Pillow wants to make crypto saving and investing easy for new users • TechCrunch

Pillow wants to be an all-in-one platform that says it helps even beginners save, spend and invest in cryptocurrency. The Singapore-based startup announced that it has raised $18 million in Series A funding led by Accel and Quona Capital, with participation from Elevation Capital and Jump Capital.

The app currently has more than 75,000 users in over 60 countries. It supports seven digital assets – Bitcoin, Ethereum, Solana, Polygon, Axie Infinity and USD-backed stablecoins USDC and USDT – and plans to expand to over 20 assets in the coming months.

Founded in 2021 by Arindam Roy, Rajath KM and Kartik Mishra, Pillow focuses on emerging markets such as Africa and Southeast Asia. Its founders say that since the beginning of the year it has grown its user base by 300%, with assets under management growing 5x. It has also recently expanded to include Nigeria, Ghana and Vietnam.

Before founding Pillow, Roy and KM explored web3 while working at identity verification and AML software provider HyperVerge, while also holding jobs in the traditional financial industry. During this time, the two started a Discord server on the site to get people on board with web3, which eventually grew to more than 15,000 people.

“We saw a pattern of problems that were repeating themselves,” the two told TechCrunch. “People don’t know how to pay gas fees, don’t know how to bridge different blockchains, people don’t know what transaction they’re approving and end up losing funds.”

Around this time, the two met Mishra, who was the business manager of Indian delivery startup Dunzo, and began talking about how to solve the onboarding problem at scale.

“We gradually realized that the challenge is that crypto transactions today do not fit the mental model of how retail users perceive transactions. You need a strong technical background to trade crypto seamlessly, they said.

As a result, Pillow was born to make crypto usage understandable.

To do this, the Pillow team has to tackle a couple of big problems. The first is awareness, as most people still think crypto is just buying and selling Bitcoin, without understanding other uses. The second is complexity, since using crypto in its entirety means understanding gas taxes, blockchain technology, and bridging. “A person who just wants to trade is not going to scale this learning curve,” they said.

To use Pillow for the first time, people sign up using their email accounts, then provide KYC information, such as live selfies and national identity cards. Afterwards, they are given a short lesson on the potential risks of investing in digital assets before choosing which ones they want to deposit or invest in. Before the first investment, they are taken through another lesson on the potential risks of that asset.

After that, they can deposit cryptocurrency from their own wallets or another crypto platform by making a transfer to the displayed crypto wallet address on Pillow. In some countries where Pillow has partnered with local, compatible on-ramp service providers, users can also purchase crypto with their local fiat currency. Pillow supports fiat currency deposits and withdrawals through local partnerships in Nigeria, the Philippines and Vietnam, with plans to add more in Southeast Asia, Africa and Latin America with its new funding.

(It’s important to note here that crypto investors have had questions about Pillow’s exposure to Anchor, the DeFi lending protocol in the Luna ecosystem that collapsed last year. Roy told TechCrunch that Pillow had no exposure to Anchor or Luna during the events of May 2021, and therefore it had no impact on Pillow’s performance.

On Polygon and Solana, Roy said returns are generated solely by liquid stakes, and effective interest is derived directly from the chain staking, with an interest rate of 4.75% for Solana and 8.5% for Polygon. For Bitcoin, the return is generated by wrapping Bitcoin into Ethereum-compatible assets such as $WBTC and $renBTC and distributing wrapped assets as liquidity to DeFi protocols such as Uniswap, with an effective interest rate of 1.52%. On USD Coin and Tether, the return is generated by distributing stablecoin to DeFi protocols without permanent loss. Effective interest rate is 5.5%. For Ethereum, returns are generated by floating stakes and DeFi instruments, similar to Bitcoin. Effective interest rate is 3.51%.

Roy added that Pillow does not derive revenue from derivatives and does not engage in any form of institutional lending, including unsecured or sub-secured loans with all revenue derived solely from DeFi instruments).

The startup’s largest user base is in Nigeria, and it also has a large presence in India, Ghana, and Vietnam, and growing user bases in Brazil, the Philippines, and Sri Lanka. It focuses on retail investors, allowing them to start with investments as small as $5.

Since Pillow’s users are from different geographies, its closest competitors also come from all over the world. They include crypto exchange Luno in Africa, multi-asset exchange Pluang (another Accel investment) in Southeast Asia and global crypto savings app Nexo. Pillow’s founders say it stands out with its goal of becoming a one-stop home for digital asset-driven financial services that allows even first-time crypto users to earn, save, spend and invest from the same platform.

Pillow is currently in its growth phase and plans to introduce transaction fees as new products, including swaps and real-world tokenized assets are introduced. It currently profits on returns generated on top of the 5% to 10.42% returns made available to users. Pillow keeps a small percentage of the spread generated, and another part also goes into the return reserves.

Edit: Updated with CEO comment about anchor exposure.