While crowdfunding is a great example of the growing democratization of capital formation online, many of the top campaigns turn to professionals for help running their campaigns. One of these professionals, Zach Smith, founded a firm to do exactly that. Funded Today has helped over 150 start-ups achieve success. In one example, with the help of Funded Today, BauBax raised $9.1 million to launch its travel jacket, making it the most funded clothing project in the history of crowdfunding and the 4th most successful Kickstarter project of all time.
Zach Smith, co-founder of Funded Today joins Tradestreaming for an exclusive interview.
Why would crowdfunding campaigns turn to an agency? Can you crowdfund on your own?
Zach Smith, Funded Today
You can crowdfund on your own, but any campaign needs some marketing in place, and unless you’re an expert in PR and paid media, you’re leaving a lot of money on the table. With a campaign that has a good product and does no marketing, Funded Today increases pledges by 1000%.
For example, if a campaign is averaging $500 to $2,000 per day, we could take them to $20,000 per day. Magbelt is an example of one of our clients. We increased pledges by 10,000%. Even if a client is running a successful crowdfunding campaign, we can still reach more people than anyone else and drive additional sales because we’re experts in paid media on multiple channels. We can reach over 2 billion people by honing in on likely buyers. We will always augment whatever a client is already doing.
Has crowdfunding gotten more competitive — if so, how?
It used to be that you if you had a good product, you could put it on Kickstarter and reach out to press and they would cover it. Or, if a company had a good product, they would sell X many units per day and stay within the top 5 on Kickstarter (essentially, you’d stay within the top 5 on Kickstarter and continue to generate more sales because you’re in that popular category).
Now, the crowdfunding market is pretty saturated, and it’s not as easy to be a success. With that said, if you have a successful campaign, the market is much bigger, so instead of having a $250K campaign, it might result in a $2.5M campaign.
What are some of the tools in your toolbox that help you be successful for your clients?
We have worked on over 300 campaigns, so we have audience demographics that we use in our social media marketing that we can utilize to hone in on markets that work well and convert well. We can also scale a campaign with just two weeks or four weeks, whereas most people wouldn’t be able to scale that quickly. And, we have credit that we can leverage, so if there’s a campaign that we know will have a good ROI we can spend half a million dollars to front it.
Essentially, we are experts in paid media because the audience for a campaign is the most important. And finally, we know how to reach out to media and generate publicity for our clients. In fact, just this week, we became the first crowdfunding agency to ever represent clients in the top two most popular campaigns on Kickstarter (Xpand Lacing System and UsBidi).
What components are necessary for a successful crowdfunding campaign?
We have something we call the Crowdfunding Success Matrix : there are 4 quadrants that a campaign fits into:
good product and good marketing
a good product with bad marketing
a bad product and bad marketing, called “outer darkness,”
a bad product with good marketing, a “black hole”.
We also have a formula we came up with: Ubiquity + Techy (i.e. groundbreaking technology in their field) + Chill Factor Story + Amazing Video = huge chance of success.
So, ubiquity means is it everywhere. One example is one of our clients called Trunkster. They developed luggage and of course everybody has luggage. Another example (not one of our clients) is Pebble Watch: it’s a watch but the client made it like an Apple iPhone. Or the Coolest Cooler (not a Funded Today client). SilverAir invented socks that don’t stink. By soaking the fibers of the cloth in silver you can wear their socks for 10 days. These are a few examples of clients that fit that success formula.
What does crowdfunding in the future look like? Do you see trends from your clients and in the market? Will more bigger brands enter the space?
Your question comes at the perfect time. In fact, Hasbro, one of the world’s leading toy and game manufacturers, just announced they will be doing a crowdfunding campaign as a way to connect with gamers. So, definitely, we will start to see bigger brands entering this space, and we already are. Also we will see more equity crowdfunding. Typically, you’re pledging to get a perk, and this is the type of crowdfunding we specialize in.
In a world of roboadvisors, index funds, and algo trading, investors have learned to cut costs and simplify their investing. In some markets, over 90% of all trading is done by machines and we know markets are moved by large indices, not retail investors
It’s fair to say that we’ve lost that connection between an individual investor and the company behind a stock he or she owns. We may lack the connection but it’s also hard to come by the magic moment when an investor falls in love with a company and goes out to buy the stock to show his allegiance and affiliation.
Founder and CEO of Stockpile, Avi Lele joins us to talk about what it took to build a fractional share brokerage and how doing the small things right has positioned his company to just close a $15M investment round and launch in a big way.
Listen to the FULL episode
In this podcast, you’ll hear about the following:
Stockpile’s retail product and distribution strategy
How gift cards for stock works
How Stockpile is combining physical and virtual distribution strategies
How education plays a major role in investing discovery
The challenges and opportunities in building a fractional brokerage
Pascal Bouvier is an experienced fintech investor and joins Tradestreaming today to talk about his investments in the fintech space, how the market has changed over the past few years, and where this investor thinks the opportunities lie ahead. Follow Pascal on Twitter, LinkedIn, and his blog.
Who are you and what do you do?
Pascal Bouvier, fintech investor
I am a fintech investor who brings both operational and investment experience to the table. I have worked with large financial institutions as well as with startups and post-revenue small-sized businesses. I have also worked with technology and non-technology businesses. This uniquely positions me as an investor in early stage companies in the financial services industry. Further, I do have a global background having worked on several continents, a requirement given the financial services industry is a truly global industry.
What’s your view of fintech and finserv and how has it changed?
I have developed an expansive model where finserv equals fintech, like it or not. By that, I mean all finserv participants will have to behave like technology companies going forward. This means they will have to stop creating products and pushing them in unilateral ways to consumers and users and they will have to start to focus on technology, data and in a broad sense, customer experience.
All participants will have to do so, whether they are startups or incumbents, large or small or service providers. This will have, and is already having, a profound impact on how the industry is organizing itself. Namely, the customer and his needs – be it an individual or a corporation – will need to be front and center as opposed to wha the financial institution thinks the customer needs. This is both a subtle and profound departure from past and current paradigms.
In many ways the industry will have to reorganize itself around customers’ lifetime events via contextually relevant services and move away from a product-centric approach. That is the greatest insight one can have as a fintech investor.
You have a very interesting work history, with experience on the operator side in software and other industries. How has this impacted your worldview of fintech as an investor?
I was a commercial banker which influenced my view on commercial credit. I worked as an operator with various early stage startups, as well as high growth post revenue SMBs, which helped me understand the reality of day to day tactical operations and long term strategic vision in a very material and tangible way.
I also have acted as an investor in the banking world and in the VC world. My fintech investment style has been heavily influenced by my learnings as an operator. Early stage investing is not purely informed by dry analysis and spreadsheets. It is informed by how one relates to individuals and teams and by how one understands how operational complexity grows as a startup grows and experiences traction. I believe this has made me a better investor.
Where’s your sweet spot for making an investment? What does your target investment look like?
Based on how I see the financial services industry evolving, I believe the most effective sweet spot at this point in time is to focus on seed, Series A, and Series B investments where the investment size ranges from $500k to up to $5m. I do like to go above $5m for exceptional investments. I like that flexibility.
From an operational point of view, this means I focus on startups that have a product or platform in use with customers, whether in beta or whether live, and whether pre revenue or post. I shy away from ideas or technology that has yet been productized. I focus on companies that are about to hit product/market fit or already have a strong sense of product/market fit and who are experiencing the first inklings of pipeline growth. Although my view is global in nature, I have lately focused on Europe and the US.
How do you compare consumer fintech opportunities with more B2B ones?
Speaking of the firm I recently left, the portfolio is evenly split between D2C and B2B. some of the D2C are really B2B2C plays. As for my natural inclination, it really depends on the sector I look at.
The industry is comprised of five sectors: lending, capital markets, insurance, asset management, and payments. Given a particular geography and time for each of these sectors, I would be more attracted to D2C models, whereas this may change to B2B models otherwise. For payments, I prefer B2B by far, as getting traction in D2C payments is extremely difficult. In banking and insurance, I would prefer digitizing distribution channels which may mean D2C or B2B2C. For asset management or capital markets I would favor B2B models.
It really depends. Consumer plays are so much more difficult to hit just right that there is a natural comfort zone around B2B models, in my opinion.
What do you think is the most exciting investable part of fintech right now?
I will give several answers. First, insurance because the industry has barely been touched as of yet by disruption, so the opportunity is immense. Second, anything that has to do with identity management as applied to any of the five sectors comprising the industry. Third, and this is a new trend I am focusing much more on these days, financial wellness, which can be equally applied to the Western world as to emerging markets. Financial wellness is going to be huge in my opinion, as it sits at the intersection of the expectations of customers and a better stewardship of money, in general (not that I expect us to be completely weened from excessive consumerism mind you, but still I do expect changing times ahead).
What’s the most overdone part of fintech? Where are expectations too high in fintech investing?
It is always difficult to answer this question. So much depends on geography and timing. I would tend to answer that retail/consumer payments in the US is overheated and extremely crowded. “Digital” banking also seems to fall in that category. Finally, one particular model past its prime is pure retail roboadvisory in the wealth management space.
Steven Mendel is the CEO and co-founder of Bought by Many.
Why is buying insurance so hard?
There has been a lot of innovation/ change in the way in which consumers buy and interact with most retailers/ distributors in most industries, just this change has not arrived in the insurance world – so we are all forced to deal with intermediaries to buy insurance through poorly designed web offerings. So rather than saying buying insurance is hard, I prefer to say that it hasn’t moved on, in the same way that most other industries have.
Also, everyone dreads having to renew/ take out an insurance policy, not knowing who to buy from, how much cover to buy, whether they are being ripped off, etc.
How does Bought by Many change that? How does it work?
Steven Mendel, Bought by Many
Consumers are used to transacting on their mobile phones, and indeed 70% of Bought by Many members join us on a mobile device – this is the medium consumers are now demanding.
We enable our members to interact with others looking for the same type of insurance to discuss this with them. We work with each group to help individuals get a better deal on their insurance.
We write a lot about the complexities around insurance decision-making and encourage our members to share their insights as well, making the whole experience much more social and less about the individual, thereby giving our members much more comfort that they are making a good decision.
What’s the genesis story — where did you and your co-founder come up with the idea?
Was there a personal reason? Both Guy and I have been frustrated with the financial services industry that takes advantage of individuals in a way that the industry doesn’t take advantage of other corporates – evidence is widespread: group life assurance is much cheaper than individual life assurance — retail share classes in unit trusts can be 3-5 times the price of institutional share classes for the same fund.
My personal example was in private medical insurance where the price for me was four times as a self-payer compared to the same offering from the same insurer when part of a corporate scheme.
How does arranging insurance buyers in groups change the dynamics of the underwriting/brokerage relationship? At what benefit to your users?
We cut the traditional face-2-face broker out of the equation – which has been costing consumers 30-35% per annum and instead use that saving to improve terms for our members.
You recently bought an insurance underwriter in the pet insurance industry. Why?
We are keen to show consumers and the industry what a great mobile-designed customer experience can be like in the insurance industry and found that the only way to achieve this was by being able to own the whole customer journey – hence the acquisition. Watch this space for the launch of this new experience soon….
What’s next for users of BBM — product enhancements/services?
So the roll out of the new customer experience for a small number of our groups is definitely next. We’ll then be expanding this to a number of other groups. We recently launched our first private medical insurance groups, which you’ll appreciate from my personal experience above, was important to me. We’ll be adding more medical insurance groups in the coming months, so if you don’t find what you are looking for now, let us know!
[x_alert type=”success”]Every week, Tradestreaming highlights startups in the news, making things happen. The following is this week’s news roundup. You can get these updates delivered direct to your inbox by signing up for the Tradestreaming weekly newsletter.[/x_alert]
List of the top 10 roboadvisor CEOs (Tradestreaming) Tradestreaming Tearsheet: Everyone’s talking @ #roboadvisors and automated investing platforms. Leading startups in the space have raised hundreds of millions of dollars in venture capital and are managing billions of dollars in AUM. But, who are the CEOs running these firms? Who are the people behind this whole industry? Here are 10 of the best.
What will be the most valuable fintech companies in 2020? (Disruptive Finance) Tradestreaming Tearsheet: Who will be the most valuable Fintech companies of 2020? Here’s an (educated) guess. More importantly, will the largest Fintechs still be focused on niche areas or will they expand into other sectors (like the largest global financial services companies have done)?
Opening up access to new investors in litigation finance (Tradestreaming) Tradestreaming Tearsheet: Online finance isn’t just making plain vanilla investing/lending more efficient and cheaper to the end users – it’s also opening up entirely new ways to invest and entirely new investable assets available to the average investor. Tradestreaming’s interview with Jay Greenberg of @lexshares – he’s opening up litigation finance to everyone. Can this be an asset class that eventually everyone holds in their retirement portfolios?
Interview with TransferWise’s Taavet Hinrikus and Kristo Kaarmann (Business Insider) Tradestreaming Tearsheet: The international money transfer startup became one of London’s few ‘unicorns’ in January when Silicon Valley’s Andreessen Horowitz invested. “That makes us here think, ok, we’re probably also at a very special point in time where we’re seeing the birth of whatever number of new global financial services companies.”
Xignite Records 50 Billion Financial Data API Calls per Month (bobsguide) Tradestreaming Tearsheet: Xignite announced that in July it served more than 50 billion API requests from its market data cloud platform, breaking all previous company records and making Xignite among the top API cloud providers in the world. As fintech enables further unbundling of data and services, Xignite and others in the space are riding the trend.
The fintech Silk Road – what we can learn from China (Jessica Ellerm) Tradestreaming Tearsheet: “Banks often look at disruption in terms of product impact, in other words, how general FinTech (including distributed ledger technology, P2P lending, third-party payments, etc.) will disrupt. In reality, the biggest threats lie in the changing structure of global markets.”
Kickstarter surpasses $2 billion in pledges (The Verge) Tradestreaming Tearsheet: Kickstarter announced that more than $2 billion has been pledged in total on the platform. It took the company nearly five years to hit the mark but revenue growth is ramping. Has crowdfunding become a standard way companies finance new products in our age?
Invoice2go gets $15M to compete more directly with Square and PayPal (VentureBeat) Tradestreaming Tearsheet: Invoice2go has provided small businesses with one tool—a simple way to create an invoice and send it to clients. Now, with $15 million in new funding, the company is preparing to expand more deeply into the small business product territory. Square and PayPal should probably be paying attention.
Hart Lambur is co-founder at Openfolio. He was most recently a government bond trader at Goldman Sachs.
What is Openfolio?
Openfolio is a platform where investors share their portfolios—not dollar amounts, but their contents and ideas—to see how their investments compare. Data derived from our network brings fresh insight and increased transparency to personal investing, helping everyone in our community make smarter, more confident investment decisions.
What’s the genesis story of Openfolio? What itch were you trying to scratch?
Hart Lambur, co-founder Openfolio
We were working on Wall Street when we hatched the idea for Openfolio. We noticed how the open culture of our trading desks, where people freely shared ideas and insights, helped everyone succeed. But we also quickly realized that there was no platform, or scalable solution, to replicate that powerful experience in the real world – even though so much untapped wisdom resides in everyone’s extended networks. We wondered: isn’t sharing information about investing at least as important as sharing information on Foursquare… or Tripadvisor… or Spotify?
That experience inspired the creation of Openfolio. It’s a new, open approach to investing, based on the simple idea that people will share their portfolios, in percentage terms, within their networks. Openfolio is a place where investors share insights and ideas, and watch how others put them into action. We all learn from each other’s successes (and mistakes).
Why do you think there’s a lack of transparency when it comes to investing whereas in other industries, we’re so much more likely to share our information? How has this opacity impacted the average investor?
The taboo nature of talking about money and the idea that investing is scary and risky intimidates people from sharing information with each other. There is a stigma that each of us will be laughed at as fools for sharing, when really sharing information is usually a great way to learn. The average investor is left in a cycle where it’s hard to know where to seek advice about best practices, and a large amount of the advice is anecdotal.
As a result, transparency and information is only present in small circles. There are investor communities such as Seeking Alpha, or Stocktwits, but these are largely for the engaged investor, often looking for opinions on specific stocks and bets they want to make. There is also expertise from investment advisors, but it makes sense for that expertise to be held there both for the benefit of the advisors’ business and their clients peace of mind.
Openfolio is designed for personal investors, who are invested in the market, but don’t want to pay 1-2% on assets for expert consultation or fully engage in active DIY investment. Openfolio is an free service that lets you engage with your investments in an informative and non intimidating way, by giving you context into what others are doing, i.e. social validation.
So, once you have more transparency on our investing behavior, what’s the next step? Can Openfolio help us make better investment decisions?
Our mission is to bring about a better understanding of investing behavior, one that complements technical expertise and avoids professional jargon. This understanding will be based on our existing intuition about how people behave. This shift creates an opportunity to bring in people that are interested in investing but may be intimidated by the topic.
This added behavioral dimension can be a really powerful teaching tool, but relies on us accurately characterizing investors based on the info they share with the community. A simple comparison of how your portfolio performed versus the average investor only scratches the surface, the best insights will come from a deeper synthesis.
For example, my portfolio holds USO, a highly volatile Oil ETF. Openfolio tells me that “People who are betting on USO trade it 2x as much as any other stock in your portfolio”. This helps me appreciate the reality of my decisions, i.e. that I own a stock that many people use for short term speculation.
The idea of Openfolio has been tried before (in various manifestations — I’m thinking Covestor, which ended up pivoting to track only professionals’ trades) — what’s different with Openfolio? Why will you guys make a business out of this where others have tried and moved into other things? Are you planning on rolling out replication technology?
The approach many other social services take is putting forth an idea that there is exists a group of high performers, who can consistently beat the market, and the way to use these services is to highlight these experts and let people emulate them. Openfolio is based on the fundamental idea that even if a minority of market beating wizards do exist, tracking and copying what they do is not the point, and is also not sustainable.
Openfolio exists to shed light on what typical investors do correctly, i.e. have a balance of stocks and funds, are sufficiently diversified, don’t trade in and out too much or get nervous when the market moves. By showing how people compare to the average based on clear metrics backed by real portfolio data from the community, we can make it easier to “get it”, i.e. this is what investing is about. It’s not about speculation, or trying to beat the market, often times it’s about deciding on a reasonable core portfolio and maybe understanding some themes (e.g. what are high dividends, diversifying into international and emerging markets), and then remembering to re-invest.
What’s next in the pipeline? Where are you taking the business?
Today, our sole focus is to create a platform that is useful for anyone that has investments, and foster a vibrant, engaged community. This is fun, exciting, and keeps us busy. Tomorrow? Actionable information and advice, backed by community driven data, which may be delivered through a subscription model or integrated into a service to help users understand and choose from different investing services. Having said that, our core product will always be a free.
Earlier this week, a report out of Silver Lane Advisors, an investment banking boutique that specializes in financial services M&A, caused quite a stir. The report, entitled “Have Roboadvisors Jumped the Shark“, drew parallels from the advent of Internet banking to the more recent phenomenon of automated investment advisors, or so-called, roboadvisors.
One of the author’s of the report, Peter Nesvold, is a managing director at Silver Lane. He joins Tradestreaming to discuss the report, the future of asset management, and how he thinks it all plays out.
In your study, you spend considerable time using the growth trajectory of Internet banks as a parallel case to what’s likely to play out for roboadvisors. Why is that?
Peter Nesvold, Managing Director, Silver Land Advisors
There’s an old saying from Mark Twain that “history doesn’t repeat, but it does rhyme”. We find that the investment thesis of today’s independent roboadvisors bears a striking resemblance to that of the original fintech disrupters — the Internet-only banks of the 1990s.
Fintech disrupters are, by definition, gunning for dramatic, sweeping changes to how financial services are consumed. While it’s almost a forgotten chapter of fintech history, online banking is actually the most successful fintech innovation of the past 20 years. People often talk about how online brokers disrupted traditional brokers during the 1990s. But even today, online brokerage is only about 30% of the retail market. In contrast, an incredible 80% of U.S. households with an Internet connection bank online. The convenience factor is extraordinary. But despite this massive consumer adoption, all of the standalone, Internet-only banks failed! That’s because online banking is not a standalone business, but rather a product extension of traditional banking.
If we look at this purely as a technology, online banking in the 1990s and online/automated investment advice of today share many characteristics. Both are incredibly innovative technologies that enable users to transact whenever, wherever they want; the marginal cost of serving each incremental user is very low; yet in both online banking and online investment advice, the offering is really just a subset of the broader portfolio of services that the user is likely to need over time.
Why do you think that roboadvisors may have jumped the shark?
Two events have happened in recent quarters that suggest we’ve hit an inflection point. First, and probably most importantly, we’ve seen mega-brands jump into the market and completely overpower the progress of the start-ups, despite these huge companies having sat back for years as idle observers. Schwab and Vanguard — two industry behemoths — netted more assets in only 90 days from launch than the independent roboadvisors had their entire lives. The exact same thing happened with Internet banks in the 1990s. While players such as Bank of America were arguably slow to follow the lead of innovators such as NetBank, BofA completely leapfrogged the start-ups in only 90 days once they decided to jump in. Now that the big boys are interested, the start-up robos will have to pour an extraordinary amount to capital into brand building and raising service levels to compete. Forget what Twain said, this isn’t history rhyming, it’s history repeating!
Second, we’ve started to see consolidation begin. LearnVest sold to Northwestern Mutual; FutureAdvisor combined with Blackrock; and Covestor merged with Interactive Brokers. A small number of independent robos still have a chance to grow into big businesses; the further down the list, however, the more urgent it likely is to find a suitable partner.
How can robos avoid jumping the shark?
Using history as a guide, the Internet banks whose DNA survived were those that affiliated with larger brands. Wingspan Bank is a good example — although the Internet-only bank was always a wholly-owned subsidiary of Bank One, it was branded and managed independently of its parent. You never saw Bank One mentioned in any of its ads. But after a little more than a year, Wingspan was folded back into the parent to become the online offering. That made sense.
Likewise, TeleBank (once a publicly-traded Internet bank) sold to E*Trade at the peak of the market and still survives today as the brokerage division’s banking arm. In contrast, those Internet banks that did not affiliate with a bigger brand in some way all disappeared.
We believe that independent roboadvisors should consider aligning with larger, established competitors — provided those competitors are equally forward-thinking. We noted some recent examples above. Combining innovative technology with a highly credible brand seems like the best path.
If they have jumped the shark, what do you think happens going forward for the robos? For competition from within the industry (Vanguard, Schwab)? Who’s positioned well to “own this market”?
To be fair, it’s important to keep in mind that the TV series, Happy Days, survived for five more seasons after the “Jump the Shark” episode. In its truest form, a “JTS moment” doesn’t mean the end has arrived; it suggests the downward ascent has begun. There are plenty of episodes ahead for the roboadvisor trend; we just believe that the most innovative days as independents has now peaked.
In terms of who’s best-positioned to own the market: it’s a billion-dollar market that’s likely to be captured by billion-dollar brands. Early movers from the traditional brands include Vanguard, Schwab, Fidelity, Blackrock, Northerwestern Mutual, and Internactive Brokers. We anticipate someone like State Street or Invesco making a move as well, as a robo platform would be a logical distribution channel for their tremendous ETF product offerings.
Is this market saturated? Where will new competition come from and why?
The market isn’t saturated yet, because consumer adoption has been relatively slow. Even smaller, independent roboadvisors will attract assets — but the key is that they are unlikely to attract so many assets that they scale to material profitability. New competition keeps coming into the market. We probably see new entrants weekly; on paper, the business plan can look really exciting to a venture capitalist who understands technology but has limited experience in the financial services industry. But anyone jumping in today faces an unusually difficult uphill battle.
[alert type=white ]Every week, we write about fintech startups raising money, making partnerships, and generally disrupting finance.[/alert]
Wow, what a week.
Money 2020 has turned into a must-attend fintech event. Equity crowdfunding rules were announced on Friday – creating utter chaos for some players and elation for others. Things are speeding up in fintech land as stock market holder ICE bought leading data provider IDC in a deal worth over $5B.
OneVest Launches “1000 Angels” to Reinvent Venture Capital (Crowdfund Insider) Tradestreaming Tearsheet: Onevest, a New York based investment crowdfunding platform focused on funding start-up entities, has announced the launching today of its new “1,000 Angels, the “world’s largest digital-first, invitation-only investor network”.
$1 Billion In Small Business Loans From PayPal (PYMNTS.COM) Tradestreaming Tearsheet: PayPal used to be all about processing payments instead of handling funds, but if you’re not growing in this business, you’re dying. PayPal is serious about growing its SMB loan business and seems to be positioned well to continue attracting new business borrowers.
Can This Startup Restore Privacy in Payments and Turn a Profit? (American Banker) Tradestreaming Tearsheet: Privacy.com is catching the attention of many finance professionals (including some smart fintech investors) as a creative security platform that’s building its business by protecting transaction privacy. In the Edward Snowden era, it will be interesting to see if the startup can build a business with its revenue model (taking a cut on interchange fees around a transaction).
Bizfi Originates $127M in Financing in Q3 2015 (BusinessWire) Tradestreaming Tearsheet: Bizfi, a fintech platform that combines aggregation, funding and a participation marketplace for small businesses had a very good quarter, reporting $127M in business financing during Q3 2015.
ReadyForZero launches credit monitoring product (ReadyForZero) Tradestreaming Tearsheet: Following CreditKarma’s success in providing credit tools, personal finance manager (PFM), ReadyForZero launches its own credit monitoring tool.
Groundfloor Announces Three New Tools to Expand Peer-to-Peer Real Estate Lending (Crowdfund Insider) Tradestreaming Tearsheet: On Monday during the Money2020 conference, real estate lending marketplace Groundfloor introduced three new analytic tools that allow peer-to-peer real estate investors greater flexibility and analysis over security selection and portfolio management.
Digital Asset Holdings Acquires Blockchain-as-a-Service Innovator, Blockstack.io (Finovate) Tradestreaming Tearsheet: “Miron Cuperman, Blockstack CTO, called Digital Asset “the best platform” to deliver Blockstack’s blockchain application development tools as part of a comprehensive solution for customers. Digital Asset Holdings CEO Blythe Masters praised both Blockstack’s technology as well as its talent, calling Cuperman “a renowned pioneer in the blockchain world.””
Lending Club Reports Q3 Results. Loan Originations Jump 92% Year-over-Year (Zacks) Tradestreaming Tearsheet: Lending Club (NYSE: LC), the largest marketplace lending platform in the US, has announced Q3 results. And the origination growth is silencing some of the biggest critics of the first marketplace lender to float on public markets.
Startups raising money this week
Spreedly Raises $2.5 Million in New Funding (Finovate) Tradestreaming Tearsheet: Spreedly helps marketplaces and platforms accept a wider range of payment types while reducing cost, complexity, and compliance burden.
Zebit Secures $10M investment; Launches Zero-Interest Credit to the Underserved (LetsTalkPayments) Tradestreaming Tearsheet: The credit can be used to make purchases from the Zebit Market or directly from retailers that accept Zebit as a checkout option.
Issuer processor platform Marqeta closes $25m funding round, new customers (Finextra) Tradestreaming Tearsheet: At Money20/20 2015, Marqeta, the Open API issuer processor platform, announced a host of new marquee customers, including Affirm, DoorDash, HyperWallet and Kabbage, alongside known customers such as Facebook, Bento for Business and Perk. Marqeta also confirmed closing a $25 million Series C round.
It’s that time of year again: when scores of investors descend upon Coronado, a small town across San Diego Bay from downtown San Diego. It’s there, that for 2+ days, they’re treated to discussions by some of the smartest investors around. It’s Howard Lindzon‘s shindig and Stocktoberfest has become a must-attend event for traders, investors, and fintech entrepreneurs.
Howard’s activities as fintech angel investor (see his Social Leverage portfolio), entrepreneur (previous CEO of StockTwits, Wallstrip), and generally gregarious professional position him as an ideal connector for this event which essentially ran 2 tracks this year (or themes): the race to a $1 trillion marketcap for the largest tech firms and the social finance revolution. For startups, Stocktoberfest acts as a sort of launching pad, with a few of the firms presenting in front of a professional audience for the first time.
Marketplace lending is better
There were a few of themes coming out of Stocktoberfest that resonated with attendees (Lindzon himself wrote up his own 10 takeaways from Stocktoberfest 2015). The first was regarding the big changes facing banking.
With the growth in marketplace lending firms like Lending Club and Prosper, industry analysts think that it’s not only an inefficiency in the market that’s powering these firms, but marketplace lending is just better than traditional borrowing/lending.
According to Lindzon:
At Stocktoberfest, ApplePie Capital, PeerStreet and ProducePay received the most attention from friends in attendance. Hunger for yield matters.
Cost of information (nearly) free, but value going up
Many of the attendees to Stocktoberfest are in the investing content game themselves. They blog, podcast, and tweet about the markets. Some of these analysts, like Brian Lund, have extensive experience investing. Lund, who founded broker-dealer Ditto Trade in 2008, has been trading the markets for over 30 years and his opinion pieces are syndicated to Yahoo Finance, AOL’s DailyFinance, and About.com.
Lund observed that while the price of content is going down, the value continues to improve.
The days when you had to be an embedded analyst at a major Wall Street firm, or pay nosebleed subscription prices to get access to top shelf data and information are over.
Take, for example, Urban Carmel, who writes The Fat Pitch, was named after Pope Urban II by his papal loving parents, and sipped 18-year-old Scotch while Howard interviewed him. His take on the market is informed, experienced, and insightful, and he gives it away for free.
Just a few years ago, the Finovate series of events were pretty much the only game in town when it came to showcasing top talent and technology in the fintech space. Events like Stocktoberfest are becoming more common and provide a powerful sounding board for fintech startups to get up in front of a room full of prospective customers of their products. Now, it seems like almost every week new fintech accelerators, focused VC funds, and meetup groups are being launched.
Here’s a short video of Howard Lindzon and Jeff Macke talking about what they took away from Stocktoberfest 2015.
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This week, finance’s who’s who soiréed at the Economist’s Buttonwood Gathering. The one question that seemed to underly all the discussions and break out sessions:
what about banks?
What’s the banking sector’s role going forward when fintech is disrupting from above, below, and laterally?
The Startups: Who’s shaking things up
Inside Monese, the mobile banking app for migrants (Tradestreaming)
The app lets people sign up with just a picture of a passport and a selfie in as little as 3 minutes.
LendKey Enhances Lending-as-a-Service for Local Banks & Credit Unions (Finovate) Tradestreaming Tearsheet: Even in this newsletter there’s lots of talk about the competition hitting banks. New platforms like LendKey don’t disintermediate them as lenders; instead, they help them create digital offerings and compete. It will be interesting to see how many banks adopt platforms like LendKey or instead partner with the larger online lenders.
Indiegogo Launches Generosity To Compete In Personal Crowdfunding (About.com) Tradestreaming Tearsheet: After GoFundMe’s (crowdfunding platform for personal campaigns like paying medical bills or tuition) success and raising massive amounts of capital, Indiegogo wants more of the market and relaunches (and rebrands) its own offering, Generosity.
Digital currency is poised to reinvent how startups are funded, led by Chroma Fund (TechRepublic)
Chroma Fund is a crowdfunding site powered by the blockchain, the same underlying technology that powers Bitcoin. Learn how it’s preparing to disrupt startup investing.
From start-up to incumbent: the innovation cycle (The Finanser) Tradestreaming Tearsheet: Interesting framework to think about growth in the fintech industry and how that maturation unfurls for startups on their way to becoming larger, incumbent players. Useful for startup founders and those investing/partnering with fintech startups.
RushCard Breakdown Affects Thousands of Prepaid Debit Card Users (NYT)
The troubles, lasting much of the past week, illustrate the potential perils for those without access to the banking system.
Co-Founder of Capital One, Nigel Morris, Joins Zopa Board (Crowdfund Insider)
Morris, currently the Managing Partner at QED Investors, is the co-founder of Capital One. QED has invested in well known Fintech companies, including, Credit Karma, Avant Credit, GreenSky and SoFi.
OnDeck Adds New Small Business Lending Options (Finovate)
“The expanded product suite includes broader loan terms, increasing the maximum loan amount from $250,000 to $500,000 and granting borrowers up to 36 months to repay (from 24 months). Lines of credit will be available up to $100,000 (from $20,000) for a monthly fee of $20 and no “draw fees.” And repeat customers will be eligible for annual rates as low as 5.99%, as well as loyalty pricing benefits.”
Early Read on Square’s S-1 Filing (First Annapolis)
Good initial read of the payment firm’s IPO filing – what questions it answers and which ones remain unanswered.
Startups raising money this week
Goldman Sachs leads investment in cloud-based POS startup Financeit (Finextra)
FinanceIt enables businesses to offer payment plans to their customers and Goldman Sachs wants a piece of the online lending fintech firm.
American Express Invests In Bitcoin Venture, Abra, Which Announces U.S., Philippines Launch (Forbes)
Bitcoin startup Abra will soon launch in the US and Philippines, and is rolling out a merchant services API. It also received investment from American Express and Ratan Tata.
Citrus Payments Raises $25M (Let’s Talk Payments)
PE firm Ascent Capital and early investor Sequoia are investing $25M in Citrus’s C round. Citrus “makes digital payments and online checkout processes simpler, faster, safer and easier for an 800 million strong electronically connected user base”.
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