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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