UK’s MarketFinance secures $383M to fuel its online loans platform for SMBs

Small and medium businesses regularly face cashflow problems. But if that’s an already-inconvenient predicament, it has been exacerbated to the breaking point for too many during the Covid-19 pandemic. Now, a UK startup called MarketFinance — which has built a loans platform to help SMBs stay afloat through those leaner times — is announcing a big funding infusion of £280 million ($383 million) as it gears up for a new wave of lending requests.

“It’s a good time to lend, at the start of the economic cycle,” CEO and founder Anil Stocker said in an interview.

The funding is coming mostly in the form of debt — money loaned to MarketFinance to in turn loan out to its customers as an approved partner of the UK government’s Recovery Loan Scheme; and £10 million ($14 million) of it is equity that MarketInvoice will be using to continue enhancing its platform.

Italian bank Intesa Sanpaolo S.p.A. and an unnamed “global investment firm” are providing the debt, while the equity portion is being led by Black River Ventures (which has also backed Marqeta, Upgrade, Coursera and Digital Ocean) with participation from existing backer, Barclays Bank PLC. Barclays is a strategic investor: MarketFinance powers the bank’s online SMB loans service. Other investors in the startup include Northzone.

We understand that the company’s valuation is somewhere in the region of under $500 million, but more than $250 million, although officially it is not disclosing any numbers.

Stocker said that MarketFinance has been profitable since 2018, one reason why it’s didn’t give up much equity in this current tranche of funding.

“We are building a sustainable business, and the equity we did raise was to unlock better debt at better prices,” he said. “It can help to post more equity on the balance sheet.” He said the money will be “going into our reserves” and used for new product development, marketing and to continue building out its API connectivity.

That last development is important: it taps into the big wave of “embedded finance” plays we are seeing today, where third parties offer, on their own platforms, loans to customers — with the loan product powered by MarketFinance, similar to what Barclays does currently. The range of companies tapping into this is potentially as vast as the internet itself. The promise of embedded finance is that any online brand that already does business with SMEs could potentially offer those SMEs loans to… do more business together.

MarketFinance began life several years ago as MarketInvoice, with its basic business model focused on providing short-term loans to a given SMB against the value of its unpaid invoices — a practice typically described as invoice finance. The idea at the time was to solve the most immediate cashflow issue faced by SMBs by leveraging the thing (unpaid invoices, which typically would eventually get paid, just not immediately) that caused the cashflow issue in the first place.

A lot of the financing that SMBs get against invoices, though, is mainly in the realm of working capital, helping companies make payroll and pay their own monthly bills. But Stocker said that over time, the startup could see a larger opportunity in providing financing that was of bigger sums and covered more ambitious business expansion goals. That was two years ago, and MarketInvoice rebranded accordingly to MarketFinance. (It still very much offers the invoice-based product.)

The timing turned out to be fortuitous, even if the reason definitely has not been lucky: Covid-19 came along and completely overturned how much of the world works. SMEs have been at the thin edge of that wedge not least because of those cashflow issues and the fact that they simply are less geared to diversification and pivoting due to shifting market forces because of their size.

This presented a big opportunity for MarketInvoice, it turned out.

Stocker said that the early part of the Covid-19 pandemic saw the bulk of loans being taken out to manage business interruptions due to Covid-19. Interruptions could mean business closures, or they could mean simply customers no longer coming as they did before, and so on. “The big theme was frictionless access to funding,” he said, using technology to better and more quickly assess applications digitally with “no meetings with bank managers” and reducing the response time to days from the typical 4-6 weeks that SMBs would have traditionally expected.

If last year was more about “panicking, shoring up or pivoting,” in Stocker’s words, “now what we’re seeing are a bunch of them struggling with supply chain issues, Brexit exacerbations and labor shortages. It’s really hard for them to manage all that.”

He said that the number of loan applications has been through the roof, so no shortage of demand. He estimates that monthly loan requests have been as high as $500 million, a huge sum for one small startup in the UK. It’s selective in what it lends: “We choose to support those we thought will return the money,” he said.

#api, #bank, #barclays, #ceo, #corporate-finance, #coursera, #digital-ocean, #economy, #embedded-finance, #europe, #finance, #funding, #invoice, #loans, #marketfinance, #marketinvoice, #marqeta, #money, #partner, #short-term-loans, #startup-company, #uk-government, #united-kingdom

Airwallex raises $200M at a $4B valuation to double down on business banking

Business, now more than ever before, is going digital, and today a startup that’s building a vertically integrated solution to meet business banking needs is announcing a big round of funding to tap into the opportunity. Airwallex — which provides business banking services both directly to businesses themselves, as well as via a set of APIs that power other companies’ fintech products — has raised $200 million, a Series E round of funding that values the Australian startup at $4 billion.

Lone Pine Capital is leading the round, with new backers G Squared and Vetamer Capital Management, and previous backers 1835i Ventures (formerly ANZi), DST Global, Salesforce Ventures and Sequoia Capital China, also participating.

The funding brings the total raised by Airwallex — which has head offices in Hong Kong and Melbourne, Australia — to date to $700 million, including a $100 million injection that closed out its Series D just six months ago.

Airwallex will be using the funding both to continue investing in its product and technology, as well as to continue its geographical expansion and to focus on some larger business targets. The company has started to make some headway into Europe and the UK and that will be one big focus, along with the U.S.

The quick succession of funding, and that rising valuation, underscore Airwallex’s traction to date around what CEO and co-founder Jack Zhang describes as a vertically integrated strategy.

That involves two parts. First, Airwallex has built all the infrastructure for the business banking services that it provides directly to businesses with a focus on small and medium enterprise customers. Second, it has packaged up that infrastructure into a set of APIs that a variety of other companies use to provide financial services directly to their customers without needing to build those services themselves — the so-called “embedded finance” approach.

“We want to own the whole ecosystem,” Zhang said to me. “We want to be like the Apple of business finance.”

That seems to be working out so far for Airwallex. Revenues were up almost 150% for the first half of 2021 compared to a year before, with the company processing more than US$20 billion for a global client portfolio that has quadrupled in size. In addition to tens of thousands of SMEs, it also, via APIs, powers financial services for other companies like GOAT, Papaya Global and Stake.

Airwallex got its start like many of the strongest startups do: it was built to solve a problem that the founders encountered themselves. In the case of Airwallex, Zhang tells me he had actually been working on a previous start-up idea. He wanted to build the “Blue Bottle Coffee” of Asia out of Hong Kong, and it involved buying and importing a lot of different materials, packaging and of course coffee from all around the world.

“We found that making payments as a small business was slow and expensive,” he said, since it involved banks in different countries and different banking systems, manual efforts to transfer money between them and many days to clear the payments. “But that was also my background — payments and trading — and so I decided that it was a much more fascinating problem for me to work on and resolve.”

Eventually one of his co-founders in the coffee effort came along, with the four co-founders of Airwallex ultimately including Zhang, along with Xijing Dai, Lucy Liu and Max Li.

It was 2014, and Airwallex got attention from VCs early on in part for being in the right place at the right time. A wave of startups building financial services for SMBs were definitely gaining ground in North America and Europe, filling a long-neglected hole in the technology universe, but there was almost nothing of the sort in the Asia Pacific region, and in those earlier days solutions were highly regionalized.

From there it was a no-brainer that starting with cross-border payments, the first thing Airwallex tackled, would soon grow into a wider suite of banking services involving payments and other cross-border banking services.

“In last 6 years, we’ve built more than 50 bank integrations and now offer payments 95 countries payments through a partner network,” he added, with 43 of those offering real-time transactions. From that, it moved on the bank accounts and “other primitive stuff” with card issuance and more, he said, eventually building an end-to-end payment stack. 

Airwallex has tens of thousands of customers using its financial services directly, and they make up about 40% of its revenues today. The rest is the interesting turn the company decided to take to expand its business.

Airwallex had built all of its technology from the ground up itself, and it found that — given the wave of new companies looking for more ways to engage customers and become their one-stop shop — there was an opportunity to package that tech up in a set of APIs and sell that on to a different set of customers, those who also provided services for small businesses. That part of the business now accounts for 60% of Airwallex’s business, Zhang said, and is growing faster in terms of revenues. (The SMB business is growing faster in terms of customers, he said.)

A lot of embedded finance startups that base their business around building tech to power other businesses tend to stay arm’s length from offering financial services directly to consumers. The explanation I have heard is that they do not wish to compete against their customers. Zhang said that Airwallex takes a different approach, by being selective about the customers they partner with, so that the financial services they offer would never be the kind that would not be in direct competition. The GOAT marketplace for sneakers, or Papaya Global’s HR platform are classic examples of this.

However, as Airwallex continues to grow, you can’t help but wonder whether one of those partners might like to gobble up all of Airwallex and take on some of that service provision role itself. In that context, it’s very interesting to see Salesforce Ventures returning to invest even more in the company in this round, given how widely the company has expanded from its early roots in software for salespeople into a massive platform providing a huge range of cloud services to help people run their businesses.

For now, it’s been the combination of its unique roots in Asia Pacific, plus its vertical approach of building its tech from the ground up, plus its retail acumen that has impressed investors and may well see Airwallex stay independent and grow for some time to come.

“Airwallex has a clear competitive advantage in the digital payments market,” said David Craver, MD at Lone Pine Capital, in a statement. “Its unique Asia-Pacific roots, coupled with its innovative infrastructure, products and services, speak volumes about the business’ global growth opportunities and its impressive expansion in the competitive payment providers space. We are excited to invest in Airwallex at this dynamic time, and look forward to helping drive the company’s expansion and success worldwide.”

#airwallex, #articles, #asia, #asia-pacific, #australia, #bank, #banking, #blue-bottle-coffee, #cloud-services, #dst-global, #economy, #embedded-finance, #enterprise, #europe, #finance, #financial-services, #funding, #goat, #hr, #lone-pine-capital, #melbourne, #north-america, #papaya-global, #salesforce, #salesforce-ventures, #sequoia-capital-china, #series-d, #startup-company, #united-kingdom, #united-states, #veem

Embedded finance won’t make every firm into a fintech company

A short decade after software started eating the world, along came headlines about every company becoming a fintech thanks to innovation and growth in embedded finance business models.

This narrative oversimplifies the evolution that’s happening in the financial services sector. Storing and moving money and extending credit in a regulated environment is difficult. And differentiating your offering from incumbent financial institutions requires much more than superficial tweaks.

What really makes a fintech company extends far beyond user interface enhancements and delivering financial services to end customers. It’s what’s “under the hood” — the full-stack approach that allows fintech companies to truly innovate for their customers.

What really makes a fintech company extends far beyond user interface enhancements and delivering financial services to end customers.

Embedded finance helps companies and brands outside of the core financial sector distribute financial services. This requires varying levels of effort from the company and looks like anything from Starbucks offering an integrated wallet and payments within its app to Lyft offering a debit card to their drivers. But that doesn’t make Starbucks or Lyft fintech companies.

The fallacy behind the hype

The “every company will be a fintech” stance investors are bullish on conflates multiple approaches to inlaying financial offerings, coupling the resurgence of white-labeled financial services (which have been around for decades) with the rising banking, payments and lending-as-a-service players. The latter approach allows companies to customize their financial product experience while outsourcing many core financial services tasks. The former is simply distribution through embedded delivery.

There are four core tenets to fully operate as a financial services provider: a customer-facing product, transactional infrastructure, risk management and compliance, and customer servicing. In the case of lending, there is a fifth tenet: Companies also need to be able to manage capital. Embedded financial services help companies sidestep the majority of what it really means to be a fintech.

White-labeling versus “becoming a fintech”

While embedded finance is hot today, white-labeled financial services have been around for decades. Branded credit cards, for example, are a common paradigm for white-labeling. They quickly became a lasting way to incentivize consumer loyalty but don’t signal real effort or know-how in financial services. United and Alaska don’t run credit checks, configure billing or handle disputes for cardholding customers, nor do they assume any risk by embossing their logo on a card. The partnerships are major money makers for airlines while the risk stays on the financial institutions’ side (Chase, Bank of America and Visa). This risk can even account for significant loss on the financial side: According to American Express, 21% of its outstanding credit card loans belonged to people with a Delta credit card a few years ago.

This white-labeling approach is becoming common for other services, coming to life in forms like banking offerings from cell carriers, and it’s by design: Financial services are complex and highly regulated, so brands prefer to defer most of the work to the experts. So while United, Delta or T-Mobile offer financial services under their brand, they are definitely not becoming fintech companies.

In contrast, some corporations are seeing the opportunity to build financial services from the ground up. Walmart’s move to snag Goldman Sachs talent to lead its foray into finance (with Ribbit at the helm) shows promise for a true fintech spinout.

The investment in expertise in compliance and risk management furthers the company’s potential to build detailed and relevant infrastructure from the get-go — a significant step beyond the retailer’s many existing white-labeled financial partnerships.

The limitations of platforms as a service

Tools and turnkey solutions that help non-finance companies build financial applications more recently came into the mix: VCs are enthusiastic about new players building embedded payments, lending and, more recently, banking platform services (also known as BaaS) through APIs and backend tools.

As opposed to financial infrastructure services provided directly by sponsor banks or processors providing payments or ledger services, these platforms abstract the underlying infrastructure, wrap them with friendly-to-use APIs, and bundle core financial elements like risk management, compliance and servicing. While these platforms do offer some self-efficacy for companies to provide financial services, their major limitation is that they’re general purpose by design.

Fintechs found an opportunity to serve customers overlooked and underserved by traditional finance through specialization. Traditional financial institutions long applied the generalist model, carrying hundreds of SKUs and serving all segments. This strategy inevitably led banks to invest more in services for their most profitable customers, optimizing for their needs. Less profitable segments were left with stale and one-size-fits-all offerings.

Fintechs’ success with these underserved segments is derived from a relentless pursuit and laser focus on addressing core customers’ unique needs, building products and services designed for them. In order to deliver on this promise, fintechs must innovate across all layers of the stack — from the product experience and feature set to the infrastructure and risk management, all the way down to servicing.

UI is not nearly enough to differentiate, and addressing customers’ needs while minding overall unit economics is critical. One fintech’s choices on these matters may be completely different from another if they address different segments — it all boils down to tradeoffs. For example, deciding on which data sources to use and balancing between onboarding and transactional risk look different if optimizing for freelancers rather than larger small businesses.

In contrast, third-party platform providers must be generic enough to power a broad range of companies and to enable multiple use cases. While the companies partnering with these services can build and customize at the product feature level, they are heavily reliant on their platform partner for infrastructure and core financial services, thus limited to that partner’s configurations and capabilities.

As such, embedded platform services work well to power straightforward commoditized tasks like credit card processing, but limit companies’ ability to differentiate on more complex offerings, like banking, which require end-to-end optimization.

More generally and from a customer’s perspective, embedded fintech partnerships are most effective when providing confined financial services within specific user flows to enhance the overall user experience.

For example, a company can offer credit at the point of sale through a third-party provider to enable a purchase. However, when considering general purpose and standalone financial services, the benefits of embedded fintech are much weaker.

Building a product of choice

The biggest proponents of embedded finance argue that large companies and brands can be successful with finance add-ons on their platforms because of their brand recognition and install base.

But that overlooks the reality of choice in the market: Just because a customer does one facet of their business with a company doesn’t necessarily mean they want that company as their provider for everything, especially if the service is inferior to what they can get elsewhere.

While the fintech market booms and legacy brands continue to buy into the opportunity, verticalized, full-stack fintechs will trump their generic offerings time and time again. Some aspects of embedded finance and white-labeling will continue to crop up or prevail, like payment processing and buy now, pay later services. But customers will continue to choose the banks/neobanks, lenders and tools built for them and their own unique needs, bucking the “every company is a fintech” fallacy.

#banking, #banking-as-a-service, #column, #embedded-finance, #finance, #financial-services, #fintech, #opinion, #payment-processing, #risk-management, #tc

Rapyd raises $300M on $8.75B valuation as fintech-as-a-service continues to boom

Neobanks, other financial startups, and the basic concept of “finance anywhere” are seeing huge gains at the moment, and today one of the key companies building the infrastructure that powers services like these is announcing a major growth round of funding to double down on the opportunity.

Rapyd — which provides a range of financial services like payments, mobile wallets, money transfers, card issuing, fraud protection, and more, all by way of an API for third parties to integrate quickly into their own services — has raised $300 million, a Series E that TechCrunch understands from reliable sources values the company at $8.75 billion.

The company has been on a fast pace of growth in the last year, spurred in no small part by the global shift to carrying out life and business online in the wake of the Covid-19 pandemic. Rapyd’s total payment volume is on target to pass $20 billion this year, a four-fold increase on 2020’s volume of $5 billion. The company has some 12,000 small and medium-sized businesses using its services, with another 650 large enterprise clients.

Target Global — the European VC that has been making some big bets on fintech and commerce lately — is leading this round, with new backers Fidelity Ventures, Altimeter Capital, Whale Rock Capital, BlackRock, and Dragoneer, and previous backers General Catalyst, Latitude, Durable Capital Partners, Tal Capital, Avid Ventures, and Spark Capital also participating. Past strategic investors in the startup have included the payments behemoth Stripe.

Rapyd’s CEO and co-founder Arik Shtilman said in an interview that the plan will be to use part of the investment for acquisitions, and part for R&D.

Rapyd has been starting the M&A march in earnest already this year, acquiring payments and card issuing company Valitor in July for $100 million to expand deeper into Europe, and starting an investment arm called Rapyd Ventures. Acquisitions will likely be to continue getting deeper into markets where it is

On the R&D front, the company already has some 900 different services that cover 100 countries within its API. I’ve likened Rapyd’s approach in the past to being akin to a “swiss army knife” of services, and Shtilman says that these roughly fall into several distinct categories. 

“At the end of the day there are five things on planet earth for financial services whether you are a bank or a mom-and-pop shop: payment collection, money dispersing, funds storage, card issuing, and foreign exchange. From these you can build endless capabilities,” he said. One priority now, he added, will be to focus on expanding its technology related to identity management and fraud to complement what it already does.

“Know your customer [KYC] and compliance tools will help us bring on more customers even faster,” Shtilman said.

The timing of this latest round is a big deal for Rapyd. For starters, it’s coming just seven months after Rapyd announced another $300 million round, its Series D (that round actually closed in November, I’ve found out). Notably, that last round was at a $2.5 billion valuation, and while the company is not disclosing its funding, Shtilman told me that revenues have grown 3.5 times since then. A source very close to the company told me that the valuation was, simply, the multiple of those two figures: $8.75 billion.

Secondly, it’s important in the context of the wider market and where Rapyd fits into it.

We’re currently seeing a huge profusion of companies tapping into the potential of so-called embedded finance — financial services that are built and operated by one party and integrated by APIs into another party’s service — to build new products, ranging from neobanks around the world, to e-commerce companies building checkout services, or companies only tangentially in the business of commerce who are now launching products to improve customer engagement or make their first moves into the space.

That’s meant a lot of competition for Rapyd, with some other big players including Fast, Checkout, Mambu, and Railsbank, all of which have also raised huge rounds.

In other words, not only is this round a sign of Rapyd’s own growth, but a signal to the market of how it is positioning itself and faring in what is shaping up to be an interesting and competitive field.

Rapyd — which is now based in Silicon Valley but has its R&D and CEO based in Tel Aviv — was one of the earlier players in this space, and Shtilman likes to recall how, when he first started the company, he was met with a lot of skepticism from others in the financial services community, not just because the idea sounded too hard to execute but because they saw financial infrastructure as essentially the crown jewels of most financial services companies.

“When we started in 2016 everyone thought we were crazy because the concept was too big and too wide,” he said. “Then, like mushrooms after the rain, everyone saw it. Everyone understands now that the future of fintech is fintech infrastructure. Like cloud computing.”

Indeed, it’s taken a little while, but these days most acknowledge that the basics of these services are, yes, super hard to build, but essentially work the same for everyone, so they can be built once, and then packaged and turned into something you can tap by way of cloud services, and thus turned into commodities that you can spend your resources, time, and strategy to personalize.

Meanwhile, the crown jewels are, in fact, your customers. And therefore, building transactional services that either complement what you already do as a business, or augment it in an interesting and useful enough way, is how you end up deepening your engagement with them, and commitment from them.

The fact that this is something that might apply to just about any business online today means that the opportunities are vast as well, one reason investors are so keen to be in this market. (And that goes for more than just Rapyd, as it’s big enough not to be a winner-takes-all market.)

“Rapyd has built a borderless embedded fintech infrastructure critical to all digital businesses that operate globally. Their platform incorporates payments, compliance, FX, fraud management, escrow, virtual account and card issuing, and more. But now, as the world sees growing traction across global eCommerce, Gig Economy, Fintech Solutions and Technology platforms, Rapyd must take the next step,” said Mike Lobanov, General Partner at Target Global, in a statement. “There is currently an unprecedented need for a single partner serving as a bridge between a vast array of local payment services and merchants, providing them access to the flexible, fast-to-integrate, and scalable solutions they need to thrive. Having led Rapyd’s Series A in 2018, we are confident that Rapyd can be such a partner, and are now renewing our bet in this round.”

#apis, #embedded-finance, #europe, #fintech, #fintech-as-a-service, #funding, #rapyd

Solarisbank raises $224M at a $1.65B valuation to acquire Contis and expand its API-based embedded banking tech in Europe

Embedded finance — the process by which some of the more complicated, but also commoditized, aspects of financial services are built and wrapped in an API for anyone else to implement in their own products for end users — has become a huge cornerstone of how fintech is built today. Now, one of the earlier and bigger movers in the space is announcing a major round of growth funding to build out its own.

Solarisbank, a Berlin startup that provides a range of financial services by way of some 180 APIs that others use to build end user-facing products — they include basic banking and card services; lending; payments; and know your customer services — has raised €190 million ($224 million) in a Series D that values the company at €1.4 billion ($1.65 billion), and announced the acquisition of one of its competitors in the space, Contis.

Decisive Capital Management, a Swiss firm that has also backed insurtech startup Wefox, led the round with Pathway Capital Management, CNP (Groupe Frère) and Ilavska Vuillermoz Capital; and previous backers yabeo Capital, BBVA, Vulcan Capital and HV Capital, also participating.

The round is coming about a year after its last round of $67.5 million, but as a sign of the times, what is perhaps more notable is that the company’s valuation has nearly quintupled since then (it was $360 million in June 2020).

This latest round is going to be used for expansion. CEO Roland Folz said in an interview that the Contis acquisition — which underscores a wider consolidation trend in fintech — will help it better cover all of Europe, and start to make its first early moves into Asia. (No plans right now to add the U.S. to that list, he added.)

He added that the combined entity will be making revenues in the “triple-digit euros” — that is, hundreds of millions; it posted net revenues of €35 million in 2020 — and will be in a position to go public next year, if it chooses to.

In the meantime, it’s hoping to double down on the huge shift we’re seeing in the world of financial services, where consumers and businesses are opting for newer and more modern banking experiences as they migrate away from slower, less flexible and sometimes more expensive incumbents.

“Europe is an ideal space for us to work in,” said Folz. “We believe that in Europe there are roughly 800 million bank accounts and some 400 million of those will change ‘ownership’, where traditional banks will be swapped out with non-traditional banks… If we look at the 5-10 year perspective, we want to make sure a  significant proportion of those accounts will be on our platform.”

SolarisBank counts companies like Trade Republic, American Express, BP, Samsung and Vivid among its customers, powering basic banking, know-your-customer checks, lending, digital wallet and other services related to finance for companies that can in turn focus their energies on building more user-friendly customer experiences or other services altogether. It’s been growing at a rate of 40%-60% annually, Folz added, and it has some 50 “partners” (as it calls its customers) in all, covering some 2 million customer accounts.

Contis, meanwhile, is a substantial business in its own right, with some 200 customers covering more than 2 million users and €9.9 billion in transactions annually.

Solarisbank was founded five years ago, in 2016, out of the Berlin-based startup incubator and investor finleap, with Ramin Niroumand, a founder of finleap, essentially the “founder” of Solarisbank too. (Currently and more more formally, he is also chairman of its advisory board.)

Embedded finance is all the rage at the moment, and a number of startups today are providing fintech-as-a-service, or banking-as-a-service tools to third parties. Other notable names in the same segment of the market include Railsbank (which also announced funding earlier this month),  Rapyd, which also raised a big round at a $2.5 billion valuation earlier this year; Unit, another banking-as-a-service startup picking up funding and growing; FintechOS, which really does what its name says (and is also currently raising $$); and the startup 10x, which ironically is targeting incumbents.

Solarisbank believes its particular approach to this gap in the market gives it more flexibility and mileage: unlike its rivals, the bulked-up Solarisbank will have both banking licenses for Europe, and e-money licenses (in Lithuania and UK), with its tech stack living on AWS, giving it an opportunity to build more services, to scale, and to keep better margins in the process — a critical detail in what is essentially an economy of scale play.

It also believes that its own diversity in its customer base — covering not just obvious fintech companies like neobanks, but a variety of others, like Samsung, that are building financial services (in its case, a digital wallet) — gives it more staying power, to cater to whatever segment of that base is growing most at any given time. As Niroumand points out, around 70% of its revenues some from some 30% of its customers. “It’s quite a diverse clientele we are serving,” he said.

The company is currently active in Germany, France, Italy and Spain but says it can cover the whole EEA with passporting.

“With the combined entity, we are looking at numbers that no one else is even close to remotely,” added Folz.

The market opportunity, combined with Solarisbank’s approach and its current customer base, are what attracted investors.

“We are experiencing a paradigm shift in banking, where customers expect financial services to adapt to their specific needs,” says Thomas Schlytter-Henrichen, a partner at Decisive Capital Management, in a statement. “Technology is the key to enable this transformation and Solarisbank’s powerful Banking-as-a-Service platform positions it perfectly for this new banking era. We are both inspired by the team and thrilled to work together on its mission.”

#banking-as-a-service, #embedded-finance, #europe, #finance, #fintech, #funding, #solarisbank

MaxAB, the Egyptian B2B food and grocery delivery startup, raises $40M for expansion

Globally, food and grocery delivery startups have been raising mega-rounds of late, especially those in Europe as the pandemic has given rise to more people ordering online more than ever. This growth has translated to an increase in volume across e-commerce platforms all over the world.

While there has relatively been no action in Africa in terms of raising investments, startups in MENA continue to garner interest, mainly in B2B e-commerce. Today, the latest of these is coming out of Egypt.

MaxAB, a startup based out of Cairo that serves a network of traditional food and grocery retailers across Egypt, has raised $40 million in Series A financing.

The company, which claims to have launched in a new city every month this year, will be expanding its physical footprint across the Middle East and North Africa. In addition, MaxAB plans on hiring more talent and scaling its recently launched business verticals, including new supply chains and embedded finance solutions.

Founded in November 2018 by Belal El-Megharbel and Mohamed Ben Halim, MaxAB’s platform manages procurement and grocery delivery to shops in Egypt. Store owners can use the platform to purchase goods, request delivery or logistics to move the goods, and access a customer support team.

“It’s not just the technology platform; we operate our own warehouses, we operate our own fleet. And the idea was quite simple.”  CEO El-Megharbel said to TechCrunch. According to him, small merchants in Egypt, representing a large chunk of the nation’s GDP, find it hard to procure their inventory. On the other hand, manufacturers also have to suffer immensely and incur so many costs to serve a market like Egypt, where over 400,000 small mom-and-pop shops sell 90% of groceries in the country.

“We saw that there is a massive role in optimizing this supply chain using technology so that we can have the right amount of products at the right place at the right time,” explained El-Megharbel, the chief executive who left Careem in 2018 to start MaxAB.

He calls MaxAB the Amazon for retail in the Middle East. There’s a slight comparison. In emerging markets, it can be challenging to find third-party e-commerce delivery companies to work with. Those available are either expensive or inefficient. This is why MaxAB has its own infrastructure. The company doesn’t build warehouses from scratch. Instead, it buys them outrightly and revamps them to fit its needs. After that, MaxAB uses internal technology tools to better manage inventory flow in, within, and out of the warehouse.

El-Megharbel noted that up until last year, MaxAB was focused on offering a single type of supply chain in one city. That was before and after completing its $6.2 million seed round with 9,000 merchants on its app. But with this new round, MaxAB solidifies both infrastructure and technology into a multi-supply chain and multi-city business.

The new development is accompanying a period of growth the company experienced in the last two years where it now services more than 55,000 merchants and delivers over 2,000 unique products. In terms of staff size, the company has grown more than 5x to 1,600 people and is looking to add to that number.

Image Credits: MaxAB

Talking about the embedded finance solutions, the plan for MaxAB is to offer financial services to its merchants. First of all, given the company’s database of merchants, MaxAB can predict their financial status. Then orking with banking and non-banking partners, MaxAB will offer credit facilities and capital financing to these merchants. 

MaxAB’s Series A investment is one of the largest in this financing round across the MENA region. Impact investor RMBV led the round with participation from the IFC, Flourish Ventures, Crystal Stream Capital, Rise Capital, and Endeavour Catalyst. Exiting investors, Beco Capital and 4DX Ventures also took part. This round brings the company’s total investment to date to $46.2 million.

“The COVID-19 pandemic has highlighted the unique structure of Egypt’s economy, with hundreds of thousands of shopkeepers and small businesses becoming the lifeline of our country at the time of crisis,” said managing partner at RMBV Ahmed Badreldin in a statement. “We are delighted to be backing visionary entrepreneurs that have created a transformative business with impressive growth that is a catalyst for financial inclusion and job creation. We look forward to supporting MaxAB in its next phase of development as they continue delivering on growth and innovation.”

The pandemic has significantly increased technology adoption and enhanced the company’s unit economics. As a market leader, MaxAB has taken advantage to consolidate its position and scale sustainably amidst competition.

“There is competitiveness in the Middle East. Most of them are marketplace models but do not manage their supply chain per se. And this is what makes our model more unique is that we own the end-to-end cycle. It’s painful, but we believe that this is what this industry, the food and groceries B2B e-commerce space, needs,” the CEO said.

After expanding across MENA, does the company see any opportunity southward into sub-Saharan Africa where it might face competition from the likes of Sokowatch? “Not in the near future,” answered El-Megharbel. “I think this market [the Middle East and North Africa] is almost $200 billion per year. So we have a long way to go there before we go to sub-Saharan Africa.”

#africa, #e-commerce, #ecommerce, #egypt, #embedded-finance, #food, #funding, #logistics, #maxab, #north-africa, #retailers, #tc

Extra Crunch roundup: Lordstown Motors’ woes, how co-CEOs work, Brian Chesky interview

Lordstown Motors released its Q1 earnings yesterday, and the electric vehicle manufacturer is facing a few challenges.

Expenses were higher than expected, it plans to slash production by about 50%, and the company reported zero revenue and a net loss of $125 million. Oh, it also needs more capital.

“But there’s more to the Lordstown mess than merely a single bad quarter,” writes Alex Wilhelm. “Lordstown’s earnings mess and the resulting dissonance with its own predictions are notable on their own, but they also point to what could be shifting sentiment regarding SPAC combinations.”

In light of the company’s lackluster earnings report (and a pending SEC investigation), Alex unpacks the company’s Q1, “but don’t think that we’re only singling out one company; others fit the bill, and more will in time.”

May 27 Clubhouse chat: How to ensure data quality in the era of Big Data

TC unwind chat with Ron Miller and Patrik Liu Tran

Image Credits: TechCrunch

Join TechCrunch reporter Ron Miller and Patrik Liu Tran, co-founder and CEO of automated real-time data validation and quality monitoring platform Validio, on Thursday, May 27 at 9 a.m. PDT/noon EDT for a Clubhouse chat about ensuring data quality in the era of Big Data.

The world produces 2.5 quintillion bytes of data daily, but modern data infrastructure still lacks solutions for monitoring data quality and data validation.

Among other topics, they’ll discuss the build versus buy debate, how to better understand data failures, and why traditional methods for identifying data failures are no longer operational.

Click here to join the conversation.

Thanks very much for reading Extra Crunch; have a great week!

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist


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How Expensify shed Silicon Valley arrogance to realize its global ambitions

The Expensify origin story

Image Credits: Nigel Sussman

Expensify may be the most ambitious software company ever to mostly abandon the Bay Area as the center of its operations.

The startup’s history is tied to places representative of San Francisco: The founding team worked out of Peet’s Coffee on Mission Street for a few months, then crashed at a penthouse lounge near the 4th and King Caltrain station, followed by a tiny office and then a slightly bigger one in the Flatiron building near Market Street.

Thirteen years later, Expensify still has an office a few blocks away on Kearny Street, but it’s no longer a San Francisco company or even a Silicon Valley firm. The company is truly global with employees across the world — and it did that before COVID-19 made remote working cool.

It makes sense that a company founded by internet pirates would let its workforce live anywhere they please and however they want to. Yet, how does it manage to make it all work well enough to reach $100 million in annual revenue with just a tad more than 100 employees?

As I described in Part 2 of this EC-1, that staffing efficiency is partly due to its culture and who it hires. It’s also because it has attracted top talent from across the world by giving them benefits like the option to work remotely all year as well as paying SF-level salaries even to those not based in the tech hub. It’s also got annual fully paid month-long “workcations” for every employee, their partner and kids.

Brian Chesky describes a faster, nimbler post-pandemic Airbnb

Image Credits: TechCrunch

Managing Editor Jordan Crook interviewed Airbnb co-founder and CEO Brian Chesky to discuss the future of travel and what it was like leading the world’s biggest hospitality startup during a global pandemic.

“Our business initially dropped 80% in eight weeks. I say it’s like driving a car. You can’t go 80 miles an hour, slam on the brakes, and expect nothing really bad to happen.

Now imagine you’re going 80 miles an hour, slam on the brakes, then rebuild the car kind of while still moving, and then try to accelerate into an IPO, all on Zoom.”

Embedded finance will help fill the life insurance coverage gap

Image of a keyboard with one key featuring a family covered by an umbrella to represent life insurance.

Image Credits: alexsl (opens in a new window)/ Getty Images

There’s latent demand for life insurance currently unaddressed by much of the financial services industry, and embedded finance can be the solution.

It’s imperative for companies to consider product lines and partnerships to expand markets, create new revenue streams and provide added value to their customers.

Connecting consumers with products they need through channels they already know and trust is both a massive revenue opportunity and a social good, providing financial resilience to families at a time when they need it most.

Zeta Global’s IPO filing uncovers modest growth, strong adjusted profitability

Zeta Global raised north of $600 million in private capital in the form of both equity financing and debt, making it a unicorn worth understanding.

The gist is that Zeta ingests and crunches lots of data, helping its users market to their customers on a targeted basis throughout their individual buying lifecycles. In simpler terms, Zeta helps companies pitch customers in varied manners depending on their own characteristics.

You can imagine that, as the digital economy has grown, the sort of work Zeta Global supports has only expanded. So, has Zeta itself grown quickly? And does it have an attractive business profile? We want to know.

5 predictions for the future of e-commerce

Image of hands holding credit card and using laptop to represent online shopping/e-commerce.

Image Credits: Busakorn Pongparnit (opens in a new window) / Getty Images

In 2016, more than 20 years after Amazon’s founding and 10 years since Shopify launched, it would have been easy to assume e-commerce penetration (the percentage of total retail spend where the goods were bought and sold online) would be over 50%.

But what we found was shocking: The U.S. was only approximately 8% penetrated — only 8% for arguably the most advanced economy in the world!

Despite e-commerce growth skyrocketing over the past year, the reality is the U.S. has still only reached an e-commerce penetration rate of around 17%. During the last 18 months, we’ve closed the gap to South Korea and China’s e-commerce penetration of more than 25%, but there is still much progress to be made.

Here are five key predictions for what this road to further penetration will hold.

Develop a buyer’s guide to educate your startup’s sales team and customers

Note Pad and Pen on Yellow background

Image Credits: Nora Carol Photography (opens in a new window) / Getty Images

Every company wants to be innovative, but innovation comes with its share of difficulties. One key challenge for early-stage companies that are disrupting a particular space or creating a new category is figuring out how to sell a unique product to customers who have never bought such a solution.

This is especially the case when a solution doesn’t have many reference points and its significance may not be obvious.

Some buyers could use a walkthrough of the buying process. If you are building a singular product in a nascent market that necessitates forward-looking customers and want to drastically shorten sales cycles, create a buyer’s guide.

When to walk away from a VC who wants to invest in your startup

lighted fire exit sign

Image Credits: cruphoto (opens in a new window) / Getty Images

Pay attention to red flags when meeting with VCs: If they cancel late or leave you waiting, it’s a sign, just like being asked generic questions that demonstrate little or no understanding of the proposition. If they critique you or your business, that’s fine (obviously), but make sure you find out what’s behind their assertions to judge how well informed they are.

If you’re going to face these people each month and debate the direction of your business, the least you can expect is a robust argument outlining precisely why you may not have all the right answers.

If you fail to spot the warning signs, you’ll live to regret it. But do your due diligence and work constructively with them and, together, you might actually build a sustainable future.

Deep Science: Robots, meet world

Image via Getty Images / Westend61

This column aims to collect some of the most relevant recent discoveries and papers — particularly in, but not limited to, artificial intelligence — and explain why they matter.

In this edition, we have a lot of items concerned with the interface between AI or robotics and the real world. Of course, most applications of this type of technology have real-world applications, but specifically, this research is about the inevitable difficulties that occur due to limitations on either side of the real-virtual divide.

2 CEOs are better than 1

Defocussed shot of two silhouetted businesspeople having a meeting in the boardroom

Image Credits: PeopleImages (opens in a new window) / Getty Images

Netflix has two CEOs: Co-founder Reed Hastings oversees the streaming side of the company, while Ted Sarandos guides Netflix’s content.

Warby Parker has co-CEOs as well — its co-founders went to college together. Other companies like the tech giant Oracle and luggage maker Away have shifted from having co-CEOs in recent years, sparking a wave of headlines suggesting that the model is broken.

While there isn’t a lot of research on companies with multiple CEOs, the data is more promising than the headlines would suggest. One study on public companies with co-CEOs revealed that the average tenure for co-CEOs, about 4.5 years, was comparable to solitary CEOs, “suggesting that this arrangement is more stable than previously believed.”

Furthermore, it’s impossible to be in two places at once or clone yourself. With co-CEOs, you can effectively do just that.

#airbnb, #brian-chesky, #data-infrastructure, #e-commerce, #embedded-finance, #expensify, #extra-crunch-roundup, #lordstown-motors, #newsletters, #startups, #tc, #venture-capital, #zeta-global

Embedded finance will help fill the life insurance coverage gap

An estimated 41 million Americans say they need life insurance but have yet to purchase coverage. Despite this awareness among consumers, the Life Insurance Marketing and Research Association estimates a $12 trillion coverage gap, with about 50% of millennials planning to purchase coverage within the next year.

There’s latent demand for life insurance currently unaddressed by much of the financial services industry, and embedded finance can be the solution. It’s imperative for companies to consider product lines and partnerships to expand markets, create new revenue streams and provide added value to their customers.

There’s latent demand for life insurance currently unaddressed by much of the financial services industry, and embedded finance can be the solution.

Connecting consumers with products they need through channels they already know and trust is both a massive revenue opportunity and a social good, providing financial resilience to families at a time when they need it most.

Why bundle life insurance?

The concept of digitally bundling financial products in a packaged offering to a customer is certainly not new — but it is for the life insurance space.

Embedded finance uses technology and operations infrastructure to offer products and services through entities that may not be financial institutions at all. Think of embedded finance like on-demand shopping; customers benefit from both the transaction (buying financial protection for their families) and the convenience it provides (from whatever platform they are currently engaging with).

Similar to how Amazon saves shoppers 75 hours a year, bundling life insurance gives consumers back time in their day and can improve their financial health.

#bestow, #column, #ec-column, #ec-fintech, #embedded-finance, #finance, #financial-services, #insurance, #life-insurance, #startups

Embedded finance startup Banxware raises €4M seed

Embedded finance — the idea of offering financial products where customers are already congregating via white label solutions and APIs – isn’t an entirely new concept. In fact, in one form or another, such as point of sale credit, the concept has existed for years and long before Silicon Valley venture capital firm and media company (ha!) Andreessen Horowitz made it a thing. However, fuelled by cloud technology and a plethora of new fintech and Banking-as-a-Service startups, there is no doubt the embedded finance trend is accelerating.

The latest company to declare its hand is Berlin-based Banxware, which offers embedded finance in the form of loans for SMEs, in partnership with marketplaces, payments providers, and others. It launched in December and today is disclosing that it has raised €4 million in seed funding.

Leading the round is Force over Mass, and VR Ventures. They are joined by HTGF, and private investors in banking, payment and e-commerce.

Banxware says it will use the investment to develop and grow its embedded white label financial services offering, and expand its team. In addition to lending, the startup will also soon offer card-based products and other financial services.

Banxware’s tech and infrastructure enables any company to offer loans and other banking services to SME customers. The idea is to act as the link between banks (lenders), digital platforms, and merchants. Banks get access to hard to reach SME customers. Platforms, such as online marketplaces, can up-sell financial products beyond their core offering. And merchants benefit from speedy access to working capital.

“SMEs have a hard time to access capital when needed, especially when they are less than three years old or do not have the most pristine credit history,” explains co-founder and CEO Jens Röhrborn. “On top of this, loan applications, i.e. loan decisions and loan payout, still take several weeks in most cases.

“More and more sellers and merchants are using digital platforms through which they sell their products or process their digital payments. By using the recent historic data on these merchants provided by the platforms, we can lend against their future revenues”.

This has seen Banxware build an instant lending tool that includes AML and KYC compliance, and a scoring engine that analyzes historic platform data and data from third party providers, such as account information providers and external scoring services. The promise is an instant loan decision and loan payout, “all in less than 15 minutes”.

“On the lending side, we work with both balance sheet lenders and lending vehicles with whom we pre-agree on lending terms and loan decision criteria and on whose behalf we execute the loan decision,” says Röhrborn. “Merchants repay their loan in such a way that platforms subtract a certain percentage of the future merchant payouts”.

Röhrborn says the company’s instant lending tool is “only the beginning” and that Banxware will develop additional embedded financial services and expand internationally.

Meanwhile, the German fintech currently generates revenue by charging a one time fee for each loan that is processed through its platform and via a one off customization fee.

#banking, #banxware, #berlin, #cloud-technology, #credit, #e-commerce, #embedded-finance, #europe, #financial-services, #fundings-exits, #loans, #media, #online-marketplaces, #startups, #tc, #venture-capital

Extra Crunch roundup: ‘Nightmare’ security breach, Poshmark’s IPO, crypto boom, more

The rest of the world may be slowing down as we prepare for Christmas and the new year, but we are not taking our foot off the gas.

Alex Wilhelm keeps a close watch on the public markets in his column The Exchange, but this week, he branched out to look at some of the metrics underpinning soaring cryptocurrency prices and turned his gaze on StockX, the consumer reseller marketplace that just raised $275 million in a Series E that values the company at approximately $2.8 billion.

“Selling a tenth of your company for north of a quarter-billion may be somewhat common among late-stage software startups with tremendous growth,” he says, but “don’t laugh — the round actually makes pretty OK sense.”

Our staff continues to file their end-of-year stories: We ran a post this morning by Manish Singh that studies India’s massive total addressable market for retail. The nation has more than 60 million mom-and-pop neighborhood stores, and companies like Walmart and Amazon are eager to offer help with payments, logistics and inventory management — as are hundreds of native and foreign startups.

In an interview with author and MIT professor Sinan Aral, Managing Editor Danny Crichton discussed some of the debates currently swirling around the desire in some quarters to regulate social media platforms. In “The Hype Machine,” Aral explores topics like neuroscience, economics and misinformation before offering potential solutions for resolving what he calls “a full-blown social media crisis.”

The stories that follow are an overview of Extra Crunch from the last five days. Complete articles are only available to members, but you can use discount code ECFriday to save 20% off a one or two-year subscription. Details here.

Thank you very much for reading Extra Crunch this week; I hope you have a safe, relaxing weekend!

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist


Unpacking Poshmark’s IPO filing

How did fashion marketplace Poshmark go from posting regular losses in 2019 to generating net income in 2020?

After the company filed a public S-1 last night, Alex Wilhelm pondered the question this morning in The Exchange.

Like many e-commerce platforms, Poshmark saw a surge in activity during the COVID-19 pandemic, but it also slashed its marketing spend, which helped boost profits. As the cash-rich company prepares its road show, “Poshmark is valuable,” Alex concluded.

“How valuable the market will decide. But who will it enrich with its final pricing decision?”

Just how bad is that hack that hit US government agencies?

WASHINGTON, D.C. – APRIL 22, 2018: A statue of Albert Gallatin, a former U.S. Secretary of the Treasury, stands in front of The Treasury Building in Washington, D.C. The National Historic Landmark building is the headquarters of the United States Department of the Treasury. (Photo by Robert Alexander/Getty Images)

The breach of FireEye and SolarWinds by hackers working on behalf of Russian intelligence is “the nightmare scenario that has worried cybersecurity experts for years,” reports Zack Whittaker.

The intrusion began several months ago, but news of the breach wasn’t made public until this week.

“Given that potential victims include defense contractors, telecoms, banks, and tech companies, the implications for critical infrastructure and national security, although untold at this point, could be significant,” said Erin Kenneally, director of cyber risk analytics at Guidewire, an industry platform for insurance carriers.

In his analysis for Extra Crunch, Zack breaks down the rippling effects of supply-chain attacks that can compromise platforms like SolarWinds, which is used by more than 420 of the Fortune 500.

From startups to Starbucks: The embedded API opportunity

contactless payment with QR code

Image Credits: dowell (opens in a new window) / Getty Images

Embedded finance connects services like payment processing with everyday activities like grabbing a coffee before unlocking an e-scooter.

“The ability to be at the right place at the right time, supporting consumers and merchants alike, where they want it, how they want it and when they want it — cannot be understated,” says Simon Wu, an investment director with Cathay Innovation.

In a post that identifies embedded finance’s top providers and enablers, he offers advice for startups and established brands that are hoping to “earn and build customer loyalty while generating new revenue streams.”

Is rising usage driving crypto’s recent price boom?

Bitcoin is at an all-time high.

CoinMarketCap reports that crypto market values have reached almost $659 billion; that figure was just $140 billion in March 2020.

“These gains have created a huge amount of wealth for crypto holders,” Alex Wilhelm wrote yesterday.

To get a better handle on why crypto values are sky-bound, he parsed some basic industry metrics, including the number of unique bitcoin addresses, fees paid and transactions per day.

“Do the price gains make sense in the short term? Who knows,” he wrote, “but they are not based on nothing.”

2020 was a disaster, but the pandemic put security in the spotlight

Stage Light on Black. Image Credits: Fotograzia / Getty Images

For his year-end Extra Crunch story, security reporter Zack Whittaker looked back at the myriad security challenges and vulnerabilities COVID-19 brought to the fore.

The hacks of Fire Eyes and SolarWinds were just one link in the chain: How well is your company prepared to deal with file-encrypting malware, hackers backed by nation-states or employees accessing secure systems from home?

“With 2020 wrapping up, much of the security headaches exposed by the pandemic will linger into the new year,” says Zack.

Inside Zoox’s six-year ride from prototype to product

Zoox Fully Autonomous, All-electric Robotaxi

Zoox Fully Autonomous, All-electric Robotaxi. Image Credits: Zoox

After six years of research and development, autonomous vehicle company Zoox this week unveiled an electric robotaxi that can carry four people at a maximum speed of 75 miles per hour.

Automotive writer Kirsten Korosec interviewed Zoox co-founder and CTO Jesse Levinson to learn more about the vehicle’s development and how the company overcame a series of technical and legal challenges.

“I would say that if you have a big idea and you’re confident that it makes sense, you should at least explore the idea, rather than giving up because the current regulations aren’t designed for it,” said Levinson.

Kirsten only had 15 minutes to interview Levinson, but this comprehensive interview covers topics like regulatory compliance, Zoox’s relationship with parent company Amazon and the highest (and lowest) moments he experienced along the way.

Pluralsight $3.5B deal signals a matured edtech market

Fairy dust flying in gold light rays. Computer generated abstract raster illustration

Fairy dust flying in gold light rays. Computer-generated abstract raster illustration. Image Credits: gonin / Wikimedia Commons

In one of the largest enterprise acquisitions of 2020, Visa Equity Partners this week purchased Utah-based edtech startup Pluralsight for $3.5 billion.

According to the entrepreneurs and investors reporter Natasha Mascarenhas spoke to, this deal “shows the strength of edtech’s capital options as the pandemic continues.”

“What’s happening in edtech is that capital markets are liquidating,” a major change from “the old days where the options to exit were very narrow,” says Deborah Quazzo, a managing partner at GSV Advisors and seed investor in Pluralsight.

Dear Sophie: How did immigration change for startup founders in 2020?

Image Credits: Sophie Alcorn

Dear Sophie:

I’m on an F1 OPT and am about to incorporate a startup with my two American co-founders.

What were the biggest immigration changes in 2020 affecting us?

—Ambitious in Albany

How to pick an investor in good or bad times

High angle view of young man walking towards white doorways on blue background

High angle view of young man walking towards white doorways on blue background Image Credits: Klaus Vedfelt / Getty Images

Founders and the VCs who back them may not be friends, but they’re usually friendly.

Investors are on a first-name basis with entrepreneurs from their portfolio companies and frequently have candid conversations with them about life, work and the world in general. In the before times, they might even have shared a meal or attended a baseball game together.

But make no mistake, it is a top-down relationship — the investor will always have the upper hand. When an entrepreneur accepts a check, they are hiring their next boss.

In an Extra Crunch guest post, Quiq CEO and founder Mike Myer poses two questions for founders who are considering a new relationship with a VC:

  • How can the investor help the business?
  • What’s the risk that the investor will hurt the business?

From India’s richest man to Amazon and 100s of startups: The great rush to win neighborhood stores

https://techcrunch.com/2020/12/18/from-indias-richest-man-to-amazon-and-100s-of-startups-the-great-rush-to-win-neighborhood-stores/

NEW DELHI, INDIA – 2011/12/18: Rice is sold at a night market in Paharganj, the urban suburb opposite New Delhi Railway Station. (Photo by Frank Bienewald/LightRocket via Getty Images)

In India, about 90% of consumers buy their everyday goods from neighborhood-based kirana stores instead of supermarkets.

As a result, U.S. retail giants like Walmart and Amazon have adopted an “if you can’t beat them, join them” approach, offering the nation’s 60 million mom-and-pop shops software for inventory control, payments and e-commerce.

India’s retail market will be worth an estimated $1.3 trillion by 2025, but e-commerce represents just 3% of that activity today, reports Manish Singh.

For his final Extra Crunch story of 2020, he looked at the startups and major players who are hoping to carve out their niche in one of the world’s largest retail ecosystems.

ClickUp CEO talks hiring, raising and scaling in the white-hot productivity space

Line of differently sized pink ceramic piggy banks in ascending size order on white surface, green background

Image Credits: PM Images / Getty Images

Earlier this year, business productivity software startup ClickUp raised a $35 million Series A.

Now, just six months later, the company has closed a second round of $100 million that values the San Diego-based startup at $1 billion.

Lucas Matney interviewed CEO Zeb Evans this week to learn more about how the company was buoyed by pandemic-based behavior shifts that doubled its customer base and multiplied revenue by a factor of nine.

“I think that the biggest thing that we’ve always focused on is shipping a new version of ClickUp every week. That is our differentiation,” he said. “We’ve kind of created these iterative cycles called natural product-market fit and it’s been hard to keep up with that.”

2020’s top 10 enterprise M&A deals totaled a staggering $165B

Multi Colored Bling Bling Dollar Sign Shape Bokeh Backdrop on Dark Background, Finance Concept.

Multi Colored Bling Bling Dollar Sign Shape Bokeh Backdrop on Dark Background, Finance Concept. Image Credits: MirageC / Getty Images.

In 2018, the total value of the year’s 10 top enterprise mergers and acquisitions reached $87 billion; last year, that figure fell to just $40 billion.

But in 2020, 10 M&A deals accounted for $165.2 billion.

“Last year’s biggest deal — Salesforce buying Tableau for $15.7 billion — would have only been good for fifth place on this year’s list,” notes enterprise reporter Ron Miller. “And last year’s fourth largest deal, where VMware bought Pivotal for $2.7 billion, wouldn’t have even made this year’s list at all.”

#asia, #cryptocurrency, #e-commerce, #ecommerce, #embedded-finance, #entrepreneurship, #extra-crunch, #finance, #hack, #india, #payments, #retail, #startups, #tc, #transportation, #venture-capital

From startups to Starbucks: The embedded API opportunity

Stripe recently made headlines with its entrance into the banking world with Stripe Treasury. The news follows Google’s banking and payments announcement along with IPO bound companies such as Airbnb, DoorDash and Affirm all mentioning “financial services” in S-1 filings — a clear signal of how the sector will continue to stay red hot for the coming years.

What do all of these companies have in common? The subtle, almost unnoticeable, embedding of financial services. There has been an influx of new fintechs democratizing how to embed financial services across the spectrum, from investing, insurance, lending to banking. While many of these companies are in their nascent stages, they are achieving increasingly high valuations. Why?

The ability to be at the right place at the right time, supporting consumers and merchants alike, where they want, how they want it and when they want it — cannot be understated.

Because today, customers yearn for greater personalization and less friction while brands are looking for ways to improve monetization seamlessly. The ability to be at the right place at the right time, supporting consumers and merchants alike, where they want, how they want it and when they want it — cannot be understated.

At the heart of embedded finance is the benefit of enabling any brand or merchant to rapidly, and at low cost, integrate innovative financial services into new propositions and customer experiences. To avoid developing noncore product additions in-house, companies will look to “building blocks” (or APIs) to take advantage of the big opportunity to extend customer lifetime value and address a wider variety of needs in one place.

This holds true for startups, digitally native brands and established brands, online and offline. For fledgling fintech startups or brands that want to provide financial services to their customers, working with APIs are often a no-brainer given the costs associated with building integrations in-house.

But imagine if you are a global airline company and the benefit of not having to staff a know-your-customer compliance or fraud detection team. Or for lenders who can minimize risk and increase speed by not having to request a pay stub or personal information verification?

The end goal is to earn and build customer loyalty while generating new revenue streams. Historically, established brands have been served by banks with co-branded and “affinity” programs or partnerships. But this “offline” model is usually white-label or very “human-in-the-loop” with limited and inflexible capabilities. However, APIs can change this — a great example is Starbucks Rewards, heralded as a successful case of data, rewards and loyalty. No longer are brands just reselling leads, businesses can now directly participate in the product and distribution to improve margins.

Today, embedded finance is being used in a variety of ways: In the product (e.g., Tesla’s insurance offering), in distribution channels (e.g., a startup selling insurance during car purchases), and in the technology layer (or building blocks) to improve the overall functionality (e.g., a lender leveraging a data API for instant underwriting).

We typically separate building blocks into two buckets: providers (“plug and play” applications) and enablers (those that help financial services to be offered).

There are many new entrants and it’s not one size fits all. Some have data advantages, some distribution while some enable new greenfield opportunities via delivery of the customer experience. While these “digital wrappers” around financial services infrastructure seem to be working, the question remains — who will become a market leader? Do enablers eventually become providers?

#api, #brand-management, #column, #ecommerce, #embedded-finance, #finance, #financial-services, #fintech, #payments

Wise raises another $12 million to double down on embedded business banking

Fintech startup Wise has raised a $12 million Series A round. The company offers business bank accounts with an interesting go-to-market strategy. Wise partners with other companies so that they can offer bank accounts to their own customers.

For instance, if you’re running a marketplace or an e-commerce platform that matches companies with individual customers, you can leverage Wise to offer bank accounts to your partner companies. RemoteTeam is using Wise to improve its payroll experience for… remote teams.

e.ventures is leading today’s funding round with Grishin Robotics also participating. Seed investors Base10 Partners and Techstars are also investing again.

Wise isn’t a classic bank-as-a-service company as it doesn’t want to power neobanks and help them get started. Instead, the startup targets other companies that touch on financial services but can’t offer those services because it’s such a big investment.

Integrating Wise in your product doesn’t require significant development or regulation efforts. You don’t have to develop an entire banking user interface as you can just redirect your customers to Wise. The fintech startup also handles know-your-customer and know-your-business (KYC and KYB) processes.

When your clients have their own Wise accounts, it lets them do all the basic things you’d expect from a business bank account. You can hold money, pay with bank transfers, a debit card, a virtual card or checks, and get paid using card payments, ACH and checks.

Behind the scene, BBVA provides banking services, which means that your deposits are FDIC insured up to $250,000. The company also uses Stripe for some features and other infrastructure companies.

Wise co-founder and CEO Arjun Thyagarajan describes those partners as building blocks. The company can swap those partners and integrate with other APIs to launch in new countries for instance.

Interestingly, if you choose to offer Wise bank accounts to your partners, you’ll share the revenue on deposits and interchange fees.

Up next, the company plans to expand to other countries, such as Canada. It’ll also try to tackle specific verticals, such as marketplaces for telemedicine and healthcare startups in general. It could require adding different features for different types of customers.

Wise is also negotiating some partnerships with high-profile companies, which should bring new customers to the platform.

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