Even decacorns have their challenges • TechCrunch
Welcome to The Interchange! If you received this in your inbox, thank you for signing up and your declaration of confidence. If you are reading this as a post on our site, please register here so that you can receive it directly in the future. Each week I’ll take a look at the hottest fintech news from the previous week. This will include everything from funding rounds to trends to an analysis of a particular space to hot takes on a particular company or phenomenon. There’s a lot of fintech news out there, and it’s my job to stay on top of it—and make sense of it—so you can stay up to date. — Mary Ann
Hey Hey. By the time you read this, we’ll be two days away from TechCrunch Disrupt! Sooo exciting!
But first, let’s talk about fintech.
Last week’s big news was the start of the Brex company’s spending management announcement that it is laying off 11% of its staff, or 136 people. It was also revealed that the startup’s CFO, Adam Swiecicki, is leaving to join Rippling as CFO. Notably, workforce platform unicorn Rippling recently entered the corporate management space, making it a direct competitor with Brex.
First, it’s rare—and refreshing—for a company to actually proactively share news of a layoff, so it’s interesting that Brex got ahead of the gossip and let me know about its plans. And as Alex Wilhelm pointed out on Friday’s Equity podcast, the layoffs appear to be mainly related to Brex’s move earlier this year to no longer work with SMEs and non-professionally funded startups. In other words, the company said it was primarily letting go of people focused on serving that group. Still, it must suck for the staff – especially considering that the groups it no longer works with were originally Brex’s bread and butter.
Bigger picture wise, the news of Brex’s layoffs shows that even decacorns have not been immune to this downturn. The company earlier this year confirmed a $300 million Series D raise at a staggering $12.3 billion. And while the company claims to be “in a strong financial position with many years of runway”, it adds that the shift away from SMBs to focus more on enterprise customers – and, by default, any related redundancies – will put the company on a path to sustainable profitability over the next few years.”
Side note: Brex aside, it still blows the reporter’s mind that companies can generally raise hundreds of millions of dollars in funding and still not be profitable. I doubt I can ever become a venture-backed startup founder. The pressure of having to return investors who poured that kind of money into my company and the pressure of never having to lay off employees would probably make me lose sleep at night! Guess that’s why I’m a journalist and not a startup founder!
Anyway… speaking of Disrupt and Brex, I’ll be interviewing co-founder and co-CEO Henrique Dubugras and Anu Hariharan, CEO of YC’s growth fund, YC Continuity, live in a Fireside Chat on October 19th! I’ll also be speaking with Ramp CEO and co-founder Eric Glyman, Airbase CEO and founder Thejo Kote and Anthemi’s partner Ruth Foxe Blader in a session called “How to Compete without Losing Your Mind and Runway When Cash Is Expensive” on the same day. . And finally, I’ll be chatting with Rippling CEO and co-founder Parker Conrad about the company’s plans to “go global.” Come see us! (Get 15% off here).
Oh, and if you want to hear me talk about everything from “The Good and Ugly Sides of Fintech, What Great Journalism Really Means, & Why Startups Represent Hope,” check out this episode of the Fintech Leaders podcast I recently recorded with VC Miguel Armaza.
VCs demand to fund real estate investment startups
Image credit: Edwin Remsberg (opens in new window) / Getty Images
Hello! It’s Anita Ramaswamy reporting from the fintech desk here at TechCrunch with Mary Ann. We’ve seen a lot of interest – and funding news – in the real estate and proptech spaces recently. Specifically, there have been a number of startups that have acquired real estate investment apps that aim to help expand access to the asset class for retail investors by giving them tools to bypass obstacles such as large upfront capital requirements typically required to invest in real estate.
Fintor is one such example. The startup recently closed a $6.2 million funding round at an $80 million valuation for the platform that offers fractional stakes in residential properties to investors for as little as $5. We have also covered similar platforms such as Landa, Nada and Arrived Homes, all of which have raised new funding in 2022.
The increase in interest among private investors for access to property may seem counterintuitive given that rising interest rates make property seem less attractive than it has been in recent years. But these startups are likely more focused on long-term, secular real estate demand growth as part of a diversified portfolio rather than getting caught up in concerns about short-term volatility.
Here’s what Fintor founder and CEO Farshad Yousefi had to say about the current market environment in an email to TechCrunch:
While recent media headlines have mainly focused on the volatility of the market, there are still opportunities for investors to take part in real estate investing with the right kind of strategic approach. For example, Atlanta has seen an incredibly close to 12% year-over-year growth in rents, directly increasing investors’ cash flows. Additionally, when looking across the board at the top MSAs, large institutional investors have seen a nearly 50% jump in renewal rent growth. This drastic upward trend in tenant retention clearly shows where rental demand is going.
For a deeper dive into real estate technology and how it’s changing the investment landscape, check out my article in TC+ this week:
Weekly news
Plaid announced last week that it was adding two new features to its identity verification product. By email, Plaid’s head of identity and fraud (and former Cognito CEO) Alain Meier said: “With our new autofill feature, users can be verified in as little as 10 seconds. On the flip side, we’re building more intelligence into our risk and fraud models with behavioral analytics to stay ahead of fraudsters.”
The behavior analysis part is particularly interesting because say you know your SSN/phone number by heart, your typing behavior would be very different than if you copied and pasted it from a document. Plaid acknowledges that this type of technology is not new, but claims that it is not typically combined with the other fraud detection features that Plaid offers.
Go for Square? TechRadar reports: “After acquiring now Zettle in 2018, PayPal has announced an all-new POS device designed to meet the needs of small and medium-sized businesses. The newly launched Zettle terminal connects to the internet via Wi-Fi or a free pre-loaded SIM card on the 3G and 4G network to enable business owners to operate on the go. This ‘fully mobile’ approach should appeal to providers with multiple locations, as it does not require additional setup or manual connection at each new location.”
As reported by Christine Hall: “Greenlight Financial Technology, a venture-backed fintech company focused on providing a debit card, banking app and financial education to children, added a new layer to its subscription plan with the introduction of family safety features. Greenlight Infinity, priced at $14.98 per month for the whole family, includes location sharing to see where someone in the family is and check in; SOS alerts to emergency contacts and/or 911 with one touch; and collision detection with automatic 911 dispatch where if a crash is detected while driving, driver and trip information is provided to emergency services.”
TC+ editor Alex Wilhelm dug deep into some third quarter funding numbers, and what he discovered when it comes to the fintech sector was not pretty. He writes: “Looking at Q3 2022 data from CB Insights, it is clear that the fintech funding boom is behind us; even more, global fintech funding activity is now back to where it was before 2021, indicating that last year was more aberration than new normal for the startup category.”
Sarah Perez reports it apple “is taking a big step toward offering more banking services to its customers. The company announced on October 13 that it is partnering with Goldman Sachs to soon launch a new savings account feature for its Apple Card credit cardholders, which will allow them to save and grow their “Daily Cash” — the cashback rewards earned from their Apple Card purchases. In the coming months, Apple says cardholders will be able to automatically store that money in a new high-yield savings account from partner Goldman Sachs available with Apple Wallet. Customers will also be able to transfer their own money to this account.”
The Los Angeles Times reported that “credit cards and digital payment apps like PayPal offer some distinct advantages over cash, including the ability to recover money paid to fraudsters. But Cell, a digital payment network owned by seven major banks, is not so protective of its users. If you use Zelle to pay someone who turns out to be a fraud, you only have a slim chance of getting your money back from your bank. The same applies if you send money to the wrong person. If you hit send, the money is probably gone—just like if you dropped a $20 bill on the street.” In the meantime, it was chatter on Twitter that Zelle actually had significantly greater transaction volume in 2021 than Venmo and CashApp. Hmm. I’m still trying to find proof of that.
Financing and M&A
See TechCrunch
Former VC gives smart financial advice to people who really need it, instead of just the rich: Announcing this $24.4 million raise led by GGV Capital, Northstar CEO and co-founder Will Peng told me, “The time from the first the term sheet meeting was about a month.”
With $67 million in new capital, NorthOne is doubling down on SMBs as some fintech companies pull back
Behold, TripActions Raised to $9.2B Value After Reported $12B IPO
Getaway launches a way for you to enjoy, and own, vacation homes
Egyptian consumer money app Telda raises $20 million from GFC, Sequoia Capital and Block
Airwallex Raises $100M to Run Cross-Border Business Banking, Valuation Remains Unchanged at $5.5B
Charli D’Amelio-endorsed fintech Step borrows $300 million to bring crypto to teenagers
This company wants to improve your credit by gamifying financial literacy
GoHenry, the banking service for under-18s, raises $55 million after passing 2 million users
And other places
VC firm QED acquires fintech executive search company
Astra Raises $10M in Series A Funding; $30 million line of credit
Corporate card startup Mercantile raises $22 million to target an unusual niche: professional associations
Financial Finesse launches venture arm supporting ‘fintech for the greater good’
Well, that’s it for this week! Once again, thanks for your continued support – and I really hope to see some of you IRL at Disrupt! xoxo, Mary Ann
