\nQ3 outlook forecasts cloudy days ahead for fintech M&A<\/br>
\n2023-01-20 22:22:45<\/br><\/p>\n
Welcome to The Interchange! If you received this in your inbox, thank you for signing up and your vote of confidence. If you\u2019re reading this as a post on our site, sign up\u00a0<\/em>here<\/em><\/a>\u00a0so you can receive it directly in the future. Every week, I\u2019ll take a look at the hottest fintech news of the previous week. This will include everything from funding rounds to trends to an analysis of a particular space to hot takes on a particular company or phenomenon. There\u2019s a lot of fintech news out there and it\u2019s my job to stay on top of it \u2014 and make sense of it \u2014 so you can stay in the know. \u2014\u00a0<\/em>Mary Ann<\/em><\/a><\/p>\n Last week, Paystand<\/a> \u2014 a blockchain-enabled B2B payments startup \u2014 announced it had acquired Mexican fintech Yaydoo<\/a> \u2014 creating a new unicorn in the resulting new entity.<\/p>\n Execs from the two startups say the combined company will have processed over $5 billion in payments and built a network of over 500,000 connected businesses by creating B2B DeFi payment networks in both the U.S. and Mexico.<\/p>\n In announcing the deal, they said: \u201cDeFi-enabled B2B payment networks that are on chain can unlock transformative working capital efficiencies, and make financial services more fair and open, especially in developing markets like LATAM.\u201d<\/p>\n Paystand CEO Jeremy Almond told me over email that combined revenues have been growing at over 100% year over year since inception. In particular, he said Paystand has experienced over 700% revenue growth in the last three years. The company has raised over $86 million over its lifetime and counts NewView Capital and SoftBank\u2019s SB Opportunity Fund among its backers.<\/p>\n Meanwhile, Yaydoo has raised over $20 million from investors such as Base10 Partners, monashees, SB Opportunity Fund and Leap Global Partners.<\/p>\n With nearly 400 employees, the combined company will \u201chave a very unique ability to transform entire B2B Payments ecosystems in each country we operate because of our combined scale and access to resources,\u201d wrote Yaydoo CEO Sergio Almaguer in an email.<\/p>\n \u201cToday the U.S. has a legacy, centralized financial infrastructure that needs to be disrupted and re-imagined by fintechs with blockchain technology. However, in emerging markets like LATAM, the basic financial infrastructure for B2B payments is either missing or not accessible by businesses of all sizes,\u201d added Almond, noting that the payments tech ecosystem in LATAM is generally 10\u201315 years behind that in the U.S. Fintechs like Paystand + Yaydoo have a huge opportunity to build next-gen payments tech infrastructure from the ground up.\u201d<\/p>\n Notably, word on the street is that Payday is now eyeing an IPO<\/a>.<\/p>\n We haven\u2019t been hearing about too many M&As as of late, so this deal caught our eye. It also is a good lead-in to talk about some recent M&A data we got our hands on.<\/p>\n Unsurprisingly, dealmaking in financial services declined in the second quarter due to macroeconomic headwinds, according to a recent KPMG US report<\/a>. Aggregate deal volume fell 30.9%, to 1,442 from 2,087 in the first quarter, and deal value dropped 14.8%, to $163 billion from $191 billion.<\/p>\n Bob Ruark, principal and banking and fintech strategy leader for KPMG US, noted that pricing is difficult now given the rapid decline in valuations. As he pointed out, pricing in some fintech categories dropped almost 60% according to Pitchbook, and digital and crypto companies are down over 65%.<\/p>\n \u201cWe are starting to see some of the public market valuations impact private market valuations. We have seen several high-profile companies raising new money at much lower valuations, which shows this is starting to happen,\u201d Ruark said. \u201cKlarna recently raised $800 million at a $6.7 billion valuation, which is 85% below its June 2021 raise\u2026As prices and valuations stabilize, we will see deals ramp back up.\u201d<\/p>\n On the bright side, the fact that VCs are more discriminating about where they put their dollars could actually lead to more M&A activity, according to Ruark.<\/p>\n \u201cThere is plenty of money available, but investors are looking for stronger performance, profitable performance. That is one reason why a number of VC firms have told their portfolio companies to focus on performance and cut costs,\u201d he told TechCrunch. \u201cGiven a large number of startups will not generate a profit near and are cash-flow negative in the near term, they will have to raise more capital in a difficult environment. As a result, they may have to sell.\u201d<\/p>\n What about the acquisitions that are still taking place? Most of those are product buys to drive or accelerate revenue growth with the secondary benefit of getting new talent, Ruark said. And, after crypto, payments companies \u2014 as illustrated in the example above \u2014 are among the most attractive targets.<\/p>\n Looking ahead, KPMG\u2019s view on the prospects for financial services M&A over the next six to 12 months is mixed. The firm said: \u201cOn one hand, the fundamental trends that have been driving activity remain in place. On the other, market sentiment is largely pessimistic and the outlook for interest rates and inflation is challenging.\u201d<\/p>\n Image Credits:<\/strong> Paystand\/Yaydoo<\/p>\n<\/div>\n Counting 300 U.S.-based companies as customers already, Alloy<\/strong> announced it has now expanded its platform<\/a> to 40 countries across North America, EMEA, LatAm, and APAC. The startup says it will also continue to grow its local presence and team in EMEA. The goal behind the expansion, a spokesperson told TechCrunch, is to help financial services companies \u201cmanage changing global regulatory requirements for their customers, no matter where they are located.\u201d<\/p>\n QED Investors <\/strong>said it has expanded its mental health initiative<\/a> aimed at tackling addiction among entrepreneurs to its Spanish-language portfolio companies. Last year, TechCrunch published an op-ed from Nigel Morris<\/a> around mental health stigma in the tech community when the initial program was announced. The firm says the program is focused on eliminating the stigma around talking about substance misuse in the workplace by offering an online program that \u201cdelivers critical concepts and facts regarding addiction in just 5 minutes per lesson.\u201d This will now be offered to 22 fintech companies across Mexico, Argentina, Chile, Colombia and Peru.<\/p>\n Just one week after closing on its acquisition of Metromile <\/strong>(and laying off<\/a> about 20% of the latter company\u2019s staff), Lemonade<\/strong> announced on August 4 that it has sold<\/a> Metromile\u2019s enterprise business solutions unit, a SaaS-based claims automation and fraud detection product, to EIS. Well, that was fast!<\/p>\n According to my colleague Zack, \u201chackers had access to dashboards<\/a> used to remotely manage and control thousands of credit card payment terminals manufactured by digital payments giant Wiseasy<\/strong>, a cybersecurity startup told TechCrunch. Wiseasy is a brand you might not have heard of, but it\u2019s a popular Android-based payment terminal maker used in restaurants, hotels, retail outlets and schools across the Asia-Pacific region. Through its Wisecloud cloud service, Wiseeasy can remotely manage, configure and update customer terminals over the internet.\u201d<\/p>\n Attentive<\/strong>, which describes itself as a \u201cconversational commerce platform,\u201d has launched its \u201ctext-to-buy\u201d solution<\/a> with Shop Pay, \u201cenabling consumers to make purchases directly from an SMS conversation with a brand.\u201d Built with Shopify\u2019s Shop Pay checkout flow, Attentive\u2019s new offering is aimed at \u201cturning browsers into buyers with a frictionless checkout flow built for mobile devices.\u201d<\/p>\n Retail investment behemoth Robinhood <\/strong>laid off 23% of its staff<\/a> \u2014 just 3 months after letting go of 9% of its workforce. Besides the fact that the company has shed about 1,000 workers this year alone, we also were struck by the fact that CEO Vlad Tenev took responsibility for Robinhood\u2019s overhiring in the frenzy that was 2021. Whether he was sincere or not (and many of you had wildly different views on that based on a little poll I posted on Twitter<\/a>), it was still not a typical CEO move and we took notice. You can listen to Alex, Natasha and I share our thoughts on it all on Friday\u2019s episode of Equity Podcast.<\/a><\/p>\n Opendoor<\/strong> has agreed to pay $62 million to settle charges<\/a> by the Federal Trade Commission, which says the company\u2019s claims that it helps people make more money by selling their house to the company rather than listing it on the open market were deceptive. For years, the real estate technology company has touted itself<\/a> as using its pricing technology to provide \u201cmore accurate offers and lower costs,\u201d said the FTC. Such \u201ciBuyers\u201d<\/a> use this method to make quick offers on homes, with enthusiastic claims that sellers would make thousands of dollars more than they would on the open market. But according to the FTC, that wasn\u2019t true.<\/p>\n While extension rounds<\/strong> are popular even beyond fintech today, there are often more startups hunting for the round type than there are checks. So, to better understand the market for fintech extension rounds today, we have a set of answers<\/a> from a group of fintech venture investors we recently surveyed<\/a>.<\/p>\n Another day, another Q2 funding report. PitchBook<\/strong> reported that \u201con the heels of a breakthrough year for fintech investment, VC activity in the sector is simmering down.\u201d Specifically, it said, in Q2 2022, \u201cVC investment in fintech companies<\/a> fell 17.8% from the previous quarter\u201d to $24.1 billion, \u201cthe largest percentage drop since Q3 2018.\u201d Also in the report: \u201cExits have also stalled as IPO activity grinds to a halt, and analysts expect fintech startups will attract the attention of incumbents looking for M&A opportunities.\u201d Guess we\u2019ll see about that.<\/p>\n Nice scoop from former TCer Katie Roof: \u201cTripActions<\/strong>, a travel startup (that has expanded into general expense management), is close to filing confidentially for an initial public offering<\/a>, according to people familiar with the matter, as people get back on planes and trains following the easing of the Covid-19 pandemic.\u201d<\/p>\n Manish reports that the \u201cState Bank of Pakistan, the South Asian nation\u2019s central bank, has ordered fintech Tag<\/strong> to \u2018immediately\u2019 refund all funds<\/a> to customers, citing violation of regulatory requirements and \u2018other concerns,\u2019 posing existential questions on the startup\u2019s future. The regulatory action follows a months-long probe into Tag, which offers banking and financial services to users in Pakistan.\u201d<\/p>\n Corporate spend startup Brex<\/a> has named Doug Adamic as its chief revenue officer. According to a company spokesperson, Adamic will lead revenue and growth strategy for Brex as the company expands into financial software<\/a> with Brex Empower and aims to grow its global offerings for venture-backed startups, midmarket companies, and larger enterprises. Adamic most recently served as SAP Concur\u2019s chief revenue officer.<\/p>\n Saving and investing app Acorns announced that Brent Callinicos \u2014 who most recently served as CFO of Uber \u2014 has joined Acorns\u2019 board of directors; Marissa Dulaney has been named as the company\u2019s first chief experience officer; Denise Chisholm has been tapped to serve as the new chief compliance officer; and Brent Williams is now the company\u2019s head of banking. In a written statement, Acorns CEO Noah Kerner said: \u201cWe\u2019re building a generational company from the inside out with our customers at the center.\u201d<\/p>\n Plaid announced<\/a> that financial services industry veteran Meghan Welch has joined the 1,200-plus-person company as its first chief people officer. A spokesperson told me: \u201cMeghan\u2019s more than 20 years of experience at Capital One, most recently as the Executive Vice President, Head of Enterprise HR and Chief Diversity Officer, will be a great asset to Plaid as we scale to support the millions of people who rely on Plaid to connect to fintech apps and services.\u201d Welch will report to CEO Zach Perret.<\/p>\n Image Credits:<\/strong> Plaid\/Chief People Officer Meghan Welch<\/p>\n<\/div>\n Seen on TechCrunch<\/em><\/p>\n Savana<\/strong> raises a fresh round of capital to digitize banks\u2019 services<\/a><\/p>\n Kenyan insurtech Lami<\/strong> raises $3.7M seed extension led by Harlem Capital<\/a><\/p>\n Apple alum\u2019s finance operations startup Bluecopa<\/strong> raises funds to expand globally<\/a><\/p>\n Argentinian fintech infrastructure startup Geopagos<\/strong> leaves the bootstraps behind with $35M funding round<\/a><\/p>\n Mudafy<\/strong> raises $10M in Founders Fund\u2013led Series A to fix LatAm\u2019s \u201cbroken\u201d real estate process<\/a><\/p>\n And elsewhere<\/em><\/p>\n Robinhood veterans\u2019 fintech, Parafin<\/strong>, raises $60 million funding round\u00a0<\/a><\/p>\n Online credit Marketplace FinanZero<\/strong> raises $4 million in a new round led by Swedish investors to further expand in Brazil\u00a0<\/a><\/p>\n Rapidly scaling, Kansas City\u2013based PayIt<\/strong> raises another $90 million amid \u201clong-overdue transformation\u201d of govtech\u00a0<\/a><\/p>\n NG.CASH<\/a><\/strong>, which describes itself as \u201cthe financial hub for Brazil\u2019s Generation Z,\u201d closed on a $10 million seed funding round co-led by Andreessen Horowitz (a16z) and monashees. Founded in February of 2021 and launching that August, the startup says it has over 900,000 users. Its founding team is made up of young (under 25) repeat founders who say they are responsible for building one of Brazil\u2019s largest YouTube channels (with over 8 million subscribers), along with another fintech, Trampolin, that was later sold to Stone (Brazil\u2019s version of Stripe).<\/p>\n Remote payroll provider Deel<\/strong> announced it has acquired<\/a> Legalpad<\/a><\/strong>, which aims to streamline \u201cthe hard-to-navigate US work visa process, making it faster and more efficient for companies.\u201d\u00a0 Since its founding in 2018, Legalpad says it has helped thousands of workers relocate to the U.S., and a Deel spokesperson told me the company\u2019s next move will be to integrate the tech and expand visa capability to additional countries. Canada will come first, followed by others. The spokesperson added: \u201cAs US visas have become harder to secure, the move ensures more talent can be matched to opportunities, while helping companies hire. And actually, Legalpad helped Alex get the O-1 visa he needed to start Deel.\u201d Recently, Deel has been making moves to broaden its products with a public offer<\/a> to acquire PayGroup, a partnership<\/a> with the UAE unveiled to help foreign workers secure visas, and launching Global Payroll<\/a>.<\/p>\n Weltio<\/strong><\/a>, a Mexico City\u2013based wealth management startup targeting Spanish-speaking LatAm, says it has raised $1.2 million in pre-seed funding from Y Combinator, as well as from Wealthsimple founder Brett Huneycutt, Mercado Bitcoin founder Reinaldo Rabelo, and Rhombuz VC<\/a>, among others. The company says it provides the ability for Latin Americans to open an account in USD (fully regulated\/protected by U.S. relevant bodies) and offers the ability to trade over 10,000 financial products and over 20 crypto coins. As the company evolves, the founders aim to offer a full suite of banking services.<\/p>\n That\u2019s all for this week. Once again, thank you for joining me on this crazy fintech ride. See you next time! xoxoxo Mary Ann<\/p>\n<\/p><\/div>\n <\/br><\/br><\/br><\/p>\n![\"\"](\"https:\/\/i0.wp.com\/techcrunch.com\/wp-content\/uploads\/2022\/08\/PaystandYaydoo.jpg?resize=1140%2C641&ssl=1\")
<\/p>\nWeekly News<\/h2>\n
Personnel <\/b><\/h2>\n
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<\/p>\nFundings and M&A<\/h2>\n