Welcome to The Interchange! If you received this in your inbox, thank you for signing up and your vote of confidence. If you’re reading this as a post on our site, sign up here so you can receive it directly in the future. Every week, I’ll 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’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
Stripe eyes exit, reportedly tried raising at a lower valuation
The big news in fintech this week revolved around payments giant Stripe.
On January 26, my Equity Podcast co-host and overall amazingly talented reporter Natasha Mascarenhas and I teamed up to write about how Stripe had set a 12-month deadline for itself to go public, either through a direct listing or by pursuing a transaction on the private market, such as a fundraising event and a tender offer, according to sources familiar with the matter. The news, as first reported by the Wall Street Journal, came as a surprise considering the rather dry public market activity in the tech world. Later that day, it also came to light that Stripe had reportedly approached investors about raising more capital — at least $2 billion — at a valuation of $55 billion to $60 billion. This is especially newsworthy considering that Stripe last raised at a $95 billion valuation in March of 2021. Now, down rounds are hardly shocking in today’s environment. But for some reason, when you’re talking about a company that had achieved the highest-ever valuation for a privately held startup, it sits differently. Even more intriguing, The Wall Street Journal reported that Stripe would not use the money toward operating expenses but rather to cover a large annual tax bill associated with employee stock units. It is not clear if any discussions are ongoing, and Stripe declined to comment on the matter when asked.
The fact that the company might raise money to pay off a tax bill raised eyebrows internally here at TechCrunch. That is not typical, and it certainly doesn’t seem like it’s an ideal way to spend investors’ cash. Ken Smythe, founder and CEO of Next Round Capital Partners — a capital markets and VC secondaries firm — validated our impressions.
In a phone interview on January 27, he told me that it is “highly unusual for investors to be excited about a new round that is primarily going to pay unpaid taxes.”
Instead, Smythe said, they generally get more pumped about funding expansions into new markets or products or other growth initiatives.
But generally speaking, he believes that a fundraise is a more likely outcome for Stripe than an IPO, if the company can pull it off.
“It makes sense that Stripe would try to raise money privately at a $55 billion to $60 billion, a -30% drop from their $95 billion round in 2021,” he told me. “In contrast to public fintech stocks, which have suffered -65% to -80% drops over the last 12 to 18 months (PayPal, Square, Ayden), a private raise at $60 billion would be a big win. That’s still a very healthy multiple of 20x+ revenue multiple in an environment where many fintech names are trading in the single digits.”
Going public, Smythe said, will likely remain challenging for most companies until late 2023 or 2024 — Stripe included.
“It’s highly unlikely that an IPO for Stripe is anywhere near on the horizon, given the weakness of broader fintech gains and the unpredictability and volatility of Stripe’s revenues,” he added.
Indeed, as a historically transactional-payments business, Stripe appears to be exploring ways to generate meaningful — and predictable — revenue. For example, Amazon announced on January 23 that it plans to “significantly expand” its use of Stripe. Reported Pymnts: “Under the new agreement, Stripe will become a strategic payments partner for Amazon in the U.S., Europe and Canada, processing a significant portion of Amazon’s total payments volume. Stripe will be used across Amazon’s business units, including Prime, Audible, Kindle, Amazon Pay, Buy With Prime and more.” Also, I recently wrote about how new fintech startup Mayfair is paying Stripe a fee as part of its mission to offer businesses a higher yield on their cash.
I know we’re all wondering what’s going on with the company as it appears to be struggling to keep its footing in an increasingly crowded fintech space. Will it raise or go public? What is Stripe really valued at now? I, for one, can’t wait to find out.
Bolt lays off more people, continues to struggle
One-click checkout startup Bolt laid off more people last week. And according to The Information, CEO Maju Kuruvilla “told an all-hands meeting … that ‘quite a few’ of Bolt’s recent moves, including partnerships, new products, and acquisitions, had not worked out.” Also according to The Information, about 50 employees were affected by the latest round of layoffs. Overall, the company has cut its headcount by more than half since last May.
When asked, a company spokesperson told me only that Bolt is “focused on the long-term success” of its business and its customers. She added: “We truly believe we will power the next generation of growth for independent retailers. As we concentrate on strengthening our core products, we regretfully had to make the difficult decision to restructure our teams and part ways with some of our talented employees. We’re extremely grateful for everyone’s contributions.”
TechCrunch reported on Bolt’s previous layoffs last May.
Next Round Capital Partners’ Ken Smythe is not at all surprised by the latest layoff news, telling me that Bolt has struggled to get its core product “to achieve any real traction with customers.”
“Revenue continues to be very weak — in the $30 million to $40 million range, and it was expected to be much higher at this point,” Smythe said. “A lot of customer acquisition they have talked about has not come to fruition. They overhired, raised $1B at an extreme valuation ($11B valuation at 300x+ multiple), which they used to hire but a product never materialized. Now they’re burning that cash. The reality is they haven’t delivered — hence the layoffs.”
Wells Fargo, JPMorgan Chase, Bank of America, U.S. Bank, PNC, Truist and Capital One are collaborating on a product that, according to The Wall Street Journal, “will allow shoppers to pay at merchants’ online checkout with a wallet that will be linked to their debit and credit cards.” Early Warning Services, which is owned by a consortium of the seven banks, will operate the yet-to-be-named digital wallet, which Banking Dive reports is expected to launch in the second half of the year. The wallet will operate separately from the EWS-run peer-to-peer payments platform Zelle, according to the Journal. The move seems to be an effort on the part of the banks to compete with the likes of PayPal and Apple. But is it too little too late? J.D. Power and Associates sent me a report that showed that according to its data, “mobile wallet usage among Americans continues to grow in stores, but the percentage of customers that still say it is easier to use a physical credit/debit card than a mobile wallet is on the rise.”
ICYMI: On January 19, Bloomberg reported that Capital One had “eliminated hundreds of technology positions,” a move that impacted over 1,100 workers. Those employees were reportedly invited to apply for other roles in the bank.
For those of us who suck at carrying cash, it’s good to know that digital tipping is a growing space. Christine Hall recently wrote about Grazzy raising $4.5 million to grow its digital tipping platform. And last week, startup eTip announced its collaboration with Visa aimed at helping hospitality and service industry clients “accelerate the adoption of digital tipping.” Via email, eTip said: “With eTip, guests of hotels, cruise lines, casinos, and resorts can now tip staff by simply scanning or tapping a QR code, allowing hospitality and service employees to receive digital tips in real time.”
X1 released X1+, which it described as a “premium smart credit card” focused on travel. Features include complimentary lounge access for flight delays, enhanced travel rewards and “smart” baggage protection. CEO Deepak Rao also told me via email that X1 has raised $16 million in venture debt from Silicon Valley Bank, which will be used toward “growing new product lines and having cash reserve for growth in purchase volume and outstanding balances.” That financing follows the company’s recent $15 million extension funding round.
Fintech-turned-HR outfit Deel revealed that it reached $295 million in annual recurring revenue (ARR) in 2022. That’s up 417.5% from $57 million in ARR achieved at the end of 2021. The massive jump in ARR is impressive by normal standards but particularly so considering the challenging macroenvironment that startups everywhere faced last year. The company’s co-founder and CEO Alex Bouaziz also confirmed the company’s valuation of $12 billion, which we reported on in May at the time of Deel’s $50 million raise. The executive also told TechCrunch that Deel is profitable, having been EBITDA positive since September.
Former Salesforce executive Craig Nile has taken a role as Modern Treasury’s new chief revenue officer to, in the company’s own words, “lead the company’s continuing push into enterprises.” Modern Treasury, which describes itself as “the operating system for the new era of payments,” also announced it has landed construction software giant Procore, fintech Splitwise and expense management company TripActions as new customers.
Ex-Plaid product marketing lead Victor Umunze has launched Wafi, a payment processing platform that aims to provide e-commerce businesses “with a simple API to enable fast, secure, and cost-effective processing of bank payments that eliminates redundant entities in the payment processing flow, giving businesses significant cost savings and increasing profitability,” the company told me via email. More on this here.
Reports Manish Singh: “India’s central bank has directed SBM Bank India to stop all outward remittance transactions in a blow to the bank and many of its fintech partners that offer services allowing users to invest in foreign services.” More here.
From Fintech Futures: “Mexican buy now, pay later (BNPL) fintech Kueski has appointed Fausto Ibarra as its new chief product officer (CPO) to lead the firm’s long-term vision for its financial product offerings. Ibarra brings over two decades of experience to the role, most recently serving as Stripe’s head of product for Latin America. Prior to that, he also held various senior roles at tech giants including Meta, Google and Microsoft.” Via email, Kueski told me that the company recently hit its 10-year anniversary of financial service operations, with almost 10 million loans issued since its inception to 1.7 million users across its products, Kueski Pay and Kueski Cash, totaling more than $1.4 billion in loan transactions.
PayPal and Bold Commerce have teamed up in an effort “to enable brands to go headless.” Via email, the companies told me: “Brands will now be able to give PayPal’s 430 million active users the ability to check out wherever they are — beyond brands’ traditional e-commerce sites — using PayPal’s full line of payment options: PayPal, Venmo, PayPal Pay Later solutions, and credit and debit cards. This news creates the largest global cross-merchant network effect for e-commerce … Brands will now have control of the checkout experience and payment options they offer shoppers on third-party digital channels (such as social media, blogs, digital interfaces and QR codes). Currently, brands either have to take shoppers away from the content they’re engaging with to complete a purchase, or they’re limited to the payment options selected by the channel.”
Some news out of Puerto Rico: FV Bank — which claims to be the first bank in Puerto Rico granted a digital asset custody license by the Office of the Commissioner of Financial Institutions (OCIF) — announced the launch of its cross-border, foreign currency payments facility. Via email, FV told me: “The new service will facilitate commerce, allowing US and international customers to make timely, seamless, and secure cross-border transactions, without the need for multiple currency conversions or exorbitant fees.” More here.
In this week’s episode of TechCrunch’s fabulous Found podcast, Darrell and Becca were joined by Sebastian Siemiatkowski, the co-founder and CEO of Klarna. Sebastian talks about what led him to found the startup and how it has navigated multiple market cycles since. He also dives into how Klarna has grown in different categories and which have been more successful than others. Plus, he talks about why he’s been so transparent about the company’s valuation and status amid 2022’s market turmoil. Check it out here.
And while we’re on the topic of Klarna . . . From Finextra: “Klarna has taken a leaf out of Spotify’s playbook with the launch of Money Story, a personal summary of 2022 that provides consumers with useful insights into their spending habits. Money Story uses the animated ‘story’ format popularised by social media, to provide users with spending insights that they can convert into financial goals for 2023. The package visualises spending patterns and presents animated quiz questions that prompt users to reflect on where they think they spent their money in 2022.”
Speaking of BNPL, in last week’s Exchange newsletter, the brilliant Anna Heim writes in a story cleverly titled ‘Protect me from what I want’: “Buy now, pay later is an alluring option for consumers, perhaps even more so in a recession. But with rising debt and inflation, perhaps the focus should be on companies that help protect borrowers from digging themselves into a hole.”
Reports Startup Weekly: “Bean, a Matchstick Ventures-backed digital accounting startup, announced it emerged from stealth to democratize the market for accounting services. Bean’s SaaS enabled marketplace matches a network of elite accountants (only 4% of applicants get access) with CFOs and companies. A 2022 graduate of TechStars LA, Matchstick Ventures, Far Out Ventures and Acadian Ventures invested $1.7 million joined by angel investors and founders Wayne Chang and Jeff Seibert.”
Restive Ventures released its 2023 State of Fintech report.
Inman reports: “Comparing himself to Henry Ford and Elon Musk, CEO Vishal Garg says he’s reconfigured Better‘s assembly line to crank out mortgages in a single day.” In a press release, the company — which is rumored to still be struggling quite a bit — claims that its customers “will be able to go online, get pre-approved, lock their rate and get a mortgage Commitment Letter from Better, all within 24 hours.”
Sean Roberts has left his role as COO and CFO of real estate tech company Orchard and is now CEO of Villa, a venture-backed ADU builder. According to his LinkedIn profile, Roberts will continue to strategically advise Orchard.
According to Layoffstracker.com, vacation rental management platform Vacasa laid off 1,300 employees, or 17% of its workforce, last Tuesday, “a dramatic step aimed at stabilizing the faltering Portland company.” “We need to reduce our costs and continue to focus on becoming a profitable company,” new CEO Rob Greyber wrote in a note to staff Tuesday, which Vacasa then filed with federal securities regulators.
Fundings and M&A
Seen on TechCrunch
Charlotte, NC–based commercial lending startup Foro emerges from stealth with $8 million in Series A funding Interestingly, the company tells us that one of its backers is former Bank of America CEO and chairman Hugh McColl Jr.
Sandbar gets $4.8 million to fund fight against financial crime. Beyond the headline: The startup also announced the availability of its product. Investors include Lachy Groom and Abstract Ventures, with participation from BoxGroup, as well as 45+ angel investors, including founders and executives from Ramp, Stripe, OpenAI, Plaid, and Square. Sandbar says it identifies risks and “provides more effective models to accurately identify suspicious behavior across payment products and services.” According to a spokesperson: “With stronger AML systems, Sandbar is helping to mitigate false positives and to address large-scale fraud, money laundering, sanctions, and illicit funding for human trafficking, wars, and crimes.”
Whew, I’ll be honest, that was exhausting to put together (but fun!). Thank you for hanging in there with me ’til the end. Enjoy the rest of your weekend and stay tuned for lots more fintech news next week. xoxo, Mary Ann
Tesla more than tripled its Austin gigafactory workforce in 2022
Tesla’s 2,500-acre manufacturing hub in Austin, Texas tripled its workforce last year, according to the company’s annual compliance report filed with county officials. Bloomberg first reported on the news.
The report filed with Travis County’s Economic Development Program shows that Tesla increased its Austin workforce from just 3,523 contingent and permanent employees in 2021 to 12,277 by the end of 2022. Bloomberg reports that just over half of Tesla’s workers reside in the county, with the average full-time employee earning a salary of at least $47,147. Outside of Tesla’s factory, the average salary of an Austin worker is $68,060, according to data from ZipRecruiter.
TechCrunch was unable to acquire a copy of the report, so it’s not clear if those workers are all full-time. If they are, Tesla has hired a far cry more full-time employees than it is contracted to do. According to the agreement between Tesla and Travis County, the company is obligated to create 5,001 new full-time jobs over the next four years.
The contract also states that Tesla must invest about $1.1 billion in the county over the next five years. Tesla’s compliance report shows that the automaker last year invested $5.81 billion in Gigafactory Texas, which officially launched a year ago at a “Cyber Rodeo” event. In January, Tesla notified regulators that it plans to invest another $770 million into an expansion of the factory to include a battery cell testing site and cathode and drive unit manufacturing site. With that investment will come more jobs.
Tesla’s choice to move its headquarters to Texas and build a gigafactory there has helped the state lead the nation in job growth. The automaker builds its Model Y crossover there and plans to build its Cybertruck in Texas, as well. Giga Texas will also be a model for sustainable manufacturing, CEO Elon Musk has said. Last year, Tesla completed the first phase of what will become “the largest rooftop solar installation in the world,” according to the report, per Bloomberg. Tesla has begun on the second phase of installation, but already there are reports of being able to see the rooftop from space. The goal is to generate 27 megawatts of power.
Musk has also promised to turn the site into an “ecological paradise,” complete with a boardwalk and a hiking/biking trail that will open to the public. There haven’t been many updates on that front, and locals have been concerned that the site is actually more of an environmental nightmare that has led to noise and water pollution. The site, located at the intersection of State Highway 130 and Harold Green Road, east of Austin, is along the Colorado River and could create a climate catastrophe if the river overflows.
The site of Tesla’s gigafactory has also historically been the home of low-income households and has a large population of Spanish-speaking residents. It’s not clear if the jobs at the factory reflect the demographic population of the community in which it resides.
Launch startup Stoke Space rolls out software tool for complex hardware development
Stoke Space, a company that’s developing a fully reusable rocket, has unveiled a new tool to let hardware companies track the design, testing and integration of parts. The new tool, Fusion, is targeting an unsexy but essential aspect of the hardware workflow.
It’s a solution born out of “ubiquitous pain in the industry,” Stoke CEO Andy Lapsa said in a recent interview. The current parts tracking status quo is marked by cumbersome, balkanized solutions built on piles of paperwork and spreadsheets. Many of the existing tools are not optimized “for boots on the ground,” but for finance or procurement teams, or even the C-suite, Lapsa explained.
In contrast, Fusion is designed to optimize simple inventory transactions and parts organization, and it will continue to track parts through their lifespan: as they are built into larger assemblies and go through testing. In an extreme example, such as hardware failures, Fusion will help teams connect anomalous data to the exact serial numbers of the parts involved.
“If you think about aerospace in general, there’s a need and a desire to be able to understand the part pedigree of every single part number and serial number that’s in an assembly,” Lapsa said. “So not only do you understand the configuration, you understand the history of all of those parts dating back to forever.”
While Lapsa clarified that Fusion is the result of an organic in-house need for better parts management – designing a fully reusable rocket is complicated, after all – turning it into a sell-able product was a decision that the Stoke team made early on. It’s a notable example of a rocket startup generating pathways for revenue while their vehicle is still under development.
Fusion offers particular relevance to startups. Many existing tools are designed for production runs – not the fast-moving research and development environment that many hardware startups find themselves, Lapsa added. In these environments, speed and accuracy are paramount.
Brent Bradbury, Stoke’s head of software, echoed these comments.
“The parts are changing, the people are changing, the processes are changing,” he said. “This lets us capture all that as it happens without a whole lot of extra work.”
Amid a boom in AI accelerators, a UC Berkeley-focused outfit, House Fund, swings open its doors
Companies at the forefront of AI would naturally like to stay at the forefront, so it’s no surprise they want to stay close to smaller startups that are putting some of their newest advancements to work.
Last month, for example, Neo, a startup accelerator founded by Silicon Valley investor Ali Partovi, announced that OpenAI and Microsoft have offered to provide free software and advice to companies in a new track focused on artificial intelligence.
Now, another Bay Area outfit — House Fund, which invests in startups with ties to UC Berkeley — says it is launching an AI accelerator and that, similarly, OpenAI, Microsoft, Databricks, and Google’s Gradient Ventures are offering participating startups free and early access to tech from their companies, along with mentorship from top AI founders and executives at these companies.
We talked with House Fund founder Jeremy Fiance over the weekend to get a bit more color about the program, which will replace a broader-based accelerator program House Fund has run and whose alums include an additive manufacturing software company, Dyndrite, and the managed app development platform Chowbotics, whose most recent round in January brought the company’s total funding to more than $60 million.
For founders interested in learning more, the new AI accelerator program runs for two months, kicking off in early July and ending in early September. Six or so companies will be accepted, with the early application deadline coming up next week on April 13th. (The final application deadline is on June 1.) As for the time commitment involved across those two months, every startup could have a different experience, says Fiance. “We’re there when you need us, and we’re good at staying out of the way.”
There will be the requisite kickoff retreat to spark the program and founders to get to know one another. Candidates who are accepted will also have access to some of UC Berkeley’s renowned AI professors, including Michael Jordan, Ion Stoica, and Trevor Darrell. And they can opt into dinners and events in collaboration with these various constituents.
As for some of the financial dynamics, every startup that goes through the program will receive a $1 million investment on a $10 million post-money SAFE note. Importantly, too, as with the House Fund’s venture dollars, its AI accelerator is seeking startups that have at least one Berkeley-affiliated founder on the co-founding team. That includes alumni, faculty, PhDs, postdocs, staff, students, dropouts, and other affiliates.
There is no demo day. Instead, says Fiance, founders will receive “directed, personal introductions” to the VCs who best fit with their startups.
Given the buzz over AI, the new program could supercharge House Fund, the venture organization, which is already growing fast. Fiance launched it in 2016 with just $6 million and it now manages $300 million in assets, including on behalf of Berkeley Endowment Management Company and the University of California.
At the same time, the competition out there is fierce and growing more so by the day.
Though OpenAI has offered to partner with House Fund, for example, the San Francisco-based company announced its own accelerator back in November. Called Converge, the cohort was to be made up of 10 or so founders who received $1 million each and admission to five weeks of office hours, workshops and other events that ended and that received their funding from the OpenAI Startup Fund.
Y Combinator, the biggest accelerator in the world, is also oozing with AI startups right now, all of them part of a winter class that will be talking directly with investors this week via demo days that are taking place tomorrow, April 5th, and on Thursday.
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