So much fintech M&A
You are welcome to The Interchange! Thank you for signing up to receive this email and for your confidence vote. If you’re reading this as a post on our site, sign up here So you can get it in the future. Every week, I’ll take a look at the hottest fintech news of the previous week. This includes everything from trends and funding rounds to analysis of specific spaces to hot take on a company or phenomenon. There’s a lot of fintech news out there and it’s my job to stay on top of it — and make sense of it — so you can stay in the know. — Mary Ann
Consolidation everywhere
Friday, January 13th, investment giant BlackRock It announced that it had acquired a minority stake at the SMB 401(k), provider startup Human Interest. Terms of the deal weren’t disclosed, but it definitely caught my attention for a few reasons. For one, as one source told me, BlackRock’s investment is a show of faith in the SMB 401(k) market — one where the firm hasn’t historically played. That same source, who preferred not to be named, pointed out that “SECURE 2.0’s auto-enrollment provisions (among others), will make 401k plans more impactful at the lower end of the market, Human Interest is well-positioned to execute.”
I’ve been writing about Human Interest since March 2020, covering each of its funding rounds since then (here, here and hereAfter its remarkable growth, it was awarded unicorn status in August 2021. In August 2021, it was granted unicorn status and was looking at an IPO. It feels like the market has changed a lot since then. This is a good result for the startup that was founded in 2015 by Roger Lee (Paul Sawaya). Lee (a very nice man, incidentally), moved on years back, and recently founded another startup. Comprehensive.io Tracker for launching layoffs Layoffs.FYI Soon after the COVID-19 pandemic, it was over.
The deal was just one of many M&A deals in the fintech space that occurred last week. Here’s a rundown of some others:
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Remote payroll startup Deel acquired fintech Capbase I was the only person to receive information from both companies about an undisclosed cash and stock deal. Deel, which was last valued at $12 billion in 2012, is one of the most talked about fintechs. Its decision to acquire Capbase reflects its intention to enter the equity management market.
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Investment giant Fidelity acquired ShoobxIt marks its 7th purchase (!). Crunchbase reports that Stephan Richter and Jason Furtado co-founded Boston’s Shoobx in 2013. According to Crunchbase, the pair later raised $10 million for the company. Fidelity said its purchase of Shoobx is a sign of its commitment to the private market “and will help to satisfy an increasing demand Fidelity sees from private companies to support them as they scale and grow.”
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Vouch, Insurtech that is focused on startups acquired lending startup Level For an undisclosed amount. As reported by Life Insurance International: “Level has created a tech-driven underwriting process for early-stage fintech startups that is claimed to have brought new efficiency and speed to the debt-raising process. Vouch hopes to leverage Level’s expertise in developing underwriting technologies to underwrite and support complex insurance products. Level was founded by Vladimir Korshin, Asa Schachar and Molly Hogan in 2021.” In September 2021, I covered Vouch’s announcement of $90 million in new funding. Vouch as well as Level are both Y Combinator alums.
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American Express Announced that it has reached an agreement to acquire Nipendo, The company, which aims to streamline and automate business-to–business (B2B), payment processes for global companies, has raised an estimated $12 million in funding. I had the opportunity to speak with Dean Henry (EVP of global commercial Services at Amex) and Colleen TAYLOR (President of Merchant Services, US at Amex), and got some insights into their strategy. For starters, Henry said the credit card giant has been on “a multiyear journey…to really grow and expand capabilities in B2B payments.” He added: “What we’ve really tried to evolve in the last few years is into a one-stop-shop for businesses to pay anybody anywhere, using any kind of payment rails that they want to use in order to facilitate the payments….What we’re trying to do with Nipendo is add to that capability set and provide more value to suppliers who are trying to send invoices, interact with buyers and transact with data around B2B payments.” Notably, Taylor told me that American Express concluded that it would take a big company like American Express “a long time to replicate what they’ve built.” And this line was the classic motivation for all incumbents buying fintechs: “Why not just bring it in to our platform and get it to customers as quickly as possible?”
To bring some context around all this M&A, I conducted an email interview with Jonah Crane, partner at Klaros Group. Crane predicts we will continue to see a lot of fintech M&A.
He told me: “The question I have is who will capitalize on this bear market to scoop up valuable technology or talent. In particular, I’m interested in whether banks can be opportunistic. Some large banks are already active. The rest of them need to think about whether or not they are serious about digital transformation and innovation. If they are, they can’t afford to miss this moment.”
He said that much will depend upon the macro picture. “If we have a soft landing, and markets head back up, the true bargains may already have passed. And if we are in for a very hard landing, buyers are at risk of catching falling knives—especially in the credit sector,” Crane said. “Getting deals done in these markets is no sure thing. We’ve already seen a number of announced deals fail to close: UBS/Wealthfront, Bolt/Wyre, and now JPMC/Frank (more on that later). Ultimately, the big challenge will be whether buyers and sellers can cross the massive valuation chasm created by the bursting of the fintech bubble.”
No doubt the venture slowdown and practically dead IPO and SPAC markets have contributed to the surge in M&A activity.
“VCs are telling their portfolio companies they should be prepared to shelter in place for 18 to 24 months, and many have laid off a lot of staff. But what’s the end game? What are you aiming to achieve that will allow you to raise at a reasonable valuation when markets are fully reopened?” Crane asks. “Those who don’t have a clear bridge to the other side of that chasm will be looking for buyers (if they’re smart).”
All I know is if we have more weeks like this one, you’re going to have one exhausted fintech journalist on your hands!
check pen
Weekly News
Layoffs
Reports Jagmeet Singh: “Greenlight, a fintech startup offering debit cards to kids, has laid off 104 employees — or over 21% of its total headcount of 485 employees — to “better align with ongoing operating expenses” amid the economic slowdown. TechCrunch received information about the layoffs earlier this week from its employees. The startup later confirmed the development over an email.” More here.
Digital mortgage platform Blend The company said that last week it had cut its U.S. workforce in half by 28% (or 340 job openings), in its fourth layoff in less a year. According to the company, President Tim Mayopoulos In the first quarter, he will be retiring from his position but will continue to serve as a member of the board. Evidently, the rise of mortgage interest rates is having an effect. Read More here.
Online lending platform that is publicly traded Lending Club Reports indicate that the company is going to cut 14% from its workforce. This move will affect 225 employees. MarketWatchThe company predicted lower fourth-quarter revenues due to higher interest rates, which was in contrast with expectations.
Other news
Public.comInvesting platform with more 3 million members,, announced last week that they had launched rolling out Treasury accounts Through a partnership agreement with fintech startups Jiko. According to the two companies, the accounts allow members to invest their cash in U.S. Treasury bills that “are automatically reinvested at maturity and can be sold at any time.” A spokesperson told me that Public’s Treasury accounts “offer members similar flexibility to a high-yield savings account, but are currently offering even higher yields.”
Platform for Equity Management Carta It was a difficult week. Connie Loizos of TC reported that the 11-year-old company based in San Francisco, whose core business involves selling software to investors to track portfolios, had a rough week. sued its former CTOThe company claims Jerry Talton was fired on Friday, December 23rd, citing ’cause’. The case is a bit of a sordid one, considering that “toward the end of Carta’s long list of accusations against Talton, Carta says that Talton both sent and received ‘sexually explicit, offensive, discriminatory and harassing messages with at least nine women including during work hours and on Carta’s systems.'” For his part, Connie also wrote that Talton was put on administrative leave in October of last year after submitting a letter to Carta’s board of directors, flagging various “problems” with the company’s culture. Later that day, Natasha reported that the company had been sold to a private investor for $7.4 billion. cut 10% of its staff.
It seems that many institutions and banks are still having difficulty offering tech-enabled financial service.
For one Goldman Sachs Group It was reported last Thursday that it had suffered a $3.03 billion loss on its platform solution business, which houses credit card and transaction banking services since 2020. Reuters reports: “The disclosure did not provide separate numbers for its direct-to-consumer business, Marcus, which was moved into its asset and wealth management arm. Marcus also lost money, and did not set up a checking bank. Swati Bhatia was the leader of the group. stepped down earlier this month, according to an internal announcement seen by Reuters.”
Meanwhile, Wells Fargo CNBC is taking a backward step from mortgages. CNBC reported: “Instead of its previous goal of reaching as many Americans as possible, the company will now focus on home loans for existing bank and wealth management customers and borrowers in minority communities.” Interestingly, in an interview with CNBC, CEO Charlie Scharf acknowledged that the bank “will need to adapt to evolving conditions” while remaining confident about its competitive advantage. Specifically, he said: “Given the quality of the five major businesses across the franchise, we think we’re positioned to compete against the very best out there and win, whether it’s banks, nonbanks or fintechs.” To me, it feels like the move to shrink back from the housing market might open up more opportunities for fintechs.
Forbes, which is referred to above, is the final mention. reported An absolutely insane account of JPMorgan The founders of a startup are basically luring you. FrankIt bought the company for $175 million. Here’s an excerpt from the Forbes piece detailing a lawsuit filed by the banking giant, which claims that founder and former CEO Charlie Javice “pitched JP Morgan in 2021 on the ‘lie’ that more than 4 million users had signed up to use Frank’s tools to apply for federal aid. When JP Morgan asked for proof during due diligence, Javice allegedly created an enormous roster of ‘fake customers’ — a list of names, addresses, dates of birth, and other personal information for 4.265 million ‘students’ who did not actually exist.” In reality, according to the suit, Frank had fewer than 300,000 customer accounts at that time.” Oof. Oof.?
Stay tuned for more news
Research from Utility BidderAccording to the firm, over 700 unicorn companies are currently in existence in the United States, with 132 of them in the fintech sector. The firm’s new study The fastest global fintech companies to reach $1 billion in valuation have been revealed by the Financial Times. Proptech Pacaso It took just six months for unicorn status to be achieved, which is the top of the list. Other companies that made the list were Clara, Pipe, Magic Eden, Brex, and Brex. The firm was also ranked as the most valuable fintech companies. This is the leader StripeIt is actually the newest version of the original another internal valuation cut laid off over 1,100 workers last November. Ironically, many other startups that made it to the top 10 did layoffs in the last few months. These included Plaid, Brex, and Chime. Are you wondering why Utility Bidder cares so much about fintech? So did I. Here’s what a spokesperson told me: “Utility Bidder [is] A price comparison site for energy rates and utility rates. They have a strong focus on business finance as well as energy.
Platform for identity decision making and fintech unicorn Alloy Recently, the annual report was released. State of Fraud Benchmark Report. According to the report, 70% of the financial institutions surveyed reported losing more than half a million dollars to fraud last year. 27% of respondents also lost more than $1 million to fraud over the past 12 months. Additionally, 37% and 31% respectively of fintech firms and regional banks estimate losing between $1 million and $10 millions to fraud.
A Morgan Stanley spokesperson reached out to me last week after seeing our coverage of Fidelity’s acquisition of Shoobx to let me know that “Morgan Stanley at Work has invested a lot of time and resources” in its Private Markets business, “and continues to see it as an area of growth — especially as we recently just saw an astounding uptick in liquidity events during Q4 2022, which further supports the idea that private companies/startups need an effective software solution to handle these complex transactions.” The firm acquired Solium, a cap table management solution platform now called ShareworksIn 2019.
Oracle Retail It was announced last week that the new Oracle Retail Payment Cloud Service. Via email, a spokesperson told me: “This new service equips retailers with a fixed rate model and the ability to accept all major contactless payment options including credit/debit cards and mobile wallets — all without hidden fees, long-term contracts or minimum monthly requirements. These benefits enable increased flexibility, agility and greater transparency for retailers of all sizes and industries…”
Mesh Payments This has led to Daniel Ochoa as the company’s first SVP of global business sales. Ochoa, who is based in Austin, was most recently VP of customer success and sales at TripActions. Mesh co-founder and CEO Oded Zehavi told TechCrunch via email that Ochoa was brought on “to leverage a surge in customer demand” as the company builds out “new services to meet the needs of larger companies who are more than ready to move off of legacy spend management solutions.” Sounds like Mesh, like competitor Brex last year, is going after more enterprise customers.
Talk about Brex, here’s a fun tweet thread from former CRO and current Founders Fund partner Sam Blond about “the best outbound campaign” Brex ever ran.
Image credit: Getty
Funding and M&A
TechCrunch: Seen
From cloud computing to proptech: DigitalOcean co-founders raise $29M for Welcome Homes
Vista Equity Partners to acquire insurance software company Duck Creek for $2.6B
And other places
Dubai-based social investing startup InvestSky picks up $3.4M pre-seed
Proptech that offers fractional home ownership to wealthy individuals raises $30M in debt and equity
Pagaya Technologies announces acquisition of Darwin Homes
Canadian fintech Nuvei will acquire Atlanta-based payments firm Paya for $1.3B
40Seas secures $11M in equity, $100M in credit to grow cross-border trade financing platform
Butter raises $22M led by Norwest Venture Partners to end accidental payment churn
This week, I also wrote the following stories:
These 5 companies bootstrapped their way to big businesses while VCs came knocking
And I also recorded Equity Pod along with my amazing co-hosts Natasha Mascarenhas & Rebecca Szkutak Frank-ly, the Kardashian method won’t work for SBF
Whew. This week was the busiest we have seen in quite some time. I hope those of you who live in the U.S. enjoy a relaxing and restful weekend. Take care, and see you next time. xoxoxo — Mary Ann