Serial fintech SPACer Cohen Circle focuses on venture capital

Cohen Circle, the fintech investment firm founded by two of the industry’s earliest players, is turning its attention to venture capital deals.

Why it matters: The launch of the growth fund is known in recent years for taking a series of SPACs to market, and points to a renewed focus on the private fintech market.

Driving the news: Cohen Circle is looking to raise $200 million for a growth fund, a source with knowledge of the matter told Axios. Founded by Betsy Cohen and her son Daniel Cohen, the firm has held an initial close of this fund at $30 million.

• With a portfolio that includes Arta, Greenwood and Payoneer, Cohen Circle is pitching potential limited partners to invest in fintech infrastructure, and at the intersection of finance and artificial intelligence.
• Cohen Circle declined to comment on news of the growth fund, but in an interview in March, c0 founder Betsy Cohen told Axios, “This is an excellent time to enter the venture capital market in sectors we know.”

Background: Cohen Circle has launched 12 SPACs since 2015. Although the average SPAC has gone up in flames, the firm’s own track record has defied that trend.

• According to data from SPAC Insider, the five SPACs involving both Betsy Cohen and Daniel Cohen who did deSPAC have yielded an average of 30.2%.
• Most of those gains came from two SPAC transactions that predated the deal boom of the COVID era: International Money Express, which went public in 2018, and CardConnect, which went public in 2016 and was acquired by First Data a year later. As a result, the Cohen SPACs lag the performance of the S&P 500 on average.
• By comparison, SPACs that found a target are down an average of 54% since 2016 — the year Cohen’s first SPAC merged with the company.

Between the lines: Cohen Circle’s SPACs tended to merge with fintech companies that were profitable or approaching profitability.

• Perella Weinberg Partners, Paya and International Money Express all reached profitability a year after being taken public by the Cohens. CardConnect was profitable the year before it went public.
• Payoneer, the worst performer of the pack, was profitable in the first half of 2022, but was hit by Russia’s invasion of Ukraine in 2022 due to significant Ukrainian business. The company also suspended Russia-based operations that year.

Of note: The firm pulled out of two large SPAC deals when it determined the timing was off. A SPAC scrapped its $1.8 billion merger with Pico, saying the company failed to provide required financial information. An $8.8 billion deal with stock and crypto trading company eToro was also mutually canceled last year.

• The eToro merger — the largest SPAC deal the Cohens would have completed — collapsed in part because the SEC was hesitant about how to account for the company’s crypto operations, Axios has learned.
• Cohen Circle and eToro and declined to comment.

Yes, but: Cohen & Co, an investment bank run by Daniel Cohen and not financially connected to Betsy Cohen, launched SPACs that acquired insurtechs Metromile and Shift Technologies. Both have underperformed.

• Metromile, which went public at a valuation of $1.3 billion, was acquired by Lemonade for $145 million. Shift, once valued at $415 million, now trades at a market cap of $25 million.
• When asked if he thought it was a mistake to enter that arena or if he felt the markets were unfair, Daniel Cohen said yes to both.
• “I would say that in one of the two deals, we were very disappointed with the management,” said Daniel Cohen, noting that his firm successfully pushed to replace Metromile’s chairman in 2021. “The other one we fell in love with. The industry is harder than it looks.”

Look forward to: Since the closing of the public listing window—in part because of higher interest rates—the Cohens have taken a step back from the asset class, liquidating five SPACs that failed to find an acquisition target and returning capital to investors.

• Still, the team believes in the funding model despite regulatory scrutiny and ominous headlines.
• “We see the market as a series of opportunities,” said Betsy Cohen. “The market today may be in a slightly different place than it was two years ago or a year ago.”
• Two of their SPACs remain particularly active and looking for a target.

The bottom line: The Cohen family may be making less noise in the SPAC world now, but they are positioning themselves to be more active in venture capital later on.