Welcome to The Switch! If you received this in your inbox, thank you for signing up and trusting us. If you read this as a post on our site, please sign up here so that you can receive it immediately in the future. Every week I watch the hottest fintech news from the past week. This includes 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 up to date – and understand it – so you stay informed. — Mary Ann
Hello Hello. By the time you read this, we’ll be two days away from londonbusinessblog.com Disrupt! Soooo exciting!
But let’s talk about fintech first.
The big news last week was the announcement by corporate expense management startup Brex that it would lay off 11% of its workforce, or 136 people. It was also revealed that the startup’s CFO, Adam Swiecicki, is leaving to join Rippling as CFO. Notably, the staff platform unicorn Rippling has recently entered the business management space, making it a direct competitor to Brex.
First, it’s rare — and refreshing — for a company to proactively share news about a layoff, so it’s interesting that Brex got ahead of all the gossip and let me know first-hand about his plans. And as Alex Wilhelm noted in Friday’s Equity podcast, the layoffs appear to be primarily related to Brex’s move earlier this year to stop working with SMBs and non-professionally funded startups. In other words, the company said it mostly let go of people focused on serving that group. Still, it must suck for those workers — especially considering the groups it no longer works with were initially Brex’s bread and butter.
As for the bigger picture, news of the Brex layoffs shows that even decacorns haven’t been immune to this downturn. The company confirmed a $300 million Series D renewal earlier this year at a staggering $12.3 billion valuation. And while the company claims to be “in a strong financial position with years of run-off jobs,” it adds that the SMB’s shift to focus more on corporate clients — and, by default, all related layoffs — will push the company “on a path to sustainable profitability in the coming years.”
Side note: Brex aside, it still amazes my journalists that companies in general can raise hundreds of millions of dollars in funding and still be unprofitable. I doubt I could ever be a venture-backed startup founder. The pressure of having to provide returns for investors who have put that kind of money into my business and the pressure of never wanting to lay off staff would probably put me to sleep at night! Guess that’s why I’m a journalist and not a startup founder!
Anyway… Speaking of Disrupt and Brex, I will be interviewing co-founder and co-CEO Henrique Dubugras and Anu Hariharan, director of YC’s growth fund, YC Continuity, live in a Fireside Chat on October 19th! I’ll also be talking that same day with Disaster CEO and Co-Founder Eric Glyman, Airbase CEO and Founder Thejo Kote, and Anthemis partner Ruth Foxe Blader in a session called “How to Compete without Losing Your Mind and Runway When Cash Is Expensive” that same day. And finally, I’ll talk to Rippling CEO and co-founder Parker Conrad about his company’s plans to “go global.” Come see us! (Get 15% off here).
Oh, and if you want to hear me talk about all things “The good and bad sides of fintech, what great journalism really means and why startups represent hope”, check out this episode from the Fintech Leaders podcast I recently recorded with VC Miguel Armaza.
VCs Call for Funding for Real Estate Startups
Hello! It’s Anita Ramaswamy reporting from the fintech desk here at londonbusinessblog.com alongside Mary Ann. We’ve been seeing a lot of interest — and funding news — in the real estate and proptech spaces lately. In particular, there have been a number of startups that have raised rounds for real estate investing apps that aim to broaden access to the asset class for retail investors by giving them tools to get around hurdles such as large initial capital requirements that are typically needed to invest in property.
Fintor is one such example. The startup recently closed a $6.2 million funding round with an $80 million valuation for its platform that offers fractional residential shares to investors for just $5. We also covered similar platforms such as Landa, Nada and Arrived Homes, all of which have raised new funding in 2022.
The strong interest of private investors in accessing real estate may seem counterintuitive, as rising interest rates make real estate look less attractive than it has been in recent years. But these startups are likely more focused on long-term growth in real estate demand as part of a diversified portfolio rather than getting caught up in short-term volatility concerns.
Here’s what Fintor founder and CEO Farshad Yousefi had to say about the current market environment in an email to londonbusinessblog.com:
While recent headlines have focused on market volatility, there are still opportunities for investors to engage in real estate investing with the right strategic approach. Atlanta, for example, has seen incredible growth of nearly 12% year-over-year in rental rates, which has directly boosted investor cash flows. In addition, 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 heading.
For a deeper dive into real estate technology and how it is changing the investment landscape, check out my article in this week’s TC+:
Plaid announced last week that it added two new features to its identity verification product. Via email, Plaid’s head of identity and fraud (and former Cognito CEO) Alain Meier told me, “Our new autofill feature allows users to be verified in just 10 seconds. At the back end, we’re building more intelligence for our risk and fraud models with behavioral analysis to stay ahead of fraudsters.”
The behavior analysis section is particularly interesting, because if you memorized your SSN/phone number, your typing behavior would be very different from copying and pasting it from a document. Plaid acknowledges that this kind of technology is not new, but claims that it is usually not combined with the other fraud detection features that Plaid offers.
Are you going after Square? TechRadar reports: “After the acquisition of now Zettle in 2018, paypal has a brand new POS device designed to meet the needs of small and medium businesses. The recently launched Zettle Terminal connects to the internet via Wi-Fi or a free preloaded SIM card on the 3G and 4G networks, allowing business owners to work on the go. This ‘fully mobile’ approach should appeal to suppliers with multiple locations, as there is no need for additional configuration or manual connection at each new location.”
As reported by Christine Hall:Greenlight financial technology, a venture-backed fintech company focused on providing children with a debit card, banking app and financial education, added another layer to its subscription 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 everyone in the family is and to check in; SOS alerts for emergency contacts and/or 911 with one tap; and crash 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 has delved into some third-quarter funding figures, and what he discovered when it came to the fintech sector was not pretty. He writes: “Looking at Q3 2022 data from CB Insights, it is clear that the fintech financing boom is behind us; In fact, global fintech financing 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 that Apple “is taking a big step towards offering more banking services to its customers. The company announced on Oct. 13 that it is partnering with Goldman Sachs to soon launch a new savings account feature for its Apple Card credit card holders that will allow them toDaily cash’ — the cashback rewards earned from their Apple Card purchases. In the coming months, Apple says cardholders will be able to automatically save this money in a new high-yield savings account from partner Goldman Sachs that can be accessed with Apple Wallet. Customers can also deposit their own money into 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 scammers. But Zelle, a digital payment network owned by seven major banks, isn’t as protective of its users. If you use Zelle to pay someone who turns out to be a scammer, you have a slim chance of getting your bank’s money back. The same goes if you send money to the wrong person. If you hit send, the money is probably gone, just like you lost a $20 bill on the street.” Meanwhile there was chat on Twitter that Zelle actually had significantly more transaction volume in 2021 than Venmo and CashApp. hmm. I’m still trying to find proof of that.
Financing and M&A
Seen on londonbusinessblog.com
Former VC is bringing smart financial advice to people who really need it, not just the rich: In announcing this $24.4 million raise led by GGV Capital, Northstar CEO and co-founder Will Peng told me: ” The time from the first meeting to the term sheet was about a month.”
With $67 million in new capital, NorthOne is doubling up on SMBs as some fintech companies pull out
Oh Look, TripActions Has Raised $9.2 Billion After Reported $12 Billion IPO File
Getaway launches a way to enjoy and own vacation homes
Egyptian consumer money app Telda raises $20 million from GFC, Sequoia Capital and Block
Airwallex raises $100 million to enable cross-border corporate banking, valuation remains stable at $5.5 billion
Charli D’Amelio-Approved Fintech Step Lends $300 Million to Bring Crypto to Teens
This company wants to improve your credit by gamifying financial literacy
GoHenry, the under-18 banking service, raises $55 million after passing 2 million users
VC firm QED acquires fintech executive search firm
Astra Raises $10 Million in Series A Financing; $30 million credit limit
Business card startup Mercantile raises $22 million to target an unusual niche: trade associations
Financial Finesse launches venture arm to support ‘fintech for the greater good’
Well, that’s it for this week! Thanks again for your continued support – and I really hope to see some of you IRL at Disrupt! xoxo, Mary Ann