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
Hello! It’s my first full week back in some time, and I’m excited. Turns out having COVID helped me get more rest than I have had in a very long while. (Silver linings.)
The week of Thanksgiving turned out to be less boring than I expected — I reported that three of alternative financing startup Pipe’s co-founders were stepping down as the company searched for a “veteran” CEO to take the company to the next level.
For some context, I have been covering Pipe since it raised $6 million in a seed round led by Craft Ventures back in 2019. I have watched it grow over time, in various ways. All the while, I have been in contact with its CEO and co-founder Harry Hurst. So when I got the news that he was planning to leave the company, along with two of his co-founders, I was surprised. This is not a common thing. Co-founders don’t often step down so soon after a company was founded and achieved unicorn status. And it’s practically unheard of for three co-founders to leave at the same time.
After that article published, I was inundated with tweets, messages, and so on…with a number of allegations around “the real reasons” that Pipe’s co-founders were stepping down. Among those rumors were claims that Pipe made roughly $80 million in loans to one or several crypto mining companies. The outfit or outfits have since gone out of business and the $80 million is believed to have been completely written off, these individuals claimed (many of whom said they had “heard” about the events).
To be clear, if we reported on every rumor we heard here at TechCrunch, we’d turn into the “National Enquirer” of the startup world. At the same time, when a reporter is provided with the same information from multiple sources who they know and trust, it is then irresponsible to not follow up on those claims. So that’s what I did.
Ultimately, Pipe denied the claims against it but in that denial, a couple of interesting things came to light. First, the startup’s board — despite its long list of investors — consists of only the three co-founders who are stepping down and one independent director, Peter Ackerson, a general partner at Fin Capital who himself became a VC just three years ago. Second, I found out that once a new CEO is found, that individual will assume Hurst’s seat on the board.
Now, I am not here to “take sides.” I don’t know what truly has, or has not, gone down behind the scenes at Pipe. But regardless, this all struck me as odd. For one, how can a startup that has raised some $300 million and is valued at $2 billion not have a more independent board? Two, why would Hurst — who has been the very vocal frontman of Pipe since its inception — leave the board? Finally, it turns out there is a fourth co-founder, Michal Cieplinski, whose name was notably not mentioned at all when the other three founders’ departures were announced. Apparently, he remains in his role as chief business officer.
For now, I can only report on what I am told. As time goes on, we’ll see if more details surrounding this unusual development emerge.
When pressed, Pipe declined to reveal details around its financials. So perhaps it felt even more refreshing when consumer fintech X1 happily shared details around its revenue in an interview last week. The company was founded in 2020 to offer a credit card to consumers based on their income, rather than their credit score. It launched that credit card to the general public in mid-September after amassing a waitlist of 600,000. While I don’t know how many cardholders the company currently has, I was impressed that it has seen its revenue triple over the past 6 months — from $1 million per month to $3 million per month, giving it an annual revenue run rate of $36 million. Not bad. Not bad at all.
X1 is one of the few fintechs I have covered that opted NOT to raise in 2021. That may have been a very wise decision. Its valuation was not inflated, so after raising $25 million earlier this year in a Series B round, investors clamored to offer it another $15 million earlier this month — at a 50% higher (undisclosed) valuation.
The startup feels low-key in a sector that has been full of hype and chest-beating in recent years. It recently lured away an Apple exec to serve as its chief risk officer, and according to CEO and co-founder Deepak Rao, it’s already conducting audits (others in the space should take note!).
The company is now taking on the likes of Robinhood as it gears up to launch its own investing platform, which will give its cardholders a way to buy stocks with the reward points they earn using its card. It’s a novel concept and we’ll see how it works out. On that topic, one thing I found interesting: FPV Ventures, a venture firm founded by Google Analytics founder Wesley Chan, led X1’s $25 million Series round. Well, Chan was also an early investor in Robinhood. X1 declined to comment on that fact, but it is just one other example of VCs backing startups that very closely resemble others that they have already backed. In a world where companies are constantly evolving and iterating, it shouldn’t be shocking. But it does feel a bit…awkward, to say the least.
Stripe announced it built a fiat-to-crypto onramp. The company described it as “a customizable widget that developers can embed directly into their DEX, NFT platform, wallet, or dApp. Stripe claims to handle all the KYC, payments, fraud, and compliance and that the on-ramp can be integrated “with just 10 lines of code.” Romain goes deeper on the topic here.
Eric Wu, co-founder of Opendoor, stepped down from his role as CEO of the real estate fintech. Carrie Wheeler, who has served as the company’s CFO for just over two years, is taking over the role of CEO. Wu will now serve as president of Opendoor’s new marketplace offering, Opendoor Exclusives. At the time of the launch last month, Wu said: “We’ve designed Opendoor Exclusives to be a new marketplace where you can directly buy and sell a home, without any of the hassle of the traditional real estate model.”
Finextra reported that “Klarna has launched a platform that connects retailers with creators and influencers that can help them reach their target markets. The Creator Platform promises to match retailers with the right influencers and then track performance metrics — including traffic, sales and conversion rates — in real time. Already live in the US, it is now available in all markets in which Klarna operates, providing an additional marketing channel for the firm’s 450,000 retail partners.”
News like this doesn’t exactly bolster the case for fintech. According to the Chicago Sun-Times, “since 2020, more than 3,500 complaints have been filed about San Francisco-based Chime Financial Inc. with the federal Consumer Financial Protection Bureau about closed accounts, unauthorized charges or other issues. Most are marked ‘closed with explanation,’ meaning the company resolved them privately with the customer…Some Chime customers who have complained about sudden account closures were shocked to hear that it could take up to a month to get their money back.”
As reported by the very talented Joanna Glasner, who writes for my former employer, Crunchbase News: “Last year, financial services was the leading sector for venture investment, with at least $131 billion globally going into startups in the space. This year, the industry still ranks among the largest recipients of venture capital funding. However, investment to startups in the space has been dropping every quarter this year, with Q4 likely to be the lowest yet.”
American Express is going deeper on B2B payments. On December 1, the credit card giant launched Amex Business Link. A spokesperson told me this will offer “a new B2B payments solution for network issuers and acquirers to offer to their business customers.” Its goal is to provide “more streamlined, efficient, and flexible ways for businesses to pay each other on the Amex network”
Seen on TechCrunch+
Is FTX’s failure a stress test for corporate credit card startups? As reported by Natasha Mascarenhas: “Ramp recently sent a message to crypto companies using its corporate card services saying that it is significantly lowering spending limits and adding new requirements. Some users were temporarily suspended from spending altogether…While Ramp somewhat backtracked on the changes, its move offers a window into how corporate credit card companies could be stress-tested in the current environment. Brex, Ramp’s biggest competitor, said that there have been no changes to crypto users’ spending limits.”
Of all the venture capital funding invested in 2021, around one in every five dollars went to fintech. But this boom now seems behind us, as global fintech funding activity returned to pre-2021 levels. Worse, fintech didn’t escape the recent waves of tech layoffs, with high-profile companies like Brex, Chime and Stripe making headlines for this disheartening reason over the last few weeks. And yet, fintech startups are still getting founded and funded this year. Of the 223 companies in Y Combinator’s summer 2022 batch, 79 fell more or less into the fintech category. Why are founders and investors still placing bets in fintech and where? To find out more, Anna Heim reached out to fintech-focused VC firm Fiat Ventures.
As reported by Manish Singh: “Shares of Paytm in November slid to an all-time low of 477 Indian rupees ($5.8), a week after the lockup period for early backers of the Indian financial services firm ended last week and mounting concerns of growing competition.”
Sarah Perez reported: “In November, PayPal-owned Venmo rolled out two changes to its peer-to-peer payments app, including the ability to donate to charities through Venmo as well as a redesigned money-sending experience. The latter aims to make it easier to see how much you’re sending and who you’re sending to, while also improving the ability to either pay or request multiple payments at once.”
And here’s some news that inadvertently got left out of the November 20 edition of our newsletter…my apologies (I blame COVID brain!)! Thanks again to Kyle Wiggers for drafting the write-ups.
Block’s Square wants to get into the credit card game — but it’s going the partnership route to get there. The company announced that it’s teaming up with American Express to launch a new credit card targeted at Square sellers on the Amex network. Details were tough to come by at publish time — Square says it’ll reveal more about the card early next year — but the press release suggests that the card, soon available to all “eligible” Square sellers in the U.S., will integrate with Square’s existing services to let cardholders organize their finances and manage cash flow from a single pane of glass.
Fintech startups — startups dabbling in banking, investing, budgeting and payments — remained red-hot this year, with 18% of global venture dollars going to fintechs in Q2 2022. That’s not surprising in light of recent findings from digital analytics company Amplitude, which show that fintech apps and services continued to add new users over the last year, hitting a peak in June and July at 22% higher growth compared to August 2021. The stats align with the results of a 2021 Plaid survey showing that nearly nine in ten Americans now use some kind of fintech app to manage their financial lives. Clearly, the economic downturn aside, fintech is here to stay — and going strong.
With the “buy now, pay later” (BNPL) market on less firm ground than it once was, some of the largest vendors are on the hunt for alternative lines of revenue. Enter Klarna’s price comparison tool, which the BNPL startup is positioning against shopping services like Google Shopping and Shopping.com. Built on top of tech acquired through Klarna’s $1 billion acquisition of PriceRunner earlier this year, the new tool allows users to filter product searches by criteria such as size, color, ratings, availability and shipping options and view historical pricing data, which shows how the cost of the product has fluctuated over time. Klarna earns money by driving traffic and sales for its retail customers.
Speaking of Klarna, CEO Sebastian Siemiatkowski says that the collapse of crypto exchange FTX may encourage financial sector regulation that’ll make it harder for fintech firms to compete against traditional lenders. Speaking to Bloomberg, he said: “I’m a little bit concerned that these debacles that we’ve seen will again inhibit that and continuously prolong the overly large profitability that we’ve seen in the banking industry.” There’s not a ton of evidence to support this, but it’s undeniably true that regulators are preparing to take a long, hard look at crypto specifically after years of legislative inaction. The Washington Post reports that the Treasury Department has placed calls to large crypto exchanges to assess the risks of a broader contagion and congressional committees have readied reviews, including a House inquiry that could see FTX founder Sam Bankman-Fried testify under oath next month.
Fundings and M&A
Seen on TechCrunch
Tweet of the Week
Former journalist turned VC Chrissy Farr had a notable tweet this week, in which she said: “Companies that are announcing funding in this market should do it in a way that’s constructive for other founders. What did you get right? How long did it take? What were the metrics that you needed? How many convo’s? Otherwise not helpful as others are really struggling.”
I feel compelled to bring this up because the way I cover funding rounds has fundamentally changed from 2021. Let’s be honest — the people usually most interested in reading about a company’s raise are those that either work at, or have invested in, the company itself. In fact, you may be surprised to know that funding-focused articles are rarely among the most read on the TC site. I realized that to continue covering 10 funding rounds a week was not really doing our readers a favor. So these days, I try to focus on companies that (a) are doing something that appears to be really unique or novel and different from existing tech; (b) are willing to share revenue figures or specifics around their financials; (c) have a compelling origin story — say, founders with nontraditional backgrounds or hailed from other high-profile companies or startups; (d) can share specifics and context around their raise and how it came together; and (e) run counter to existing narratives or trends….among a few other things.
Bottom line is we get inundated with pitches. Seriously, you could not even imagine. We have to be super selective about what we choose to cover. Not to mention the fact that by committing to a ton of funding stories, we are leaving less room and time to cover breaking news and write profiles, features or trends and analytical pieces. So, when I say thanks, but no thanks I’m not able to cover your funding round outside of including a mention in my newsletter, please don’t follow up another 10 times. It’s not personal.
Did you know that I record the Equity podcast every week with my wonderful co-hosts and dear friends Alex Wilhelm and Natasha Mascarenhas? You can listen to our latest episode here. Oh, and I’m SO proud to report that Equity was ranked among the top 5% shared podcasts globally on Spotify!
Also, back in September (I don’t think I ever shared this), I was honored to be a guest on Miguel Armaza’s Fintech Leaders podcast. Among the topics we discussed: why I love covering the startup world and some tips on how to pitch your story to tech reporters, the future of tech media, my idea of what good journalism really means…and a lot more! Listen in here.
With that, I will close. Thanks once again for reading/sharing/subscribing. See you next week! Until then, take good care. xoxoxo — Mary Ann
Got a news tip or inside information about a topic we covered? We’d love to hear from you. You can reach me at email@example.com. Or you can drop us a note at firstname.lastname@example.org. If you prefer to remain anonymous, click here to contact us, which includes SecureDrop (instructions here) and various encrypted messaging apps.
A network of knockoff apparel stores exposed 330,000 customer credit cards
If you recently made a purchase from an overseas online store selling knockoff clothes and goods, there’s a chance your credit card number and personal information were exposed.
Since January 6, a database containing hundreds of thousands of unencrypted credit card numbers and corresponding cardholders’ information was spilling onto the open web. At the time it was pulled offline on Tuesday, the database had about 330,000 credit card numbers, cardholder names, and full billing addresses — and rising in real-time as customers placed new orders. The data contained all the information that a criminal would need to make fraudulent transactions and purchases using a cardholder’s information.
The credit card numbers belong to customers who made purchases through a network of near-identical online stores claiming to sell designer goods and apparel. But the stores had the same security problem in common: any time a customer made a purchase, their credit card data and billing information was saved in a database, which was left exposed to the internet without a password. Anyone who knew the IP address of the database could access reams of unencrypted financial data.
Anurag Sen, a good-faith security researcher, found the exposed credit card records and asked TechCrunch for help in reporting it to its owner. Sen has a respectable track record of scanning the internet looking for exposed servers and inadvertently published data, and reporting it to companies to get their systems secured.
But in this case, Sen wasn’t the first person to discover the spilling data. According to a ransom note left behind on the exposed database, someone else had found the spilling data and, instead of trying to identify the owner and responsibly reporting the spill, the unnamed person instead claimed to have taken a copy of the entire database’s contents of credit card data and would return it in exchange for a small sum of cryptocurrency.
A review of the data by TechCrunch shows most of the credit card numbers are owned by cardholders in the United States. Several people we contacted confirmed that their exposed credit card data was accurate.
TechCrunch has identified several online stores whose customers’ information was exposed by the leaky database. Many of the stores claim to operate out of Hong Kong. Some of the stores are designed to sound similar to big-name brands, like Sprayground, but whose websites have no discernible contact information, typos and spelling mistakes, and a conspicuous lack of customer reviews. Internet records also show the websites were set up in the past few weeks.
Some of these websites include:
If you bought something from one of those sites in the past few weeks, you might want to consider your banking card compromised and contact your bank or card provider.
It’s not clear who is responsible for this network of knockoff stores. TechCrunch contacted a person via WhatsApp whose Singapore-registered phone number was listed as the point of contact on several of the online stores. It’s not clear if the contact number listed is even involved with the stores, given one of the websites listed its location as a Chick-fil-A restaurant in Houston, Texas.
Internet records showed that the database was operated by a customer of Tencent, whose cloud services were used to host the database. TechCrunch contacted Tencent about its customer’s database leaking credit card information, and the company responded quickly. The customer’s database went offline a short time later.
“When we learned of the incident, we immediately contacted the customer who operates the database and it was shut down immediately. Data privacy and security are top priorities at Tencent. We will continue to work with our customers to ensure they maintain their databases in a safe and secure manner,” said Carrie Fan, global communications director at Tencent.
All Raise CEO steps down again
Less than a year after assuming the role, All Raise CEO Mandela SH Dixon has stepped down from her position at the nonprofit. The entrepreneur, who previously ran Founder Gym, an online training center for underrepresented founders, said in a blog post that the decision was made after she realized “being in the field working directly with entrepreneurs everyday” is her passion. Dixon said that she will be exploring new opportunities in alignment with that.
Her resignation is effective starting February 1st, 2023. She will remain an advisor to the Bay Area-based nonprofit.
This is the second chief executive to leave All Raise since it was first founded in 2017. In 2021, Pam Kostka resigned as the helm of the nonprofit to rejoin the startup world as well; Kostka is now an operator in residence and limited partner at Operator Collective, according to her LinkedIn. With Dixon gone, Paige Hendrix Buckner, who joined the outfit as chief of staff nine months ago, will step in as interim CEO. In the same blog post, Buckner wrote that “Mandela leaves All Raise in a strong position, and I’m grateful for the opportunity to continue the hard work of diversifying the VC backed ecosystem.”
Dixon did not immediately respond to comment on the record. It is unclear if All Raise is immediately kicking off a permanent CEO search.
The nonprofit has historically defined its goals in two ways: first, it wants to increase the amount of seed funding that goes to female founders from 11% to 23% by 2030, and, second, it wants to double the percentage of female decision-makers at U.S. firms by 2028.
In previous interviews, Dixon said that the company will work on creating explicit goals around what impact it wants to have for historically overlooked individuals. The data underscores the challenge ahead. Black and LatinX women receive disproportionately less venture capital money than white women; non-binary founders can also face higher hurdles when seeking funding, as All Raise board member Aileen Lee noted in the blog post. The nonprofit has created specific programs for Black and Latinx founders but has not disclosed a specific goal for the cohort yet. These disconnects can be lost if not tracked. All Raise’s last impact report was published in 2020 and they’re working on bringing that analysis back, Lee tells TechCrunch in an interview.
“All Raise is in great hands with Paige as interim leader and we’ve got a lot of exciting things that we’re shaping and scaling,” Lee said. “We have to all continue to link arms to try and continue to make improvements for our industry…we’ve made good progress that we can’t let up.”
Since launch, the nonprofit has raised $11 million in funding, and opened regional chapters in New York, Boston, Los Angeles, Chicago, DC and, soon, Miami.
Shopping app Temu is using TikTok’s strategy to keep its No. 1 spot on App Store
Temu, a shopping app from Chinese e-commerce giant Pinduoduo, is having quite the run as the No. 1 app on the U.S. app stores. The mobile shopping app hit the top spot on the U.S. App Store in September and has continued to hold a highly-ranked position in the months that followed, including as the No. 1 free app on Google Play since December 29, 2022. More recently, Temu again snagged the No. 1 position again on the iOS App Store on January 3 and hasn’t dropped since — even outpacing competitor Shein’s daily installs in the U.S.
Offering cheap factory-to-consumer goods, Temu provides access to a wide range of products, including fast fashion, and pushes users to share the app with friends in exchange for free products, which may account for some of its growth. However, the large majority of its new installs come from Temu’s marketing spend, it seems.
When TechCrunch covered Temu’s rise in November, the app had then seen a little more than 5 million installs in the U.S., according to data from app intelligence firm Sensor Tower, making the U.S. its largest market. Now, the firm says the app has seen 5 million U.S. installs this January alone, up 19% from 4.2 million in the prior 22 days from December 10 through December 31.
According to Sensor Tower estimates, Temu has managed to achieve a total of 19 million lifetime installs across the U.S. App Store and Google Play, more than 18 million of which came from the U.S.
The growth now sees Temu outpacing rival Shein in terms of daily installs. In October, Temu was averaging around 43,000 daily installs in the U.S., the firm said, while Shein averaged about 62,000. In November, Temu’s average daily installs grew to 185,000 while Shein’s climbed to 70,000 and last month, Temu averaged 187,000 installs while Shein saw about 62,000.
The shopping app’s fast rise recalls how the video entertainment platform TikTok grew to become the most downloaded app worldwide in 2021, after years of outsized growth. The video app topped 2 billion lifetime downloads by 2020, including sister app Douyin in China, Sensor Tower said. Combined, the TikTok apps have now reached 4.1 billion installs.
Like Temu, much of TikTok’s early growth was driven by marketing spend. The video app grew its footprint in the U.S. and abroad by heavily leveraging Facebook, Instagram, and Snapchat’s own ad platforms to acquire its customers. TikTok was famously said to have spent $1 billion on ads in 2018, even becoming Snap’s biggest advertiser that year, for instance.
By investing in user acquisition upfront, TikTok was able to gain a following which then improved its ability to personalize its For You feed with recommendations. Over time, this algorithm became very good at recognizing what videos would attract the most interest thanks to this investment, turning TikTok into one of the most addictive apps in terms of time spent. As of 2020, kids and teens began spending more time watching TikTok than they did on YouTube. And earlier this month, Insider Intelligence data indicated all TikTok users in the U.S. were now spending an average of nearly 1 hour per day on the app (55.8 minutes), compared with just 47.5 minutes on YouTube, including YouTube TV.
While Temu is nowhere near TikTok’s sky-high figures, it appears to be leveraging a similar growth strategy. The company is heavily investing in advertising to acquire users, which it uses to personalize the shopping experience. One of Temu’s key features, in fact, is its own sort of For You page that encourages users to browse trending items “Selected for You.” In addition to gamification elements, Temu also puts heavy emphasis on recommending shops and products on its home page, which is informed by its user data.
But the app’s growth doesn’t seem to be driven by social media. While the Temu hashtag (#temu) on TikTok is nearing 250 million views, that’s not really a remarkable number for an app as big as TikTok where something like #dogs has 120.5 billion views. (Or, for a more direct comparison, #shein has 48.3 billion views.) That suggests Temu’s rise isn’t necessarily powered by viral videos among Gen Z users or influencer marketing, but rather more traditional digital advertising.
According to Meta’s ad library, for instance, Temu has run some 8,800 ads across Meta’s various platforms just this month. The ads promote Temu’s sales and its extremely discounted items, like $5 necklaces, $4 shirts, and $13 shoes, among other deals. These ads appear to be working to boost Temu’s installs, allowing the app to maintain its No. 1 slot on the App Store’s “Top Free” charts, which are heavily influenced by the number of downloads and download velocity, among other things.
Of course, having a high number of downloads doesn’t necessarily mean Temu’s app will maintain a high number of monthly active users. Nor does it mean those users won’t churn out of the app after their initial curiosity has been abated. Still, Temu’s download growth saw it ranking as the No. 1 “Breakout” shopping app by downloads in the U.S. for 2022, according to data.ai’s year-end “State of Mobile” report. (Data.ai calculates “Breakout” apps in terms of year-over-year growth across iOS and Google Play.)
Because Temu’s growth is more recent, the app did not earn a position on the Top 10 apps in 2022 in either the U.S. or globally in terms of downloads, consumer spend, or monthly active users, on this report. Instead, most of those spots still went to social media apps, streamers, and dating apps like Bumble and Tinder. The only retailer to find a spot on these lists was Amazon, which was the No. 7 app worldwide by active users and the No. 8 most downloaded in the U.S.
Temu’s marketing investment may not pay off as well as TikTok’s did, though, as other discount shopping apps saw similar growth only to later fail as consumers found that, actually, $2 shirts and jeans were deals that were too good to be true. Wish famously fumbled as consumers grew frustrated with long delivery times, fake listings, missing orders, poor customer service, and other things consumers expect from online retail in the age of Amazon.
Temu today holds a 4.7-star rating on the U.S. App Store, but those ratings have become less trustworthy over the years due to the ease with which companies can get away with fake reviews. Dig into the reviews further and you’ll find similar complaints to Wish, including scammy listings, damaged and delayed deliveries, incorrect orders and lack of customer service. Without addressing these issues, Temu seems more likely to go the way of Wish, not TikTok, no matter what it spends.
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