developer of accounting software for banks and financial institutions. The terms of the deal were not made public. More here →
Voyager Digital, a bankrupt crypto lender, received initial court approval to move forward with its proposed sale to Binance.US. More here →
BlackRock acquired a minority stake in Human Interest, an SF-based provider of 401(k)s for small and midsized businesses that’s raised over $330m in VC funding from firms like SoftBank and TPG Rise Fund. More here →
Lessen, a Scottsdale, Ariz.-based property services platform, acquired Chicago-based facilities maintenance software provider SMS Assist for $950m. Lessen has raised over $200m in VC funding from firms like Fifth Wall, Khosla Ventures and General Catalyst, while SMS Assist raised over $250m from firms like Goldman Sachs, HDS Capital, Insight Partners and Pritzker Group VC. More here →
Skyward Specialty Insurance Group, a Houston-based specialty property and casualty insurer focused on underserved markets, raised $134m in its IPO. The company priced 9m shares at $15 (higher share count, middle of price range), and will list on the Nasdaq (SKWD). More here →
Marsh McLennan Agency Acquires HMS Insurance Associates
Marsh McLennan Agency (MMA), a subsidiary of Marsh, today announced the acquisition of Hunt Valley, Maryland-based HMS Insurance Associates, Inc., one of the nation’s largest independent agencies. Terms of the acquisition were not disclosed. More here →
Embedded Insurance
Cover Genius, the leading insurtech for embedded protection, today announced it is partnering with HomeToGo, the marketplace with the world’s largest selection of vacation rentals, to simplify the short-term rental experience with comprehensive embedded protection. More here →
Fintech
Butter, an SF-based accidental payments mitigation startup, raised $22m in Series A funding. After signing up a customer, Butter’s team dives into the company’s financial backend to build a bespoke machine learning-powered model that identifies all the ways the existing payments infrastructure is causing unintended churn. More here →
Canary, a fintech startup that helps employers set up emergency relief funds for workers, raised $2.9m in seed funding led by Capital One Ventures. The startup sells software to fintechs and others, allowing customers to create loan programs and service the resulting products. More here →
Alkimiya, a Wilmington, Del.-based decentralized capital markets protocol, raised $7.2m. Alkimiya aims to provide hedging solutions for blockspace producers such as miners and staking validators. More here →
Mondu, a German B2B payments startup, raised $13m in Series A extension funding. Valar Ventures led, and was joined by FinTech Collective. More here →
Kwara, a Kenyan credit union digitization startup, raised $3m in new seed funding. It also announced that it signed an exclusive digital solutions distribution agreement with the Kenya Union of Savings & Credit Cooperatives (Kuscco), the national umbrella body representing saccos, gaining connections to a pool of over 4,000 saccos for its banking-as-a-service offering. More here →
Komunal, an Indonesian rural bank digitization startup, raised $8.5m.The fintech partners with more than 220 banks in tier 2 and tier 3 cities spread through 19 provinces. More here →
Investtech
Public.com, an investing platform with more than 3 million members, announced last week that it has begun rolling out Treasury accounts through a partnership with fintech startup Jiko. According to the two companies, the accounts allow members to invest their cash in U.S. Treasury bills that “are automatically reinvested at maturity and can be sold at any time.” A spokesperson told me that Public’s Treasury accounts “offer members similar flexibility to a high-yield savings account, but are currently offering even higher yields.” More here →
Crypto
The Easy Co., a social crypto wallet startup, raised $14.2m in seed funding. The company allows customers to “curate your NFT collections, community affiliations, and tokens across blockchains.” More here →
C14, a New York-based web3 payments startup, raised $2.5m in seed funding. C14 believes that “simplified crypto/fiat access is the top problem facing developers as well as consumers today.” More here →
• CyberX, a market maker for digital assets, raised $15m. The company specializes in “increasing market liquidity and efficiency with world-class, real-time HFT algos and low-latency infrastructure.” More here →
Insuretech
Travel insurance provider battleface today announced the launch of Robin Assist, a new tech-driven platform as a service for travel insurance. More here →
CoverEase, a digital insurance broker, announced today the addition of Ethos' life insurance to their digital offering. Ethos allows CoverEase customers the ability to instantly quote and purchase life insurance policies for up to $2 million in coverage, without a medical exam or blood test. More here →
Proptech
Doorstead, an SF-based rental property management startup, raised $21.5m in Series B funding. The company offers “guaranteed” rental payments to homeowners, and more. More here →
Welcome Homes, a New York-based luxury homebuilding platform, raised $29m in Series A funding. The company describes their offering as “the platform to build investment properties anywhere at the click of a button.” More here →
Splitero, a San Diego-based fintech for helping homeowners access home equity, raised $11.7m in Series A funding. More here →
From the Stash
What are 11:FS’ fintech predictions for 2023? - Luckily for you, their very own Nostradamuses have been staring into their crystal balls and reading the tea leaves, and I’m excited to share with you their official fintech predictions for 2023… More here →
Stripe Trims Internal Valuation Again As Unicorn Share Prices Plummet - Payments unicorn Stripe has cut its internal valuation by 11% to $63 billion. More here →
Used Car Startups And Backers Stuck As Market Stalls. Selling used cars hasn’t historically been the most admired profession. But at least it had a reputation for being profitable.Not these days. More here →
Coinbase Lays Off 950 Employees, or at Least 20% of Staff - Coinbase is laying off about 950 people as it aims to slash 25% of costs by the end of next quarter, CEO Brian Armstrong announced in a blog post. More here →
US Bank validates innovation efforts at CES - U.S. Bank executives attend the Consumer Electronics Show to discover new technology that could have applications within the financial services industry – tech the bank’s innovation teams should pursue. More here →
Google Cloud predicts 4 trends driving change for financial services in 2023 - “Change is opportunity, and there is plenty of great innovation out there. It’s pretty clear, though, that artificial intelligence, security and resilience, and a refocus on basics, will be the currency of this year’s financial world. Here are four critical ways you’ll be seeing it happen.” More here →
3 Smart Home Tech Trends For Insurers To Watch - From auto telematics to using satellite imagery to assess the risk profile of homes, carriers are turning to technology to streamline offerings and operations, reduce costs, and build a better overall customer experience. More here →
Wells Fargo is taking a step back from mortgages. - Instead of its previous goal of reaching as many Americans as possible, the company will now focus on home loans for existing bank and wealth management customers and borrowers in minority communities. More here →
Reports / Webinars / Conferences
Tech Talk - Plaid - “Meet some of our customers and discover the impact that partnering with Plaid can create.”
More here →
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