By: Gerelyn Terzo
If these persistently low interest rates have got you down, you’re not alone. Big investors are fed up too. They are scouring the markets for the next big score and are increasingly turning their attention to fintech. Based on the market conditions, it is easy to see why.
One major bulge bracket firm is looking to stabilize its revenue by backing burgeoning startups, including those that operate in the fintech space. Meanwhile, a broker app that is known as Germany’s Robinhood just achieved a multi-billion-dollar valuation thanks in part to a repeat investment by Peter Thiel. Meanwhile, regulators across the pond are targeting e-money startups in the region, a development that has other jurisdictions watching closely. With no time to waste, let’s dive in.
Goldman Sachs has set its sights on investing in up-and-coming startups with its clients’ funds, such as family offices and endowments, through its growth investment arm, GS Growth. The firm’s maiden client fund, West Street Global Growth Partners, has attracted over $3 billion in investor capital to its coffers as of this month, which is poised to be directed toward rising startups in the fintech space, as well as a handful of other sectors.
GS Growth is eyeing growth equity targets or companies that are generating revenue and adding customers hand-over-fist but have no plans for a public listing anytime soon. Among the privately held companies that Goldman’s growth equity team has so far targeted are:
- Starling Bank, a U.K.-based challenger bank
- Swiggy, India’s mega online food-delivery platform: Separately, SoftBank is exploring as much as a $500 million investment in Swiggy, valuing the startup at roughly $5.5 billion.
- ComplyAdvantage, a data-tech company that operates in the reg-tech space
Goldman counts fintech among its past successes after its venture arm presciently backed Japan’s Plaid Inc, which recently achieved a whopping $13.4 billion valuation.
Funding is happening fast and furiously in the fintech space. Below is a roundup of some of the most notable deals in the past week.
- Former Merrill Lynch banker Christian Hecker is now at the helm of one of Germany’s largest fintech plays based on valuation. Trade Republic Bank, a broker app that has earned the reputation as Germany’s Robinhood, completed a $900 million funding round that attached a valuation of over $5 billion to the startup. Participants in the round included the likes of Sequoia, Peter Thiel’s Founders Fund, TCV and Thrive Capital.
- San Francisco-based blockchain mortgage startup Figure Technologies closed a $200 million Series D round that resulted in a $3.2 billion valuation for the company. If Figure Tech doesn’t ring a bell, the CEO’s name is sure to do so. Mike Cagney, the disgraced former chief executive of lending startup SoFi, is now the top dog at Figure. Cagney is hoping to have better luck in the blockchain space, where the company facilitates loans, mortgages, equity management, banking and payment services via its native Provenance network.
- New York-based Sterling Bancorp revealed that it is backing data-fueled credit marketplace fintech Finitive. Finitive gives big investors direct access to private credit transactions, matching them with borrowers in a process that can otherwise be messy. Approximately 90% of Sterling’s loan portfolio is exposed to commercial lending
Head in the Clouds
A couple of China’s leading fintech platforms are wrestling in the cloud. Let’s start with Alibaba, whose cloud computing segment, which has been a standout year after year, may have finally met its match. While the March quarter’s cloud computing revenue increased by a double-digit percentage — 37% year-over-year — that growth paled in comparison to past results. Alibaba suffered a blow when China’s Bytedance, which owns the popular TikTok app, ended a contract to store its international data on the fintech giant’s cloud, seemingly in an attempt to go it alone.
Meanwhile, the cloud was a bright spot for China’s gaming giant Tencent, which owns messaging app WeChat. Tencent’s fintech and business services arm, under which the cloud business operates, saw revenues climb 47% higher in the quarter ended in March, fueled in part by car site Bitauto, which Tencent recently added to its portfolio of holdings.
Shot Heard Round the World
The U.K.’s securities watchdog has placed a target on the back of fintech firms, saying that they do an inadequate job likening themselves to their banking peers without signaling to customers the risks involved in their offerings.
The Financial Conduct Authority (FCA) in a letter has given over 300 fintech companies six weeks to contact their customers and emphasize the risks involved in storing funds on a platform that does not have the backing of the Financial Services Compensation Scheme. Fintech firms should also be careful not to mislead customers about the level of regulation their offerings are subject to. The regulatory push is an indication of the influence that fintechs are having in the financial services industry and is a sign of the times in the wake of the Wirecard scandal that rocked payments platform Wirecard in 2020.
Boston-based fintech startup Circle has been through an evolution since it was founded in 2013. The company started as a social payments platform but has since shifted its focus to digital currencies and is behind its own stablecoin USD Coin (USDC). Most recently, the fintech brought new chief compliance and risk officer Mandeep Walia on board to tighten the compliance ship, so to speak, as regulators continue to target the digital currency space. Walia replaces Mark duBose and is a seasoned digital asset compliance executive.
The timing is no coincidence, as Circle looks to grow in the U.S. as well as internationally and works alongside policymakers as they seek to gain a handle on the fast-moving crypto space. Circle and its digital asset trading arm Poloniex are the target of an IRS summons to collect more data on high-stakes crypto traders who transacted more than $20K in digital currencies in the half-decade leading up to 2020. Circle isn’t in any trouble, but investors who may be trying to hide their crypto profits from Uncle Sam sure could be.