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
CB Insights released its global State of Venture report last week, while PitchBook issued its own U.S.-focused venture report. Of course, we couldn’t wait to dig in to the findings of both.
On a high level, it’s no surprise that funding flowing into fintech startups was down both globally and in the U.S. in the second quarter of 2022. And it wasn’t only funding. Everything was down. New unicorn births, M&As, IPOs.
But the results are not as gloom and doom as they may seem at first glance.
For one, fintech continues to account for a significant share of global funding. In 2021, an estimated 21% of all venture deals were fintech. In the second quarter of 2022, according to CB Insights, investment into fintech startups wasn’t too far behind that in the second quarter of 2022. That’s not far off from last year and signals that while, yes, fewer dollars are being invested generally, fintech is still attracting serious investor interest.
Another thing. While it’s clear that this year will be far more muted for fintech investment globally and in the United States, it's still on track to crush 2020’s results. In summary, as Alex wrote: “We’re seeing a comedown, but not a whole-cloth retreat; things are still more active in capital terms in the fintech world now than they were two years ago.”
Lastly, a few weeks back I took a snippet of time and wrote that investors seemed to be favoring later-stage deals. Based on the results of the CB Insights report, that was actually counter to what took place in all of the second quarter.
I can tell you from a reporter’s perspective that we’re scaling back considerably on covering one-off funding rounds and new fund closes. As always, there are just far too many of them for us to cover them all and actually do a good, comprehensive job. We also have come to question just how much value there is in this practice. While new raises and fund closes remain significant news events, most of us here at TC are being more selective than ever. It’s more crucial, in our view, to connect the dots for our readers and generally be available to hop on important breaking news than to agree to 10 embargoes a week. So when you pitch, be sure to point out what makes your company/news stand out. Why is it unique? Why would our readers care? Is it bucking a trend? I could go on and on.
So while we’re still getting pitched (a whole bunch), we more than ever are reviewing pitches with a bigger-picture lens and hope you’ll do the same when you’re doing the pitching.
The corporate spend category continues to evolve. Last week, I talked with Airbase founder and CEO Thejo Kote about the fact that the company just secured $150 million in debt financing led by Goldman Sachs. Companies close credit lines all the time, but the reasons behind the moves are often more interesting than the financings in and of themselves.
Via Zoom interview, Kote reiterated that generating SaaS revenue for the company remains its priority. But, he said, as the company has served midmarket and early-enterprise companies over the years, it has offered them a pre-funded card that they could use to make purchases. In recent months, though, Airbase has come to realize that many could benefit from the ability to make purchases with “30 days of float,” the executive said.
“We started this process of offering a charge card model because as we continue to grow and scale revenue and grow our customer base more aggressively, we found that there are definitely customers out there who can't afford to give up on the 30-day float that a card provides them either because for cash flow reasons or because of philosophical reasons,” Kote said.
Notably, competitor Brex — which started out offering a credit card to startups — earlier this year announced “a big push” both into software and enterprise. Now it seems that Airbase is making its own big push — into the corporate card space.
“Now we do offer a card line and we have the underwriting ability. Over the past six to eight months we were doing it off our own balance sheet,” Kote told TechCrunch. “As that product of ours continues to scale, we obviously don't want to use our equity dollars to underwrite our customers and provide that float of capital.” Hence its recent debt financing.
Kote emphasized that he does not believe that the move puts Airbase into the lending category.
“We are not a lender. We will never be a lender,” he said. “We are taking on more risk but we're doing a lot of risk management around that and we have a risk team that we continue to build out.”
In valuation news, Klarna finally confirmed what we already knew — that it had raised more money at a significantly lower valuation. That prompted Alex to ask if that new valuation makes Affirm “cheap"? Meanwhile, Stripe — another fintech with European roots — saw the internal value of its shares slashed by 28%, sources told the Wall Street Journal and as reported by TechCrunch. The Journal reported that the valuation cut comes from a 409A price change, determined by an independent party, and that it impacts the value of Stripe’s common shares. For its part, Stripe declined to comment.
Speaking of payments giants, Mastercard announced an expansion of its partner network to include open banking, with the goal of fast-tracking open banking adoption for fintechs, merchants and lenders. Its goal, a spokesperson told me via email, is to “give their customers easy access to qualified fintech partners that can fast track open banking solutions for payments and lending.”
In other fintech news this week:
Seen on TechCrunch
Fundings and M&A
Seen on TechCrunch
Now for a non-fintech-related PSA: For all you robotics tech lovers, TechCrunch has created a great lineup of sessions for #TechCrunchRobotics! And BONUS, this is a free event. Secure your spot today. Speaking of events, I’m so excited to attend TechCrunch Disrupt this October and meet not only my colleagues, but also many of our loyal readers!
That’s it for this Sunday. Wishing you all a good week and nothing but good vibes. Xoxo, Mary Ann