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Elon Musk details his vision for a Twitter payments system • ZebethMedia

By zebethcontrolPosted on Posted in Apps, Elon Musk, Fintech, payments, Social, TwitterNo Comments on Elon Musk details his vision for a Twitter payments system • ZebethMedia

Elon Musk detailed his vision for Twitter’s plan to enter the payments market during a live-streamed meeting with Twitter advertisers, hosted on Twitter Spaces on Wednesday. The new Twitter owner suggested that, in the future, users would be able to send money to others on the platform, extract their funds to authenticated bank accounts, and later, perhaps, be offered a high-yield money market account to encourage them to move their cash to Twitter. The new remarks followed a report this morning by The New York Times which confirmed Twitter last week had filed registration paperwork that would allow it to process payments. The report cited Twitter’s filing with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), noting that a business would need to register before it could conduct money transfers, exchange currency or cash checks. In today’s meeting, Musk explained how paid verification, which Twitter is rolling out now with its revamped Twitter Blue subscription, as well as support for a creator ecosystem could pave the way for a payments system on its platform. He stressed that, initially, Twitter would need to make fundamental technology architecture changes in order to better support video. The company was recently reported to be working on a “Paywalled Video” feature that would allow creators to charge for access to their content. This suggests Twitter could be moving into a space where it may try to compete more directly with various social media video providers, like TikTok, Instagram Reels, YouTube Shorts, and others. The Washington Post saw mockups of this concept where a tweet with a video could be unlocked for as little as $1.00. It said creators may be able to choose from preset prices, like $1, $2, $5, or $10 when paywalled videos were launched. As a result, creators would end up with a cash balance as they began to monetize their content. In addition, Musk noted that Twitter’s paid verification program would help in its plan for payments because anyone who subscribed to Twitter Blue would have already been verified by the “conventional payment system.” That is, Twitter Blue subscribers have to sign up using a credit or debit card and have their payments processed through the app stores’ in-app purchase system, which helps to combat fraud. Musk then explained how this payments system could scale saying that, once users gained a cash balance, Twitter could prompt them to move that money on its platform. It could even make a small donation to users’ accounts to get them started.  “Now we can say, okay, you’ve got a balance on your account. Do you want to send money to someone else within Twitter? And maybe we pre-populate their account…and say, okay, we’re gonna give you 10 bucks. And you can send it anywhere within Twitter,” Musk said. Later, the user could move their money out of Twitter by transferring it to an authenticated bank account, he added. In the longer term, however, Musk appeared to be toying with the idea of establishing bank accounts on Twitter’s platform that would pay a high-interest rate to attract users. This could become a competitor, perhaps, to Apple’s recently launched Savings Account for its cardholders, various fintechs or other payment providers, like PayPal and Venmo, which encourage their users to retain cash balances within their own ecosystems. Explained Musk, “the next step would be this offer for an extremely compelling money market account where you get an extremely high yield on your balance.” If such a system existed, he believed people would move cash to Twitter. “And then add debit cards, checks, and whatnot and…just basically make the system as useful as possible. And the more useful and entertaining it is, the more people will use it,” he said. The move to enter the payments business also ties to Musk’s larger plan to turn the social media platform into an “everything app” or “super app” called “X.” While that plan today is still fairly vague, the general sense is that Musk aims to combine payments, social networking, entertainment and other things into one experience, similar to China’s WeChat (though that plan could be misguided.) Musk has experience in payments, of course, as he founded an early digital payments company X.com. It’s not surprising that he would try again, given the opportunity Twitter presents. His ideas about Twitter payments, however, may not have been good fodder for a conversation with advertisers who are already worried about Twitter’s long-term commitment to their goals, given the company’s move into subscriptions which signals a desire to reduce reliance on ad dollars. Musk tried to assuage these fears by saying that Twitter was thinking about protecting advertisers’ brand safety in the longer term, not just about its ability to drive short-term sales.

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Ping wants to simplify global payments while helping Latin Americans embrace crypto • ZebethMedia

By zebethcontrolPosted on Posted in bank transfers, Fintech, latin america, ping, VentureNo Comments on Ping wants to simplify global payments while helping Latin Americans embrace crypto • ZebethMedia

If the global pandemic taught us anything, it’s that you could work from anywhere as long as you had a computer and good wireless signal. However, getting paid when you live, say, in Argentina but work for a company on the other side of the world is not so simple. Many fintech startups have taken on this challenge, including Ping. The company was started in 2021 to solve payment challenges in Latin America, where about 70% of the population does not have a traditional bank account. Today, it is a digital payment tool, available on Android, iOS and desktop, facilitating international payments for remote workers, contractors and freelancers in both their local currency and in fiat and cryptocurrency. Ping users create a free account in U.S. dollars to receive bank transfers in either their local currency or crypto, including Bitcoin, Ethereum and Litecoin. It also provides an invoicing system so that freelancers and contractors can send invoices to their employers. The company makes money from fees from its professional tier. The company was founded by Argentine natives Pablo Orlando, Mary Saracco and her brother, Jack Saracco. The team has a heavy background in both cryptocurrency and finance, having worked previously at organizations such as UBS Investment Bank, World Bank, Deloitte and the Stock Exchange of Buenos Aires. When more Latin Americans were working from home following the pandemic, Mary Saracco said the company realized how important it was to have a stable way to get paid amid inclusionary countries — and unstable economies made earning in U.S. dollars “extremely appealing.” “Then we said, ‘okay, there are clearly a lot of people working remotely in Latin America looking for higher paying jobs in dollars. Why don’t we help people?’” she told ZebethMedia. Ping is now being used in 16 countries. That’s also when Jack Saracco’s background in crypto came into play. He led the building of the company on the rails of Latamex, Latin America’s largest fiat-to-crypto gateway that provides what he told ZebethMedia is a safe option for users to buy and sell crypto from exchanges like Binance. The possibility of opening a U.S. bank account or a crypto account and receiving a payment in U.S. dollars while also seamlessly swapping from one to another and making withdrawals in any country was “certainly an interesting niche market that’s growing in the region,” Jack Saracco added. That combination of payment from anywhere and the ability to operate in crypto seems to have caught on early for Ping. The platform launched four months ago, and within its first month of operations, the company generated over $1 million in payment volume, CEO Pablo Orlando told ZebethMedia. He also said that it’s too early to discuss much of the company’s traction but did say that users are coming back monthly, and in some cases within 15 days to use Ping again. The company is now also working off of $15 million in seed funding from a group of investors, including Y Combinator, Race Capital, BlockTower, Danhua Capital, Signum Capital and Goat Capital. The funds will be deployed into team expansion, including hires for marketing and sales, and into product development in what will become a premium feature that will be a monthly subscription. Mary Saracco expects that to launch in March.  

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Kuda takes digital banking play to the U.K. with its remittance product • ZebethMedia

By zebethcontrolPosted on Posted in Fintech, Kuda, StartupsNo Comments on Kuda takes digital banking play to the U.K. with its remittance product • ZebethMedia

Kuda, the London-based and Nigerian-operating startup taking on incumbents in the country with a mobile-first and personalized set of banking services, is expanding to the U.K. by offering a remittance product to Nigerians in the diaspora.  The digital bank has seen some success since launching in Nigeria in 2019. Kuda claims to have up to 5 million users, more than thrice the number it had last August during its $55 million Series B round, money it raised to enter into other African countries like Ghana and Uganda this year. From an administrative point of view, Kuda’s U.K. move is straightforward. The startup, founded by Babs Ogundeyi and Musty Mustapha, is a U.K.-based fintech that offers financial services to Africans (starting with Nigerians) within and outside Africa. As such, services provided to Nigerian users are done via its subsidiary, Kuda MFB Limited. On the other hand, Kuda EMI Limited is the other subsidiary in charge of the newly launched services — one of which is remittance — to Nigerians in the U.K. Second, there’s business sense to it. Nigeria is sub-Saharan’s largest inbound remittance market and among the top 10 largest globally. The remittance business is so massive that it accounts for nearly 4% of the country’s GDP as of 2020. Yet, sending money from places like the U.S. and U.K. to Nigeria remains invariably expensive. For instance, it costs the sender 3.7% of the sent amount to send money from the U.K. — which is the second largest sender of remittances to Nigeria, behind the U.S., and is estimated to transmit £3 billion yearly — to Nigeria, according to data. And while international money transfer operators still control the lion’s share of the transactions in the U.K.-Nigeria corridor, African consumer fintechs are holding down their own via the fees they charge, most of which are commissions of transactions. Some include Grey Finance, PayDay, Lemonade Finance and Kyshi.  “I don’t necessarily think it’s crowded because obviously, there are still a lot of challenges in remitting money to Africa, especially to Nigeria,” said the chief executive officer Ogundeyi when asked about Kuda’s move to a relatively loaded money transfer space. “But for us, it’s not just a remittance play. There’s a user experience, convenience and price factor involved.” Kuda’s approach is different. The fintech says it’s entering the U.K. market charging a flat fee of £3 with a transfer limit of £10,000. And Kuda, which has raised more than $90 million from investors such as Peter Thiel’s Valar Ventures and Target Global, expects its transaction range to fall between £250 to £500, Ogundeyi noted. In addition to remittance, Kuda intends to provide direct debits and local transfers to Nigerians in the U.K. The plan suggests that Kuda wants to take a small piece of other neobanks’ cakes, such as Revolut, Monzo and Wise. These platforms have built sticky features that have yielded strong adoption across various demographics, including Nigerians, the niche population Kuda is targeting with its launch; therefore, it remains to be seen if remittance, the low-hanging fruit, is sufficient to derive long-term value and if it has enough pull to get customers to use other services frequently.  Unlike its remittance product, which might have been built in-house, Kuda, like many neobanks, will rely on a third party, usually a banking-as-a-service platform, to provide these financial services. The platform in question for Kuda is Modulr, an embedded payments platform for digital businesses to offer a mobile wallet, virtual and physical cards, local U.K. transfers and direct debits. “Ultimately, Kuda is building a one-stop shop for Africans, including other services outside of remittance. And our plan is not just for Africa, but for Africans everywhere,” said Ogundeyi of the expansion. “The U.K. is the first of the ‘outside of Africa’ destinations. We plan to be in other African countries and expand the remittance services to customers there and the diaspora market.”

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Grab Financial leader Reuben Lai to step down • ZebethMedia

By zebethcontrolPosted on Posted in Fintech, grab, Grab Financial, GXS, Reuben Lai, Southeast AsiaNo Comments on Grab Financial leader Reuben Lai to step down • ZebethMedia

Reuben Lai, senior managing director of Grab Financial Group, is leaving the position at the end of this year. The news was first reported by Tech In Asia. Lai oversees Grab Financial Group and is also executive director and head of regional strategy at GXS Bank, the digital bank joint venture between Grab Holdings and telecom Singtel. In a statement to ZebethMedia, GXS Bank said, “GXS Bank (GXS)’s executive director and Head of Regional Strategy, Mr Reuben Lai, has decided to leave the Bank at the end of 2022. Along with his resignation as an executive director, Reuben will be stepping down from his appointment as a director in GXS’ board in Singapore. He remains a director on the Board of the digital bank in Malaysia.” Launched by Grab in 2018, Grab Financial Group has been instrumental in Grab’s journey from a ride-hailing service to super app. Its digital wallet, GrabPay, is now the top digital wallet in Southeast Asia. During his tenure at Grab Financial Group and GXS Bank, Lai focused on financial inclusion, telling Bloomberg in 2021 that “we know that because of many of our drivers, our merchants come to us and tell us that they want to open a bank account, but they’re not able to. They want to access a working capital loan, but they’re not able to. What we want to do at Grab Financial Group is to make financial services more accessible and more convenient in a very simple and intuitive way to as many consumers as possible.” GXS Bank launched in August after Grab and Singtel were granted a digital full bank license from the Monetary Authority of Singapore. It also holds a banking license in Malaysia.

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Former Tink employees launch Atlar, a payment automation startup • ZebethMedia

By zebethcontrolPosted on Posted in api, Atlar, bank payment, Fintech, StartupsNo Comments on Former Tink employees launch Atlar, a payment automation startup • ZebethMedia

Stockholm-based startup Atlar raised a $5 million (€5 million) seed round led by Index Ventures. The company has been working on an application programming interface (API) that facilitates bank-to-bank payments for European businesses. In addtion to Index Ventures, La Famiglia VC, Cocoa and various business angels also participated in the round, such as Revolut CFO Mikko Salovaara, former EVP of global sales at Adyen Thijn Lamers and N26 CFO Jan Kemper. While European consumers are already quite familiar with open banking and payment initiation, a lot of B2B transfers are still processed manually. Business banking hasn’t experienced the same level of innovation when it comes to payments. And yet, corporate banks already offer ways to initiate payments without having to connect to a web portal and upload a spreadsheet. But banks don’t necessarily run modern REST APIs. They expect a text file formatted in a very specific way on an SFTP server. If you have a development team, they could build a custom integration. But many companies simply don’t have the resources to maintain these connections. They would rather pay a partner to handle all the technical details. Atlar provides a modern API that hides all the complexities involved with bank connections. Once a company uses Atlar, it can trigger transfers, reconcile transactions and process direct debits through Atlar’s API directly. In particular, Atlar can be used for payouts, insurance premiums, deposits and loan payouts. Companies that operate across multiple European countries likely have multiple bank accounts. That’s why automating payments could be a nice upgrade for those businesses. “Accepting payments as a business is pretty painless now, but initiating them with your bank is still agonisingly slow and manual,” Atlar co-founder and CEO Joel Nordström said in a statement. “This is why Atlar is on a journey to becoming the operating system for bank-based payments. By creating a new category, we hope to unleash a wave of innovation for our clients which will ultimately benefit European consumers and businesses.” In addition to Joel Nordström, Joel Wägmark and Johannes Elgh are the two other co-founders. They were all working at Tink, the open banking company that was acquired by Visa for $2.2 billion. Atlar competes with Numeral, a French startup that I covered earlier this year. So far, Atlar focuses on the Nordics, Germany, Austria and Switzerland. And today’s funding round will be helpful when it comes to European expansion.

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Yassir pulls in $150M for its super app, led by Mary Meeker’s BOND • ZebethMedia

By zebethcontrolPosted on Posted in Bond, Bond Capital, Fintech, Startups, Transportation, YassirNo Comments on Yassir pulls in $150M for its super app, led by Mary Meeker’s BOND • ZebethMedia

Yassir, an African super app platform that offers on-demand services such as ride-hailing, food and grocery delivery, and payments, has raised $150 million in Series B funding, five times what it raised in its previous priced round last November.  The investment was led by BOND, the growth-stage firm that Mary Meeker spun out of Kleiner Perkins in 2018. Other investors in the growth round include DN Capital, Dorsal Capital, Quiet Capital, Stanford Alumni Ventures, and Y Combinator via its Continuity Fund, among other strategic investors.  The African startup, first launched in Algeria, has now raised $193.25 million since its inception in 2017. While its valuation remains undisclosed, Yassir considers itself the most valuable startup in North Africa and one of the highest-valued startups in Africa and the Middle East, where it plans to expand in the coming months. When CEO Noureddine Tayebi started Yassir, the plan was to build a super app that included services people — in the French-speaking Maghreb region consisting of Algeria, Morocco and Tunisia — had little or no access to on one platform. So far, its execution has been spot on. Not only is the company offering ride-hailing and food and grocery delivery services (via Yassir Express) in 45 cities across six countries, but this report also says that three out of five on-demand activities in Algeria, its first market, are made via the platform.  This calculated growth has moved Yassir closer to its overarching plan to provide banking and payments. According to Tayebi, providing on-demand services in food and transportation was the entry point that allowed Yassir to gain users’ trust — which he argues is one reason most Africans are unbanked — for this endeavor. For perspective: Morocco, one of Yassir’s main markets, over 65% of Morocco’s population does not own a bank account, and according to a 2018 McKinsey report on growth and innovation in African retail banking, 57% of the continent’s population lack any form of a bank account. Yet, the report also highlights that 40% of Africa’s banked population prefers digital channels for transactions. Therefore, Yassir’s thesis is that providing consumers with a mobile banking solution as part of a broader suite of services will meet an essential need in the African market, where 50% of the population can access the internet.  “Our business model from day one was a super add model and getting into payments. When we first started, the observation was that most people were unbanked, and the number one reason is that people don’t trust the banking systems here for various reasons,” the chief executive told ZebethMedia in an interview. “We thought we could provide on-demand services that solve immediate needs around where people spent their money. We knew if we executed well, we could have a large user base that subconsciously trusts us, which we felt was pertinent to offering payment services.” Yassir’s financial services serve its multi-sided marketplace ecosystem, which includes 8 million users (over 2.5x from last year) and 100,000 partners consisting of drivers, couriers, merchants, suppliers and wholesalers. Yassir is leveraging this network — which also includes a B2B e-commerce retail part that connects fast-moving consumer goods (FMCG) suppliers with merchants — for its payments play assembled on top wallet provision and deployment of drivers and couriers as money agents.  The company’s performance has been right on the money–not counting contributions from its recently launched financial services. In the interview, Tayebi mentioned that the all-in-one ecosystem app, which provides its customers with a single-point solution for managing their day-to-day activities, from traveling to work to ordering groceries and meals, has surpassed $50 million in GMV and $10 million in revenue run rates since launch.  Image Credits: Yassir What’s next for the YC-backed platform with components from Uber, DoorDash, Udaan and PayPal? “First, we want to create a local tech startup success model which will be emulated by others and more so Yassir team members,” Tayebi answered. “Second, we want to empower the local talent and, more importantly, the technical talent which often leaves the region, mainly to Europe, to pursue further studies or find jobs,” added the chief executive, who, after earning a Ph.D. at Stanford and spending 15 years in Silicon Valley working at various companies, returned to Algeria in 2016 to get involved in the country’s nascent tech scene.  As such, Tayebi, who founded Yassir with Mahdi Yettou, says the startup intends to invest heavily in its engineering and product teams by tripling their size, at the least. He also underscored how the funding will assist Yassir — which has offices in Algeria, Canada, France, Morocco and Tunisia — in consolidating its growth, rolling out new services in the existing markets, and expanding into new geographies across Africa and the Middle East directly or via acquisitions. “Although we like to consider ourselves as leaders in the Maghreb region, we’re just scratching the surface, and there’s still a lot of room to grow,” expressed the Silicon-Valley-based Algerian entrepreneur while noting that Yassir isn’t fazed by Uber and Bolt’s duopoly in the ride-hailing category across some of the markets it plans to expand into. His confidence stems from Yassir’s dominance in its main markets where the Uber-subsidiary Careem has struggled.  Yassir is one of five Africa-focused startups to have closed a mega-round — that is, investment rounds greater than $100 million — this year. The self-described most valuable North African startup joins Flutterwave, Wasoko, Instadeep, and Sun King on the shortlist, which as of last year, included ten startups. This reduced number is a stark example of how quickly markets change and reflects ongoing global macroeconomic challenges that have seen startups lay off employees, slash valuations, or go bust. But while startups have generally faced a stricter fundraising environment this year, Tayebi claims it wasn’t the case with Yassir.  “In our first few years, we had a hard time raising money because of the region we operate in, despite us executing well,” he said. “That pushed us to be frugal and conscious of unit

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The fintech layoffs just keep on coming • ZebethMedia

By zebethcontrolPosted on Posted in Fintech, Layoffs, Startups, The InterchangeNo Comments on The fintech layoffs just keep on coming • ZebethMedia

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 Wow, I take off one week and come back to all hell breaking loose in the fintech world. Sadly, it felt like we got news of layoff after layoff. I’ll attempt to round up as many of them as I can here: Chime confirmed that it is letting go of 12% of its employees. This equals about 160 people. According to an internal memo obtained by ZebethMedia, Chime co-founder Chris Britt said that the move was one of many that would help the company thrive “regardless of market conditions.” In the memo, Britt said that he and co-founder Ryan King are recalibrating marketing spend, decreasing the number of contractors, adjusting workspace needs and renegotiating vendor contractors. Opendoor announced it was letting go of 18% of its staff. This is around 500 people. Opendoor co-founder and CEO Eric Wu said his company, a publicly traded real estate fintech, was navigating “one of the most challenging real estate markets in 40 years.” Chargebee has laid off about 10% of its staff. As reported by Jagmeet on November 2, “Chargebee, backed by marquee investors including Tiger Global and Sequoia Capital India, has laid off about 10% of its staff in a ‘reorganization’ effort due to ongoing global macroeconomic challenges and growing operational debt. The Chennai and San Francisco–headquartered startup, which offers billing, subscription, revenue and compliance management solutions, confirmed to ZebethMedia that the update impacted 142 employees.” Stripe lays off 14% of its staff. As reported by Paul, “Stripe has announced that it’s laying off 14% of its workers, impacting around 1,120 of the fintech giant’s 8,000 workforce.” In a memo published online, Stripe CEO Patrick Collison conveyed a familiar narrative in terms of the reasons behind the latest cutbacks: a major hiring spree spurred by the world’s pandemic-driven surge toward e-commerce, a significant growth period and then an economic downturn ridden with inflation, higher interest rates and other macroeconomic challenges. Danish startup Pleo may lay off 15% of its workers. Jeppe Rindom, co-founder and CEO of Pleo — which less than one year ago raised $200 million at a $4.7 billion valuation — revealed that the company’s new strategy will impact 15% of its roles. He added that “up to 150 of our colleagues may have to leave.” Pleo is a developer of expense management tools aimed at SMBs to let them issue company cards and better manage how employees spend money. Credit Karma, now a subsidiary of Intuit, has “decided to pause almost all hiring.” This is according to an internal email sent to employees by chief people officer Colleen McCreary. McCreary referenced “revenue challenges due to the uncertain environment.” This was reiterated in Intuit’s fourth quarter earnings call, during which the company shared on November 1 that “all Credit Karma verticals have been negatively impacted by macro uncertainty. Credit Karma experienced further deterioration in these verticals during the last few weeks of the first quarter.” Remote online notarization services provider Notarize cuts its team by 60 people. A spokesperson told me via email that “the reorganization impacted nearly all teams and the decision was in service to the larger strategy we have been enacting at Notarize, and will enable us to move faster to best serve our customers.” The spokesperson added that in September, one small real estate–focused team was laid off in response to both its strategy shift and “the drastic drop in demand from the specific customers that they served.” The recent layoffs follow a larger layoff in June that impacted 110 people. Prior to that reduction, Notarize had about 440 employees. It currently employs 250 people across the United States. I wrote this newsletter on November 3 because I’m leaving on a trip to celebrate my 20th wedding anniversary, so it’s possible that more layoffs took place between then and now. 🙁 What this means for the broader fintech world is not yet clear, but when well-funded companies such as Chime, Stripe and Pleo are cutting staff, it is no doubt sobering for all the players — small or large — in the space. Special thanks to TC senior reporter and very nice guy Kyle Wiggers for helping me draft the Weekly News and Fundings and M&A sections below so I could get offline and pack for my trip! Weekly News Jeeves, the fintech startup that recently raised $180 million at a $2.1 billion valuation, told ZebethMedia via email that it has launched a service called Jeeves Pay that it’s billing as a “credit-backed business payments solution” for enterprise customers. At a high level, Jeeves Pay lets customers use their existing credit line to send wires or pay vendors, ostensibly solving the problem of having to rely on cash or revenues to fund local and cross-border business and vendor payments. Jeeves Pay is available now to all Jeeves customers “where permitted by applicable local laws and regulations,” the company says. Brex sees startups as one of the key avenues to growth in the corporate card and spend management market. To that end, the company on Wednesday announced a partnership with Techstars to extend Brex services to companies within the accelerator, following similar tie-ups with Y Combinator and AngelList. For the duration of the accelerator, Techstars participants will get a Brex platform support team, access to exclusive Brex events and free use of Brex’s Pry financial forecasting

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SaaS and alts • ZebethMedia

By zebethcontrolPosted on Posted in alternative assets, Enterprise, Fintech, SaaS, Startups, TechCrunch Exchange newsletter, The ExchangeNo Comments on SaaS and alts • ZebethMedia

Welcome to The ZebethMedia Exchange, a weekly startups-and-markets newsletter. It’s inspired by the daily ZebethMedia+ column where it gets its name. Want it in your inbox every Saturday? Sign up here. As much as I like spotting new trends, it is just as important to get confirmation on previous predictions we made or heard. This week brought us some fodder in that regard, on two sectors that are pretty high on my radar: SaaS and alts. Let’s explore.  — Anna Shrinking SaaS multiples, hard times for IPOs Alex and I spent quite a bit of time this week diving into Battery Ventures’ “State of the OpenCloud 2022” report. It brought some forward-looking data to our attention — for instance, on cloud adoption — but also confirmed something impossible to ignore: That SaaS multiples — enterprise value compared to revenue projections — are shrinking. “The median forward multiple for SaaS companies has fallen from about 16x forward revenues to roughly 6x today,” Battery general partner Dharmesh Thakker told us. Multiples haven’t only shrunk, but they have also range-compressed, with fewer rewards for the fastest-growing companies compared to slower-growing ones. There are many factors at play, but the gist of it is that profitability seems to matter again to the markets. As a result of that, we’re seeing the revenge of some old rules. “Adjusted for growth,” Thakker said, “companies today that show efficient growth as implied by the Rule of 40 (i.e., companies with a growth rate + free cash flow margin greater than or equal to 40) are trading at a premium to those that are growing without regard to profitability.” Note that it’s not either growth or profitability: It has to be both, and the bar to please investors seems to be getting higher and higher. A more demanding market is a worrying picture for the many unicorns waiting to IPO, as well as for their peers who already went public but struggle to maintain their market cap. Let’s also spare a thought for Alex, who may not get his hands on another juicy S-1 before Q2 2023.

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VCs decipher the recent fintech layoffs — and why they’re happening now • ZebethMedia

By zebethcontrolPosted on Posted in Chime, EC Fintech, EC venture capital, Fintech, Layoffs, startup valuations, Startups, stripe, tech layoffsNo Comments on VCs decipher the recent fintech layoffs — and why they’re happening now • ZebethMedia

Many big companies in the fintech world cut jobs in the past month. And yet Stripe’s announcement it would lay off 14% of its workforce still made a splash, proving that unicorns and decacorns are not immune to the challenging economic and fundraising conditions. The Stripe news closely follows Chime confirming this week that 12% of its employees would be laid off and Brex revealing last month that it was cutting 11% of its workforce. So what the heck is going on here? Well, according to Spiros Margaris, a fintech venture capitalist and founder of Margaris Ventures, the current layoffs by some of these larger fintech companies were “caused by the challenging geopolitical market environment and inflationary pressures. It affects the whole fintech startup industry — and globally all industries — since the prominent players have a strategic ripple effect on the smaller players.” “Laying off good employees endangers their strategy to succeed in the grand vision they initially sold to the VC.” Spiros Margaris, founder of Margaris Ventures Cameron Peake, a partner at Restive Ventures who recently invested in AiPrise, concurred, noting via email that much of what we are seeing today “were the dynamics we saw play out last year,” including all of the “large funding rounds, sunny market projections and a belief that companies needed more people to fuel their growth.” What resulted was “a lack of discipline around company fundamentals,” she added. While the frenzy was dissipating, it was then that companies “realized they were not only ahead of their skis but that they needed to cut back in order to focus more on profitability,” she said.

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