Welcome to The Interchange! If you received this in your inbox, thank you for your subscription and vote of confidence. If you are reading this as a post on our site, please register over here So you can receive it directly in the future. Each week, I take a look at the most popular fintech news of the previous week. This includes everything from funding rounds to trends to niche analysis to hot takes on a specific company or event. There’s a lot of fintech news out there and it’s my job to stay on top of it – and understand it – so you can stay informed. – Mary Ann
More debt financing means flat is new.
I wrote about it last week. founder wayAn Austin-based company that provides debt financing to B2B startups.
As I began to think about debt and credit facilities as more attractive options for startups looking for capital – especially during the current recession – I realized that an increasing number of companies are raising debt capital or credit facilities. increasing. This can be any number. Some founders may be struggling to find venture dollars, while others aren’t — preferring not to dilute their patents.
On August 8, a cost management startup based in Mexico City Clara He announced that up to $150 million in funding from Goldman Sachs has been approved. The facility, he said, will allow Clara to continue to grow its corporate card, accounts payable and short-term financing offerings for businesses in LatAm. The company said it currently works with more than 5,000 businesses in Mexico, Brazil and Colombia. Clara was believed to be worth around $130 million in May 2021, when she raised $30 million. Eight months later, she achieved unicorn status by raising a $70 million Series B round led by Coatue.
Here in America, Way of progress In the year On August 11, it announced that it had acquired a $400 million warehouse from Monroe Capital LLC. A spokeswoman for the alternative investment startup told me the financing is the largest of its kind to date. In June 2021, I covered Yieldstreet’s $100 million Series C in “near unicorn” status. Since its inception in 2015, the company has more than 400,000 users and has raised more than $3 billion in funding for its ever-evolving investment products. The spokesperson also told me: “This is not a typical corporate debt – it uses warehouse storage, which means it is aimed at creating new funds and products for the YieldStreet platform – rather than increasing the number of investments available to users.” Total options or costs.
A quick note on the difference between warehouse facilities and debt financing – debt is loan capital for operating purposes. Warehouse facilities are essentially a line of credit. (Thanks to TC+ editor and resident financier Alex Wilhelm for the lesson.)
Hayley Jones, VP&A at Cruise Consulting, observed. My latest tweet About viewing more debt financing and share the following via email:
“There are many reasons why this is happening, but the biggest decline in equity valuations is that founders have been forced to look for less vulnerable ways to extend the highway, assuming they will grow to at least a flat rate.”
Cruz COO Scott Orn, a partner at Venture Debt Fund, added his thoughts in an email:
- You should plan ahead for venture debt. Once equity financing is done, put it up relatively quickly. In this way, there is no adverse selection for lenders; Everyone around the table (founders, VCs and lenders) is happy then. If you try to put something in for less than six months, you won’t be able to get a loan. If you put it in place after the equity round, you can draw it forward – this is called forward commitment/shortening. That gives the beginner a lot of options.
- It is extremely important to understand all terms. Often founders don’t realize that there are MACs like funding, investor waiver clauses, etc. These terms can be used by the lender to prevent the startup from disbursing the funds or from defaulting after the funds are raised. In any case, the company is in trouble and cannot count on the capital. So get to know your lender, let VCs know your lender and pay attention to your terms. That’s why we’ve created a sample venture debt term sheet to explain all the terms.
- Don’t borrow your own money. Lenders often structure contracts with several covenants, including minimum financial requirements. For example, if you always keep $2 million in the bank, they lend you $4 million. In this case, you only get $2 million in new capital. Additionally, an investor’s abandonment risk or MAC clause can prevent you from using the money properly.
- While startup interest rates are high on venture debt, lenders are getting more conservative. Across the board, startups are frequently asking us about the venture debt route. At the same time, when I talk to lenders, they are reducing the dollar amount of new obligations, shortening the interest-only period, requiring more collateral and becoming more selective about which startups to lend capital to.
Finally, I know at least Two other fintechs plan to announce debt increases and/or credit facilities in the coming weeks. So, this definitely feels like a trend.
For other TC coverage on this topic, go here and here.
Focus on Africa
August 10, TC man on Nigerian soil; Take Kane-OkaforHe wrote about fintech Team Apt Raising more than $50 million in US-based funding QED investors. Taj writes: “In a rare move by Western VCs, QED announced this January that it has hired Genga Ajayi and Chidinma “Chid” Iweke to lead its investments in Africa. The firm’s founder and managing partner, Nigel Morris, said in an interview with TechCrunch that Africa is the final piece of the puzzle to transform QED into a global fintech-specialist VC firm.
I thought this was so interesting, I asked Tage if he could explain the significance of the news. Below are his thoughts.
The most well-funded and well-known fintechs in Africa have western elements in their business: payment gateways, cross-border and digital banking plays. TeamApt, with its agency banking business, is one of the few fintechs outside of this category.
Here’s a summary of the trade. Nigeria has an average of 4.8 bank branches and 19 ATMs per 100,000 adults, compared to the world average of 13 bank branches and 40 ATMs. Also, data suggests that less than a third of Nigerian adults can find a bank branch or ATM within one kilometer of their residence. This challenge of accessing financial services, especially for the unbanked and under-banked, is addressed by agency banking, a branchless banking model that extends financial services to the last mile through a network of agencies and POS machines.
It’s a local solution that foreign investors don’t know about. Square is the closest analogy in the US when it comes to merchant engagement and sales space. But it doesn’t really capture the whole picture. So it’s not surprising to see that the investments flowing into the space have mainly come from domestic or Africa-focused investors (China-backed OPay being an exception).
So QED Investors’ first African involvement, right off the bat, in TeamApt comes as a huge win for the agency’s banking space and the local tech scene as a whole. why? Because the deal wouldn’t have happened if QED hadn’t taken the bold step of hiring local experts on the ground to help the market.
Western VCs have funded and established local offices in emerging markets such as Latin America and Southeast Asia, but are hesitant to do the same for Africa. For them, what I’m comfortable with right now is testing the market by throwing a few million dollars at a few startups and seeing how they pan out. All this is a correct strategy; However, with the current market downturn, many of these companies will have less interest in continuing to focus on their core markets. Thumbs up to QED for being bullish regardless.
And if you don’t, Follow Tage’s work! He is awesome. For more on Africa’s venture scene, go here.
From T.C Lauren Forristal: “Amazon‘One’ Palm Scanner Payment Technology Launches in More Than 65 Whole Foods Stores in California This is the largest planned rollout of the technology to date for stores in Malibu, Montana Avenue, Santa Monica, Los Angeles, Orange County, Sacramento, the San Francisco Bay Area and Santa Cruz. More here.
From TC contributor Vadym Synegin: “Ukrainians Often pioneered by market-leading companies, they have built products that have a positive impact on society, especially in the fintech sector. Despite the obstacles of the war, the Ukrainian fintech community is working to create better infrastructure and regulations for the country, which can attract important companies and institutional investors from different backgrounds. Read here 5 reasons why Ukraine’s fintech sector is growing despite the war.
Real estate technology startup to the houseIn the year In May 2021, a Series B round of funding led by Norwest Venture Partners raised $136 million at a valuation “north of $800 million” and $235 million in debt, cutting about 20% of its workforce. RealTrends reports: “‘Buy before you sell’ Humward cuts 20 percent of workforce, CEO Tim Heil says in letter to employees…Despite Heil reporting the company’s “strongest month ever” in May and strong second-quarter results, “Heil Market Turns It was more sudden than expected and forced the organization to downsize.” In the year At the time of the May 2021 addition, the company had 203 employees, so based on that, Homeward could lay off about 40 people.
Funding and M&A
Featured on TechCrunch.
Real work50 million to help lenders verify borrowers’ income and employment
MoreWealth Tech Company, Banks $15 Million Series A Value Reaches $50 Million
Phoenix FinTech Spotlight Raises $30 Million As It Picks Its Sides The startup announced earlier this year that it is becoming a payments facilitator in addition to enabling other companies to facilitate payments. The move puts it in direct competition with Stripe.
DD360 It will receive 91 million dollars to increase the supply of protech and fintech in Mexico
Modern life Purses 15 million dollars to support insurance consultants
Financial Venture Studio (FVS) Closes $40 million fund – “The fund continues to outperform…Fund I reached 4x,” a spokesperson told me in an email. In February, TechCrunch reported that FVS named former startup founder and advisor Cameron Peake as its new partner.
Focused on food stamps fodder Raises $22M – TechCrunch first covered Fodder when it emerged from hiding in March.
Well that’s it for this week. I don’t know about you, but this summer feels like it flew by. I’m not ready to finish… until next time, xoxoxo Mary Ann