London-based fintech Chip raises £7.3 million through angel and crowdfunding

Chip, the London-based fintech that created an automatic savings account, has raised £7.3 million, with £3.8 million crowdfunded by customers and the remainder from unnamed angel investors. The campaign ran for three weeks in September and is currently Crowdcube’s most participated-in crowdfund, with 7,182 investors.

The startup provides a free app “to make saving as easy as spending.” The AI-driven system calculates how much a user could save, gives the option to decline it, and then automatically transfers the amount to user’s Chip account. Chip has saved over £85 million for its users to date.

CEO Simon Rabin commented: “The most powerful way for Chip to grow is to have thousands of investors advocating for the product they believe in. It’s amazing to have this many Chip savers as investors in the company. We’ve proven there’s a big demand for Chip, and we’re ready to scale – we’re going to use our investment to grow and deliver a product that will fill a huge gap in the market. Many of the other big names in fintech are focussed on making spending easier. Monzo have the current account, Curve are disrupting credit cards, Revolut have the travel card, but Chip… Chip is for saving.”

The fintech will use the funds to increase the app’s capacity for large volumes of users, refining the infrastructure and expanding the team. THe plan is also to expand the product to offer access to FSCS protected accounts and deliver an in-app marketplace for returns products.

Already the company has made a number of senior hires, all fintech veterans: David Kavanagh (CTO), former CTO of Purplebricks; Sharon Miles (COO), former innovation director of B2B fintech unicorn Deposit Solutions, as well as Barclays and LeasePlan; Gerard Hurley (CCO), former compliance lead at Funding Circle and an ex-FCA regulator; Gary Dolman (Board Advisor), co-founder and recently retired CFO of Monzo.

New CTO David Kavanagh said: “The savings market is archaic, broken and ineffective. People want more from their savings accounts, so they are voting with their capital. Chip has raised VC-levels of funding from its users and supporters, demonstrating that what customers want is a market-changing product that is easy to use, helps them save, and offers the best possible rates in the market. It’s an incredibly exciting time for the company and I’m delighted to have joined it as such a pivotal stage. I look forward to working with the team at Chip to help set a new standard for savings apps.”

Source. Tech.Eu,. Annie Musgrove, November 6, 2019

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Online mortgage lender Athena raises $70 million in Series C

Fintech startup Athena has closed a $70 million Series C round as it looks to push into mortgage origination.

The country’s largest industry fund, AustralianSuper, joined the raise alongside long-term backers Square Peg Capital, AirTree Ventures and Hostplus, as well as Salesforce Ventures and NAB Ventures.

Square Peg’s Paul Bassat joined the Athena board last year when the company raised $15 million in a Series A. Six months later, in November 2018, it raised $25 million in a Series B. The latest cash injection values the company at $230 million.

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Sponsor 

myCareBase™ is a platform for seniors and their families to find, evaluate, hire and manage home support services, to improve the seniors’ ability to remain living safely in their current home for as long as possible. The caregiver marketplace currently offers candidates in Greater Toronto and Greater Vancouver.

To compliment this platform the company also offers an innovative care management app that centralizes communication and task management among family members and the caregiver, along with a Care Concierge service to help family members with administrative, navigational or organizational tasks.

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The cloud-based fintech, founded in 2017 by ex-NAB bankers Nathan Walsh and Michael Starkey, also counts Macquarie Bank, Rice Warner, Apex Capital, and RESIMAC Group among its investors and from the outset targeted super funds as lending partners.

To date, Athena has written around $500 million in loans since its launch in February, with a goal of writing $1 billion in business within 12 months, but has focused on refinancing. It was among the first to respond to recent RBA rate cuts, passing on the full 25 basis points to offer a 2.84% p.a variable rate for owner-occupiers and 3.24% for investors.

The cash injection will have the business eyeing off a market worth around $380 billion annually, with around 80% of that figure new mortgages.

Source. Startup Daily, Simon Thomsen, October 21, 2019

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Galileo Financial raises $77 million for its fintech services that were 19 years in the making

Clay Wilkes had already been retired for six years when he launched Galileo Financial Services in 2000.

The serial entrepreneur, who had been an early pioneer in telecommunications technologies (like voice over internet protocols), saw the need for better connectivity between secondary services and financial institutions 19 years ago, just as new digital services around payroll processing, transit vouchers, store cards and other services were launching.

Now the company runs the backend integrations with financial institutions for some of the biggest names in financial technology and has just raised $77 million in financing from Accel Partners.

Not that Galileo necessarily needed the money. The company has been profitable for years since its bootstrapped beginnings and counts fintech giants like Chime Banking, Robinhood, Monzo and TransferWise among its customers. In fact, the debit and credit card service provider will process nearly $26 billion in financing by the end of the year, according to the company.

For financial services companies that are launching these days there are a few ways to get to market quickly. One is to partner with a financial institution that will handle the money for them in accounts that are FDIC assured; the other is to become a financial provider that’s fully regulated themselves.

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Sponsor 

myCareBase™ is a platform for seniors and their families to find, evaluate, hire and manage home support services, to improve the seniors’ ability to remain living safely in their current home for as long as possible. The caregiver marketplace currently offers candidates in Greater Toronto and Greater Vancouver.

To compliment this platform the company also offers an innovative care management app that centralizes communication and task management among family members and the caregiver, along with a Care Concierge service to help family members with administrative, navigational or organizational tasks.

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Most companies have opted for the second route, and when they do, they need to find a way to hook into a bank’s financial system and the payment technologies that form the backbone of transaction processing through the debit and credit cards that a huge portion of the world relies on to buy things.

Accel partner John Locke, who is joining the Galileo board of directors, calls the company almost the flip side of the Braintree and Stripe investments that power transactions for most online merchants.

Rather than focus on the companies that are taking online orders and processing payments, Galileo deals with the consumers who are spending the money and powers the ways in which companies are trying to offer new services to get those consumers to switch from traditional banks to their upstart challengers (ironically still mostly powered by traditional banks).

“Through the API what they’re doing is creating and managing accounts, authorizing merchant transactions, monitoring fraud, initiating disputes and chargebacks, being able to configure products and a wide variety of product,” said Wilkes. “We support [direct deposit accounts] and we do credit products… all of these capabilities are capabilities that fit on our platform.”

Wilkes wouldn’t talk about the company’s valuation except to say that it’s worth “a substantial amount.”

What he will talk about is how Galileo will use the money it has raised. The Salt Lake City-based startup is planning to greatly expand its geographical reach beyond North America. It’s “actively pursuing opportunities in Brazil and Colombia and Argentina,” according to Wilkes. In fact, the company plans to open an office in Mexico City in the coming months to service new Latin American business.

Meanwhile, it already has something of a stranglehold on the market in the United Kingdom. “The top five largest fintechs in the U.K. are all clients today,” Wilkes said.

Unlike other companies in the market that take a fixed percentage of transactions, Galileo charges a variable amount of a few cents for every transaction that it processes to connect a startup with its banking back end. 

“We’re in a golden era of fintech innovation and Galileo has quietly built the API infrastructure layer powering the industry’s most innovative products,” said Locke in a statement. “Clay and his team have built a very impressive business with many parallels to companies like Qualtrics and Atlassian: bootstrapping first to build a quiet, profitable powerhouse and now, ready to go big globally. We’re excited to help Clay and team take Galileo to the next level.”

Source. TechCrunch, Johnathan Schreiber October 16, 2019

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Summer wants to vanquish student loans for borrowers, and now has $10M to do it

$1.5 trillion. That’s the amount of outstanding student loan debt held by American citizens according to the New York Fed. It is an astronomical sum, and has led to much hand-wringing about whether there is a coming bubble in U.S. higher education.

What’s even worse than the scale of the debt load though is the fact that for millions of borrowers, they literally don’t have to pay some of those dollars. Thanks to the complexity of the loan system in the U.S., borrowers often qualify for repayment programs that can lead to loan forgiveness, that is, if they can figure out the terms, apply correctly, and actively follow the rules to net the write-off.

Enter Summer. The public benefit corporation is on a mission to act as a “trusted advisor” to student loan borrowers. Through its platform, borrowers can get a full 360-degree view of their current student loan situation, and begin exploring options for how to repay it in the most financially efficient way possible.

The company’s early traction has brought it a new round of venture capital. The company announced this morning that QED Investors, one of the leading early-stage fintech investors out there, led a $10 million series A round in the company. Partner Matt Risley led the deal, who joined QED about two year ago from European fintech giant Klarna, where he was CFO.

Co-founder and CEO Will Sealy analogized Summer to how tax accountants help filers handle the complexities of doing their taxes. “We’re trying to create the software that democratizes [student loan] expertise, that gets the expertise into the hands of the end consumer, who might not be able to afford an accountant that doesn’t even unfortunately exist in the student loan space at this current moment,” he said.

He noted that the company is building out support for 120 loan forgiveness programs and their complicated rules, and has its eyes on more than a hundred other student loan proposals that are sitting in state legislatures across the country.

The company was started at Yale by Sealy and co-founders Paul Joo and Vincent Tran, and the trio eventually migrated to New York City while building the team to 13 according to its staffing page. Sealy previously worked at the Consumer Financial Protection Bureau in DC in the Office of Students, where he worked on precisely the challenges of getting students better access to quality information around student loan programs.

So far, Summer, which launched in 2017, has helped 10,000 borrowers to date, and “just in this year, we have helped borrowers save $8 million,” Sealy said. “A critical metric is not just how many people we are engaging, but how much money we’re saving them.”

Summer does not charge end users to use its product. Instead, it sells through enterprises and other types of organizations to offer the product as a benefit to employees. Sealy gave the example of medical associations, who could offer Summer to recent medical school graduates, or companies who want to entice recent grads with a simple tool that can improve their financial lives.

Summer currently works retrospectively, in that it targets users who are post-grads. I asked why Summer didn’t focus prospectively on helping borrowers think through their student loan products before they take them on. Sealy replied that “In many ways, it feels like the house is on fire. So before we would ever go about trying to create a better smoke detector and build a new home, we want to save the people who are currently struggling.”

Risley of QED explained his rationale for leading the round. “QED, like the rest of the investors like General Catalyst and Story Ventures, we put a pretty big round into this company on the belief that there’s an urgent problem facing these student loan borrowers and we’re working hard to … scale to meet the needs of tens of millions of student borrowers.” With 10,000 users and $8 million saved, you can start to project out the potential impact Summer could have for many borrowers.

In addition to QED, the round had participation from General Catalyst, Greycroft, NextView Ventures, and Story Ventures.

Update: Changed the lead partner’s name from Matt Burton to Matt Risley at QED.

Source. TechCrunch, Danny Crichton, September 26, 2019

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Mortgage Lender Better.com Grows Series C Funding Round to $160M

After initially securing $70 million for its Series C round in January and raising another $25 million in add-on funding this past spring, online mortgage lender Better.com has officially closed off the Series C with a total of $160 million raised, Fortune has learned.

Activant Capital led the latest influx in funding and was joined by Ping An Insurance, Ally Financial, Citigroup, AGNC, American Express Ventures, and Healthcare of Ontario Pension Plan (HOOPP), as well as existing investors Goldman Sachs, Kleiner Perkins, and Pine Brook. The $160 million round takes the New York-based company’s total funding to $254 million to date and brings its valuation to north of $600 million, Better.com said.

The capital will be used to further scale the mortgage lender’s operations and grow its product offerings, founder and CEO Vishal Garg told Fortune. Garg noted that Better.com has tripled its growth year-on-year since launching in 2016; while the company is at $5 billion in originations to date, Better.com financed $1 billion worth of mortgages in the second quarter of 2019—more than in all of 2016 and 2017 combined—and is on track to lend more than $4 billion in 2019.

“The way things are going, we’re going to be at $10 [billion] to $15 billion of originations next year, which would make us the largest fintech in America,” according to Garg. “We had a lot of strategic investors who weren’t able to make the first close and were really interested in the company. To accommodate them, and considering the growth rate we’ve had this year and our need for further investment capital, we decided to extend the round... We just needed to be way more capitalized.”

The startup is also growing its headcount at a prolific rate; it has expanded from around 200 employees last year to more than 700 people currently, and plans to hit 1,100 employees by the end of the year, Garg said. The company also recently opened its fourth U.S. outpost in Charlotte, N.C.—home to a fervently expanding fintech scene—to go with its offices in New York, Oakland, Irvine, Calif., and Gurgaon, India.

Better.com is part of a wave of fintech startups targeting the home-buying market via tech-oriented platforms that appeal to millennials, who now account for most new mortgages in the U.S. As Fortune has reported, home-buying tech startup recently Flyhomes sealed $141 million in new financing last week, while the mortgage and consumer lending fintech firm Blend raised $130 million in new venture funding earlier this summer.

Garg founded Better.com after experiencing a “terrible” mortgage application process of his own several years ago, which led to he and his wife losing their desired home to an all-cash buyer. The startup’s platform aims to digitize and streamline that process to allow buyers to close a typical mortgage in half the time it usually takes (21 days, versus an industry average of 42 days).

It also deploys a commission-free, fee-less business model that it claims saves borrowers thousands of dollars in costs—with the company generating revenue from originators who “pay us a premium because of the quality of the loans and the loan performance,” Garg said.

“We’re not a balance-sheet lender,” he noted, adding that Better.com has more than 30 investors—including major mortgage originators and financial institutions—who have committed more than $700 billion in financing capacity to the company. The startup is presently active in 40 states, with active applications that would see it expand to all 50 states in the U.S., Garg said.

Activant founder and partner Steve Sarracino, who is now on Better.com’s board, told Fortune that the startup’s “tech-enabled, end-to-end mortgage manufacturing process” allows it to save costs and pass those savings down to consumers. In turn, Better.com has been able to carve out a ever-larger niche for itself in the U.S.’s $15 trillion mortgage market.

“The [mortgage] process is so unbelievably broken, and it all costs the consumer more in terms of APR,” Sarracino said. “Better is the first company that’s looking to fix it end-to-end. It’s not cheap to manufacture a mortgage, and by driving down that cost, it gets passed on to the consumer.”

Better.com also found a place on Fortune and Great Place to Work’s list of the 60 best companies to work for in New York this year—ranking 11th among small and medium-sized companies.

Source. Fortune, Rey Mashayekhi, August 19, 2019

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ScaleFactor raised $100M in a Year as VCs Chase Small business focused Fintechs

ScaleFactor, the accounting fintech serving the small and medium-sized business market, raised $60 million in venture funding, in its third fundraising round in about a  year.

To date Austin, Texas-based ScaleFactor has raised $100 million, completing a $10 million Series A round in July of 2018 and a $30 million Series B round in January.

Coatue Management, an early investor in Square and Shopify, led the Series C round, which also included existing investors Bessemer Venture Partners, Canaan, and Broadhaven Ventures. New investors Vulcan, Stripes Group and NextPlay Capital also participated.

ScaleFactor makes online financial software that enables small and medium-sized businesses to automate back-office tasks including bookkeeping and payroll. Business customers pay a flat fee to access the digital tools and services with packages starting at around $6,000 and reaching as high as about $30,000 a year.

Aiming to level the playing field, ScaleFactor and it’s backers say it's giving small and medium-sized businesses digital tools and insight typically reserved for large enterprises.

“Why is it SMBs can’t have on-demand bookkeeping services just like larger corporations without having a team of 50 finance people and access to the best accounting services,” said  Thomas Laffont, senior managing director at Coatue Management. “If you think of platforms like Shopify and Square, their taking individuals or small merchants and giving them the capabilities to do what was previously only for large companies. That’s a huge trend we believe ScaleFactor plays in.”

As part of the investment, Coatue gets a seat on the board, giving ScaleFactor access to a hedge fund that invested in Uber, Lending Club, Reddit, and Lyft in addition to Square and Shopify. “The proliferation of data is making platforms like ScaleFactor increasingly useful,” for small and medium-sized businesses that are looking for actionable insight in real-time, said Laffont.

ScaleFactor founder and chief executive Kurt Rathmann started the company from his living room after working as the CFO for a small business. Trained at KPMG, Rathmann was frustrated by the small business constraints he faced when it came to managing accounting and financing. Obsessing about how to meld the two became his pastime, leading him to form the company in 2014.

Six years later ScaleFactor has more than 1,000 customers and big names in tech investing as backers.

The company offers an easy to use digital platform that houses all of the business’ financial data. That gives business owners a complete view of their finances in real-time. With a News Feed like scrolling feature on the app, customers can decide in real-time to make business actions whether that's to pay an invoice or initiate payroll.  Its digital chatbot Marge is also on hand to answer questions on the go. “You can be on the run and really need the EIN number. Marge can text it back in three or four seconds,” said Rathmann, noting ScaleFactor products are all focused on saving small businesses time and helping them grow.

“In working with thousands of companies over the years, we’ve learned small business owners care about two factors above everything else: saving time and scaling their businesses.”

While ScaleFactor has its roots in accounting and financial management software, its expanding its services, which is where most of the proceeds from the fundraising will go. Rathmann said the business is evolving into a relationship one in which customers are coming to ScaleFactor for advice on other aspects of the business such as insurance. To capitalize on the deepening relationship between ScaleFactor and its customers, he said the company is developing a lending product that will be available in the fourth quarter.

The accounting platform provider is part of a growing list of fintechs that are going after the small and medium-sized business market. Ignored by the big banks for years, fintechs correctly bet small and medium-sized businesses were in need of digital services.  Venture capitalists are fawning over these fintechs, throwing hundreds of millions of dollars their way. Some already command billion-dollar valuations. Rathmann says ScaleFactor is headed that way as well. “Were are growing quickly. We’re not a unicorn yet but that’s the next step for us,” said the executive.

“We’re really excited about the diverse viewpoints now being brought to the company. We’re just getting to the net wave of what ScaleFactor will be.”

Source. Forbes, Donna Duscalso, August 8, 2019

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German Challenger Bank N26 Nets $170M In Series D Extension

Today, Berlin-based mobile banking upstart N26 announced that it raised an additional $170 million, extending its Series D round.

This transaction values the venture at approximately $3.5 billion, post-money, up markedly from the $2.7 billion post-money valuation N26 achieved following the first tranche of its Series D round—a $300 million deal Crunchbase News covered when news broke back in January.

News reports and Crunchbase data suggest this was an inside round, with existing investors contributing to the top-up transaction. These include the likes of Peter Thiel-backed Valar Ventures, the corporate venture arm of German insurance giant Allianz, Chinese internet conglomerate Tencent, and Singaporean sovereign wealth fund GIC, among others.

The capital contracted in this deal brings the company’s total funding to over $680 million in combined USD and Euro-denominated VC backing.

Since the company’s last round there’s been talk of expansion beyond N26’s beachhead markets in Europe. Last week, the company formally announced its launch in the United States. According to the company’s statement, “N26 is the first European challenger banking platform to launch in the US.”

Europe is home to a number of banking upstarts—like Atom Bank, Monzo, Revolut, and others—seeking to unseat incumbents by offering slick branding and a more full-featured banking experience mediated through mobile phones. London-based Monzo launched a “light version” of its app in the U.S. back in June, though a more feature-complete rollout is slated for later this summer.

In its U.S. launch announcement, N26 said it first opened an office in New York City back in autumn 2017, when the company had approximately 500,000 customers. Last month, the company announced it now serves 3.5 million customers worldwide. In addition to its Berlin headquarters, the company maintains offices in New York, São Paulo, Barcelona, and Vienna, collectively employing 1,300 people. N26 said it will use the new funding to continue expanding toward the goal of becoming “a global bank.”

Source. Crunchbase, Jason Rowly, July 18, 2019

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Receipt management startup Sensibill raises $41 million CAD Series B

Toronto-based receipt management app Sensibill has raised a $41 million CAD ($31.5 million USD) Series B, led by Radical Ventures.

Other participants in the round include past Canadian investors Information Venture Partners and First Ascent Ventures, as well as National Bank of Canada. The FinTech startup, which uses AI to scan and digitize physical receipts for banking customers via desktop or mobile app, said the raise comes as it expects to triple both its bank customer base and annualized revenues by the end of the year, according to The Globe and Mail. The company’s ultimate goal is to offer advice and improve end users’ financial health through machine learning.

“This is a classic story of an under-the-radar company from Toronto with fantastic data-driven, customer-facing AI solutions being used by a whos-who of global Tier 1 banks,” said Jordan Jacobs, co-founder and managing partner at Radical Ventures, who sold his AI startup Layer 6 to TD Bank early last year. “We are very excited to help support Sensibill’s rapid growth as it transitions from a successful startup into a global powerhouse.”

Positioning itself as a customer value-add for financial incumbents, Sensibill’s software uses machine learning to identify and extract unstructured text from receipts and return structured data in the form of a digital receipt. The company is trying to teach machines to read receipts the same way humans do, by pinpointing specific items and categorizing them.

Founded in 2013, the company raised a $2 million Seed round in 2015, followed by a $17.3 million Series A in early 2017. Since its Series A, Sensibill said its employee headcount has more than doubled, they’ve opened an office in London, England, and have secured partnerships with more than 30 major banks in Canada, the US, and the UK.

Ten million bank customers currently use the platform through their financial institutions, and the company is expected to generate over $10 million in annualized revenues by the end of the year, triple what the company reported last year, according to The Globe. Rather than disrupting banks as many FinTech startups are trying to do, Sensibill is trying to help banks retain their customers through its solutions.

“What we’re trying to do at Sensibill is bridge the gap between what banks are good at today, and where they need to be in five or 10 years to protect their relationships from disruption,” said Sensibill CEO Corey Gross. “Tools beyond core banking, an incredible customer experience, and meaningful customer insights for banks, that’s what we bring to the table.”

Since launching, the company has forged banking partnerships both domestically and internationally. In 2017, it partnered with Quontic Bank to launch a solution designed to instantly catalogue purchases, categorize receipts by expenses, and enable customers to export this record for expense reporting or tax prep. In December 2016, Scotiabank was the first Tier 1 bank to roll out Sensibill’s solution for its customers. It has also partnered with the Royal Bank of Scotland, Ottawa-based credit union Alterna Savings, and digital wallet company Ugo, among others.

Source. BetaKit, Isabella Kirkwood, July 4, 2019

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Brex raises $100 million at $2.6 billion valuation for startup-friendly credit card

By Paul Sawers

It has been a whirlwind 12 months for fledgling fintech startup Brex, which launched last June with $57 million in funding from some big-name investors, including PayPal’s founders and Y Combinator. Brex, which has created a corporate credit card for startups and scale-ups, raised another $125 million series C round in October, at a valuation of $1.1 billion, and made its first acquisition (a blockchain startup, no less). It also raised an additional $100 million debt round a couple of months back.

Today, Brex has announced another $100 million in funding in a series C extension round led by Kleiner Perkins Digital Growth Fund, with participation from existing investors, including  Y Combinator Continuity, GreenOaks Capital, IVP, Ribbit Capital, and DST Global. This takes Brex’s total equity funding to $315 million, with a valuation of $2.6 billion — a considerable growth trajectory for a company founded in 2017 that has been widely available for less than a year.

Brex it

By way of a quick recap, Brex launched as a corporate credit card for startups, which typically find it more difficult to gain access to lines of credit from traditional lenders. Brex effectively serves as an underwriter and sets credit limits based not on credit history, but on factors such as who has invested in the startup and the equity they hold and the startup’s cash balance and spending patterns. Startups don’t pay any fees for the first five cards, after which they pay $5 per month for each card — of course, Brex also makes money from transaction fees similar to other credit cards.

Brex offers a number of other useful features, such as the ability to capture receipts with a smartphone camera and match them to a statement, and it directly integrates with accounting tools, including QuickBook, Expensify, and Xero.

Brex was cofounded by Brazilians Henrique Dubugras and Pedro Franceschi, known as the teenage creators behind online payments processor Pagar.me, which they sold for an undisclosed sum in 2016. Fast-forward to March, 2017, when Brex was born, this time in Silicon Valley and with a vast target market spanning the entire U.S.

After graduating from Y Combinator, Brex went on to accumulate around 1,000 customers during its private launch, including Affirm, Algolia, Flexport, and Y Combinator itself. Though Brex’s initial offering was aimed at startups, it has expanded its focus to larger tech companies and specific verticals such as ecommerce.

With another $100 million in the bank, Brex will invest in specific spend-management features, its rewards program that launched back in October, and efforts to target new customers.

“At Brex, we build corporate payment technology to accelerate entrepreneurs and scaling companies,” said Dubugras, who serves as co-CEO. “We recognize that each business is unique and therefore tailor our product to meet their specific circumstances. With this new funding, we can deliver relevant and unique financial products to an increasingly broad customer base.”

Source. VentureBeat, Paul Sawers, June 11, 2019

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Koho raises $42 million Series B inside round led by Portag3 Ventures

By Douglas Soltys

Toronto-based FinTech startup Koho announced the close of a $42 million Series B round today, led by Portag3 Ventures, with participation from Greyhound Capital and other unnamed strategic investors. Sources familiar with the deal put the company’s post-money valuation north of $100 million. Koho has raised $52.6 million to date.

Launched publicly in 2017, Koho positions itself as a modern alternative to Canada’s traditional banking oligarchy. While it doesn’t have a Canadian banking license, it does have partnerships with Visa and Peoples Trust Company to provide similar services: e-transfers, ATM and purchase use with the Koho prepaid card, insights on spending habits, and financial coaching. The company says it now has over 120,000 accounts and has reached $500 million in annualized transactions.

This is Koho’s second funding round led by Portag3, which also led the company’s $8 million Series A round in 2017. The startup’s connection to Portag3 (and the money behind it, Power Financial), runs deeper, however. Koho raised an undisclosed bridge round in July 2016, led by Power Financial with participation from angel investor Adam Felesky, who later became Portag3’s CEO. Following the company’s Series A round, Felesky and Power Financial SVP and Portag3 executive chairman, Paul Desmarais III, joined Koho’s board of directors, along with Wealthsimple co-founder and CEO, Michael Katchen (Power and its subsidiaries own a majority stake in Wealthsimple).

The overlapping interconnections are entirely by design. For years, Desmarais has been working to build through Power and Portag3 what this publication has glibly dubbed Canada’s FinTech Justice League: an archipelago of financial services distributed via a portfolio of startups to combat the institutional incumbents. Borrowell provides the lending, Wealthsimple the investing, Koho the spending (and saving – 17 percent of the money that comes into Koho ends up in a savings account), etc. Opportunities within Portag3’s portfolio to partner and stack services on top of an overlapping customer base abound.

Both the size of Koho’s new funding and the round’s familiar lead are notable. Inside rounds (i.e., a round entirely or predominantly led by existing investors) typically give VCs fits because they’re stuck pricing their past investments rather than having someone else validate them. It can also send mixed signals to the market, meaning a lack of interest from external investors, a necessary bridge round to additional funding or an exit, or a double-down from the lead to keep away a frothy list of suitors. As Spring Lane Capital’s Rob Day describes it, “in short, inside rounds can be a signal that a company is doing great, doing OK, or is close to collapse.”

Koho has several data points pointing towards a positive interpretation. For one, $42 million in funding at a significant jump in valuation is no bridge round. For another, the round matches the pricing of similar FinTechs at Koho’s current size. In 2017, UK challenger bank Monzo (Koho can’t technically be considered a challenger bank because it has no Canadian banking license, but the feature set is similar) raised a £22 million Series C at an £87 million post-money valuation with a similarly sized user base. The company is currently closing in on a £2 billion valuation as it pursues a US launch (now might be a good time to mention that Koho’s new participating investor, Greyhound Capital, is a UK-based VC with sector expertise in challenger banks, having invested in both N26 and Revolut).

This new funding is both validation of what we’ve done and a vote of confidence for the work left to do,“ Daniel Eberhard, founder and CEO of Koho, told BetaKit.

That said, $42 million is a lot of growth capital for a company with 120,000 account signups. Eberhard’s sense of validation comes from a belief that Koho is positioned for a “better outcome by owning a really small percentage of a larger market.” The reason? “We are going for the lynchpin of the financial relationship. That is the bet that Portag3 is making.”

Being the lynchpin means acting as the daily touchpoint for the way Koho’s users spend, save, and deposit money. Eberhard said that close relationship leads to a much higher customer lifetime value than other financial services. It’s also why the company cares so much about its 80 Net Promoter Score (if incumbent financial institutions beat FinTech startups on consumer trust, they most certainly lose on likability).

“The two things that are essential to our success are a great customer experience and [development] velocity,” Eberhard said. “Our theory is that if our roadmap is public and our users participate in that and we have a community we can listen to, and that we can deploy technology and new versions of the app faster than anyone else, we have a higher probability chance of finding value.”

On the development side, Koho has rolled out two new features this year: joint account support, and a tool to help users find hidden bank fees. Eberhard told BetaKit that the new funding will be dedicated to product development over customer acquisition (75 percent of Koho’s current account growth is organic or through referrals), as new product features will continue to drive what he said was the company’s best-in-class ARPU and churn. Those metrics would likely also be aided by some Portag3 portfolio partnerships noted above now that Koho has the funding and customer base to capitalize, but Eberhard declined to comment on specific plans.

As the company rises in prominence as part of Portag3’s FinTech suite, the CEO did note, however, that Koho is taking steps to diversify its own portfolio. That includes a restructuring of the company’s board, adding independent board members while reducing Portag3’s presence to make Koho a more palatable investment vehicle for larger private equity placements.

“The intention of this funding is to do two things: it’s to continue to accelerate Koho as the market leader in Canada, and to position the company for longer term private equity and capital plays,” Eberhard said. “Part of that is restructuring the board so we look more and more like a traditional venture-backed company and less like a Portag3 company.”

The repositioning is supported by the VC firm, and reflects Portag3’s own evolution, starting as a partnership between Power Financial, IGM Financial, and Great-West Lifeco before taking on external investors and expanding internationally to Europe.

Put another way, everyone expects a new firm to lead Koho’s Series C. The focus now is on the work left to do to get there.

Source. Betakit, Douglas Soltys, May 15, 2019

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U.S. smartphone financing tech startup PayJoy raises $20 million

By Anna Irrera,

PayJoy, a startup that has developed smartphone technology to facilitate access to credit in emerging markets, has raised $20 million from venture capital firm Greylock Partners, the company said on Thursday.

Union Square Ventures, EchoVC and Core Innovation Capital also participated in the round, PayJoy said. The San Francisco-based startup said it will use the funding to expand, secure more partners and develop new technologies.

PayJoy enables consumers with no bank accounts or formal credit history to purchase smartphones on installment payments and get cash loans. It does so by turning the smartphone into collateral through software that locks the phone when payments have not been made.

It believes that making smartphones more affordable can be a stepping stone toward increasing financial inclusion since more financial services are now being provided digitally.

“We’re building technology to help people carve a path into the financial system,” Mark Heynen, the company’s co-founder and chief business officer, said in an interview.

Globally, 1.7 billion adults do not have a bank account, but two-thirds of them own a mobile phone which could help them access financial services, the World Bank said in a 2018 report.

It is launching in six more countries through new partnerships with local companies, Heynen said. These include Mutual in Brazil, Waynimovil in Argentina, MyBucks in South Africa, Panacredito in the Dominican Republic, Omnipagos in Honduras and COINFIN in Colombia.

PayJoy’s technology does not make underwriting reliant on traditional credit scores, but seeks to increase consumers’ willingness to pay by taking advantage of their desire to access the phone, which in turn can help keep default rates in check, Heynen said. He declined to disclose default rates.

“Customers like it because it makes the phone pay-as-you-go,” Heynen said. “In some cases, if they decide they can’t pay, they can send in the phone and have their contract canceled.” 

Source. Reuters, Anna Irrera, May 18, 2019

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Lendified Secures $15M in Funding

Lendified Holdings, Inc., a Toronto, Canada-based financial technology company, closed a $15m funding round.

Backers included CI Financial Corp., Windsor Private Capital Limited Partnership, FirePower Capital, Glenn Murphy, the founder of FIS Holdings and former CEO of Gap Inc. and Shoppers Drug Mart.

The company intends to use the funds to continue to expand operations.

Launched in 2015 and led by Kevin Clark, President, and led by Troy Wright, CEO, Lendified offers online loans to small businesses across Canada and a SaaS credit platform to financial institutions across North America (used by credit unions, community banks, and other financial services companies) featuring tools for managing cash flow, and advanced credit adjudication software to financial service providers across North America.
Through its lending business, the company offers loans up to $150k for terms up to two years.

Its advanced underwriting process is powered by Judi, its credit adjudication platform which enables users to assess, price, and monitor credit risk, and in-turn provide the best possible services to customers.

Source. FinSMEs, Staff, April 18, 2019

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U.S. bank trade group, Accenture and others back fintech startup Finxact

NEW YORK (Reuters) - Accenture Plc, SunTrust Banks Inc and the American Bankers Association, a trade group for U.S. banks, said on Friday that they had joined a $30 million investment round in Finxact, a startup that develops the back-end technology used by banks to process some transactions.

Existing investors, including Live Oak Ventures, First Data Corp, Woodforest National Bank and T.N. Incorporation Ltd of Thailand also participated in the round, the companies said in an interview.

Finxact plans to use the funding to develop its technology and grow its operations, Frank Sanchez, the company’s chief executive and founder, said in an interview.

The investment comes as banks of all sizes grapple with old technology infrastructure as they seek to offer more digital services to their customers. Many of these systems were built decades ago and are ill-equipped to handle services customers have come to expect in the internet age such instant peer-to-peer payments or real-time account balance updates.

Smaller banks often cite this issue as one of the biggest hurdles they face in competing with younger financial services providers or larger banks that can fund costly back-end replacements.

 “I have heard from bankers across the country who wish they had more nimble and agile core processing platforms that allowed them to keep pace with customer demands,” ABA President and CEO Rob Nichols said via email. “We understand that a bank’s ability to innovate is highly dependent on its core processing platform.”

This is the second significant technology investment since Nichols’ took over as the ABA’s chief executive in 2015.

Florida-based Finxact says its more modern cloud-based platform is built to enable banks to offer better digital services to their customers and is less expensive to run than older systems.
“It is substantially more efficient to operate,” Sanchez said.

The company targets regional and community banks but also works with neo banks, or large banks who plan to migrate their old systems, Sanchez said.

Source. Reuters. Reporter Anna Irrera,  January 25, 2019