Last week proved to be quite profitable in terms of FinTech investment, with the rounds revealing the state of cryptocurrency and InsurTech sectors.
In a week that saw Robinhood seeking a $35bn valuation in a mega IPO, Revolut foraying into the travel sector, Visa acquiring CurrencyCloud in a $963m deal and celebrities such as Serena Williams, Will Smith and Jared Leto betting on FinTech startups, it would be easy to forget that we also recorded the close of 22 deals in the space.
A closer look at these deals would offer deeper insights into the FinTech sector and its various sub-sectors. For instance, the $900m investment enjoyed by FTX, which gave it an $18bn valuation – 15-times the company’s valuation a year ago – has been a significant move in the crypto space. At the moment, the FTX facilitates more than $10bn in daily trading volume and provides services to over one million users all over the world.
In the same week, Tesla boss Elon Musk said the carmaker would likely resume accepting Bitcoin once it conducts due diligence on its energy use. Amazon looks like it could soon allow users to pay in cryptocurrencies soon as the e-commerce giant is currently hiring a digital currency and blockchain product lead for its payments team. Tech giant Apple posted a similar listing in May for a business development manager “working in or with alternative payment providers, such as digital wallets, BNPL, Fast Payments, cryptocurrency.”
Another piece of eye-catching news came from Twitter and Square CEO Jack Dorsey, who admitted that bitcoin will be a “big part” of the company’s future. In his view, it’s the internet’s “native currency.” Dorsey even launched a $23.6m bitcoin fund with Jay Z with plans to lead his other company Square into the decentralized financial services market by way of bitcoin. Square also this year acquired a majority stake in Jay-Z’s TIDAL music service with an eye toward how blockchain technologies and cryptocurrencies could change the music business.
Indeed, bitcoin has been soaring with hopes of wider acceptance. In April 2021, the Bitcoin market cap reached an all-time high and had grown by over $1trn when compared to summer last year. The market capitalisation has declined since, reaching roughly $600bn in June 2021, according to Statista.
However, the sector has been under fire by regulators. More recently, Britain’s Financial Conduct Authority (FCA) in its latest crackdown on crypto trading said that Crypto broker CoinBurp has no authorisation for a planned launch of its $BURP token and initial exchange offering. In addition, FTX chief Sam Bankman-Fried revealed the Antigua-based company has curbed risky trading by limiting investments that take on too much debt, in an attempt to clamp down on high-margin trading amid massive market volatility and growing regulatory scrutiny. However, looking at the surge in crypto-based firms scoring big rounds, clearly, it has hardly dampened investors’ attraction towards digital assets. Apart from FTX, Terraform Labs too recorded a $150m round last week.
The second largest round reported by FinTech Global was non-dilutive capital provider Capchase’s $280m financing round. Essentially, Capchase allows SaaS founders to finance the growth of their operations with cash in future monthly payments avoiding dilution and additional instalments. The new funding will be used to help introduce the company’s new “buy now, pay later” feature, which allows companies to get money upfront for their largest expenses — such as payroll — and repay at a fixed rate in three-, six-, nine- or 12-month increments.
Capchase is not the only company in the emerging alternative finance space to see significant money roll in this year. Earlier this month, Toronto-based Clearco — formerly Clearbanc — raised a new $215m growth equity round led by SoftBank Vision Fund 2. In April, the company raised $100m in equity and $250m in debt that valued it at almost $2bn. In late March, Los Angeles-based Pipe raised a $250m round at a $2bn valuation, and Austin-based Founderpath raised $10m in debt.
Innovative ways to finance startups may just be beginning. The upswing in the alternative finance B2B market is driven by both US and European startups are looking for new ways to fund their companies without losing ownership stake. The alternative finance market is poised to grow by $176.15bn during 2021-2025, progressing at a CAGR of over 10% during the forecast period. The market is driven by the emergence of social media associated with growing digital connectivity and quick and easy access to credit.
The InsurTech sector too is on an upward trajectory. Last week saw Jay-Z-backed Ethos boost its unicorn status with a further funding of $100m which comes only two months after it picked up a $200m equity round. It has now raised $400m to date and has amassed a very illustrious group of backers. In addition to SoftBank, they include General Catalyst, Sequoia Capital, Accel, GV, Jay-Z’s Roc Nation, Glade Brook Capital Partners, Will Smith and Robert Downey Jr.
Ethos’s rise comes at a time when the industry is seeing other startups approaching and rethinking life insurance. Last week, YuLife raised a big round to further build out its own take on life insurance, which is to sell policies that are linked to an individual’s own health and wellness practices — the idea being that this will make you happier and give more reason to pay for a policy that otherwise feels like some dormant investment; but also that it could help you live longer. Others like DeadHappy and BIMA are, like Ethos, rethinking the accessibility of life insurance for a wider set of demographics.
Investment in the sector had a strong start to 2021 with nearly $2.3bn invested across 126 deals, according to a report by FinTech Global. While most of the capital came from large transactions, funding raised in deals under $50m showed increased promise and is already at 33.3% of the record levels reached in 2020. It’s important to note that the top ten InsurTech deals in the first three months of the year collectively raised just under $1.2bn, making up 52.2% of the overall investment in the sector during the quarter. The total is much higher than the levels recorded in Q1 2020 when the ten largest transactions raised just over $500m.
With all that taken care of, let’s take a closer look at the 22 rounds we reported on last week.
FTX bags a massive $900m
The largest ever private crypto funding round saw FTX, the crypto exchange led by Sam Bankman-Fried having seized evaluation up to $18bn, a far cry from the $1.2bn valuation it had just about a year ago.
The Series B investment round had over 60 participants, including Softbank, Sequoia Capital, Coinbase Ventures, Multicoin, VanEck and the Paul Tudor Jones Family. The company will look to further expand the network of partnerships it has for its FTX Pay, FTX Liquidity program & FTX NFT business lines as it looks to expand its presence and drive further growth.
The platform serves the entire chain of cryptocurrency trading participants from retail and crypto-native investors, to sophisticated day traders, family offices, and experienced institutional traders.
Capchase nets $280m
MA-based provider of non-dilutive capital for recurring revenue businesses Capchase raised an additional $280m in new debt and equity funding. The round was led by i80 Group.
The funding, which follows a $125m round in June, will help to drive Capchase’s financing of European recurring revenue businesses. Currently live in the UK and Spain, the company expects to launch broadly across European countries in the next 6 months.
The company provides recurring-revenue companies with an alternative to equity financing. To do this Capchase employs a range of programmatic funding solutions that provide startups capital based on their future revenue.
Spend manager Soldo snags $180m
Soldo, a European business expense automation platform, has closed an oversubscribed $180m Series C funding round, joining the likes of Revolut, ClearBank, Checkout.com and Starling Bank to have raised a ‘mega round’ of over $100m in recent weeks.
The latest funding round was led by Temasek, with new investors Sunely House Capital, Citi Ventures and existing investors Accel, Dawn Capital and Silicon Valley Bank also participating. Using the new cash, Soldo plans to expand into new markets and further tap into the $170bn European market.
Terraform Labs banks $150m
South Korean company Terraform Labs secured $150m worth of investment funding from several high-flyers in the crypto space.
Investors included Arrington XRP Capital, Pantera Capital, plus Galaxy Digital and BlockTower Capital. Galaxy had previously co-led the Series A funding round for Terra back in January. A round that culminated in $25m in financing. An ensemble of 23 companies participated in the investment in total. This multimillion cash injection will go towards Terra’s decentralized finance (DeFi) Ecosystem Fund, which in turn sponsors projects on the Terra blockchain.
Robert Downey Jr-backed Ethos bags $100m
Yapily, an open banking infrastructure provider, closed $51m Series B funding round, taking its total investment to date to $69m.
The company will use the funding to expand across Europe, extending open banking to cover 95% of the continent by the end of the year; and will continue to invest in its market-leading infrastructure to pave the way for open finance, creating financial inclusion for all.
Safe Security raises $33m from British Telecom
Cybersecurity startup Safe Security (earlier) raised $33m in a funding round led by London-based British Telecom (BT). Its existing investors, including former Chairman and CEO of Cisco Systems John Chambers, also participated in the round.
The Silicon Valley-based startup will double its engineering team to 200 engineers in India who work on its pure-play SaaS product SAFE platform. With this capital infusion, Safe Security’s total funding rises to $50m. This investment will allow BT to combine the SAFE platform with its managed security services to provide customers with a real-time view of how safe they are against an incredibly fast-moving cyber threat landscape.
A $30m raise for DC’s DNSFilter
Fresh off a $30m Series A funding round, cybersecurity org DNSFilter has huge growth plans for product expansion, employee headcount and development. The round was led by Insight Partners with support from Arthur Ventures.
DNSFilter primarily works in content filtering, allowing companies to block malware, phishing domains and crypto-jacking. The funding will be used for research and product development and refining threat protection capabilities as well as hiring. One focus will be its fingerprinting product, which looks for patterns in malicious sites using artificial intelligence and machine learning. The company reports 14,000 customers internationally and plans to block more than 1.1 million threats daily by the end of 2021.
Magic’s $27m Series A
Plug and play digital identity authentication provider Magic Labs raised $27m in a Series A funding round to expand passwordless authentication with tools like blockchain and WebAuthn biometrics.
The investment was led by Northzone, with participation from Tiger Global, Placeholder, SV Angel, Digital Currency Group, CoinFund and Cherubic. More than 80 angel investors also participated, with big names in tech like Reddit Co-founder Alexis Ohanian, former Coinbase CTO Balaji Srinivasan, and Github CTO Jason Warner included. The latest round brings Magic to a total of $31m raised.
CEO Sean Li said that Magic’s ambition is to be “the passport of the internet,” and compares the dominant, legacy model of online trust to “a teetering Jenga tower about to collapse.”
Real estate vendor Jones bags $12.5m
Jones, a real estate startup whose vendor network makes it easier for tenants and property managers to hire vendors, ensure compliance, and limit liability, raised a $12.5m Series A led by JLL Spark and Khosla Ventures. Strategic players including Camber Creek, Rudin Management, DivcoWest, and Sage Realty also joined the round.
Jones will deploy the funding to continue to bring procurement into the digital age with the industry’s network of vendors. Customers include some of the largest real estate firms in the United States, and include Lincoln Property Company, Prologis, DivcoWest, Rudin Management, Sage Realty, and JLL among others.
Serena Williams pumps in money for Esusu in $10m round
Tennis superstar Serena Williams invested an unknown sum in Esusu, a FinTech startup that helps tenants establish and enhance their credit by submitting their rent payments to credit agencies.
Esusu earns money by charging landlords $2 per unit every month for rent reporting. For landlords, the value proposition includes a 25% increase in on-time monthly payments and an amenity that they can utilise to attract new high-quality renters or retain existing tenants who wish to improve their credit.
Williams said, “I founded Serena Ventures to invest in diverse entrepreneurs and early-stage companies that excel and produce impact, while at the same time empowering people and providing opportunities,” and that “financial inclusion” of working families and institutions is at the heart of the startup’s model.
Ntropy nabs $3.2m
CA-based company removing data barriers to understand financial transactions Ntropy raised $3.2m in seed funding. The round was led by QED Investors with participation from January Ventures.
The company intends to use the funds to hire key engineering and commercial talent, to support market growth and future product development. Ntropy provides an API that enables businesses to convert raw data into contextualised and structured information understood by both man and machine. The platform trains machine learning models across organisations with different data schemas and data sensitivity issues, to remove barriers and make data an easily understandable tool.
Chaka collects $1.5m
Chaka, a global trading and investment platform, has raised $1.5m in pre-seed funding round to power digital investments for African businesses.
The round was led by global VC, Breyer Capital with participation from 4DX Ventures, Golden Palm Investments, Seedstars, Musha Ventures and Iyinoluwa Aboyeji’s Future Africa. This pre-seed round comes on the heels of Chaka becoming the first FinTech startup to obtain the new digital sub-broker license from Nigeria’s Securities and Exchange Commission (SEC). Launched in 2019, the platform provides customers with access to the local and foreign capital markets.
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