A busy month for fintech funding

May 1, 2019 10:00 PM

Venture capital funding for fintechs got off to a hot start this year, and it kept flowing into the early spring, with early-stage companies raising millions of dollars in late March and April.

Novo, a challenger institution in the field of small-business banking, and the no-code platform provider Unqork held Series A funding rounds. The simulation software provider Simudyne and the construction-lending platform provider Buillt Technologies attracted investments from large banks like Barclays, Goldman Sachs and Regions Financial.

Artificial intelligence ideas continued to draw bank support, The online lender Upstart, which raised $50 million in a Series D round, says it can both lower loan loss rate and increase the number of customers underwritten.

Meanwhile, Extend is building a platform to distribute digital cards by partnering with payment networks and card issuers. Another startup, MotoRefi, claims it can save consumers an average of $100 a month on vehicle refinancing by connecting them to trusted credit unions and community banks.

Scroll down for a summary these recent investment deals, in order of the size of the funding rounds.

sculpies - stock.adobe.com

Modernizing construction lending

Company: Built Technologies

What it does: Helps traditional lenders make construction loans online

CEO: Chase Gilbert

Founded: 2015

Funding: April 29, Series B, $55 million

Investors: Led by Goldman Sachs Investment Partners, Regions Financial

Bank Partners: About 80 lenders in commercial and consumer construction, including Regions

What it’s doing with the funds:

The funding will help the 5-year-old Nashville, Tenn.-based fintech company invest in research and development while building out its national client base, CEO and co-founder Chase Gilbert said.

“We’re relentless about being the construction-lending experts,” Gilbert said. “It’s an area that lacks structure, and Built’s platform helps lenders understand what they are set up for and to find the best-suited borrowers.”

Gilbert said Built’s construction-lending platform is essentially integrated with underwriting — on top of a bank’s core platform — to help lenders digitize data that is often stuck in spreadsheets.

A lending partner "can log in to the branded portal. It accelerates the flow of funds, and they’re managing the risk better,” Gilbert said.

Built has serviced more than $24 billion of construction loans since the platform launched in 2015.

“Built’s technology delivers an enhanced customer experience for borrowers and provides a more efficient and effective process for lenders that have historically relied on manual processes for construction lending,” Jamie Gregory, head of corporate financial strategy at Regions, said in a press release.

Goldman Sachs Investment Partners is a global arm of Goldman Sachs Asset Management that specifically invests in fintechs and other innovative startups primarily with late-stage funding. The group has invested roughly $4 billion in tech companies since 2010.

“Built’s technology platform has demonstrated a strong value proposition to borrowers and lenders alike by streamlining the overall construction-loan process, while at the same time increasing transparency,” said Christopher Dawe, co-head of the venture capital and growth equity team of Goldman Sachs Investment Partners.

Artficial intelligence for lenders

Company: Upstart

What it does: Makes consumer loans online, using AI in credit decisions

CEO: Dave Girouard

Founded: 2012

Funding: April 8, Series D, $50 million

Investors: Progressive Investment Co., Healthcare of Ontario Pension Plan, First National Bank of Omaha

Bank partners: First National Bank of Omaha, First Federal Bank of Kansas City, Mo., and BankMobile, a unit of Customers Bank in Wyomissing, Pa.

What it’s doing with the funds:

It introduced plans for an Upstart-branded credit card and partnerships with three lenders, including First National Bank of Omaha.

The San Francisco fintech markets itself as both a direct-to-consumer platform and a technology provider to banks. Since its inception, the company has raised more than $160 million.

The company, citing an internal study, says the loss rate on its loans over the past five years has been less than half of rival platforms’ loss rates when comparing borrowers who have similar FICO scores. Upstart’s pitch to bank partners is that its technology can help them find better credits that outperform their traditional portfolios.

“We did an enormous amount of work adapting machine learning to lending,” CEO Dave Girouard, a former president of Google Enterprise, said in a recent interview. “We want to move beyond unsecured personal loans and credit cards and begin to apply our technology to the rest of the market, so we need to grow our team significantly.”

'No code' in banking

Company: Unqork

What it does: Provides no-code platforms for financial services and insurance firms

CEO: Gary Hoberman

Founded: 2017

Funding: April 17, Series A, $22 million

Investors: Led by Goldman Sachs Principal Strategic Investments with participation from Summerfield Capital Management, Blue Seed Collective, Bradford Brown Capital Partners and Broadridge Financial Solutions.

Bank Partners: Goldman Sachs and 16 other financial institutions

What it’s doing with the funds:

Unqork is using the funds to accelerate growth and develop more no-code features.

The company offers a customizable forms engine that can be used to gather customer data for any purpose, such as account opening. It’s delivered in a pay-as-you-go, software-as-a-service model.

“The feedback from our tech teams internally is that Unqork is one of the closest to a real, no-code, low-code platform that we’ve seen in the workflow space,” Sarah Shenton, vice president of principal strategic investments, said in a recent American Banker story.

Unqork’s CEO, Gary Hoberman, believes the technology could be used for almost any financial product.

“If you think about the consumer side of a bank with mortgages or opening accounts, or the institutional side of a bank with capital markets where you’re opening institutional accounts and mutual funds, all that could be generalized into capturing data, validating the data and processing the data,” Hoberman said in story.

“When you open a mortgage, you’re going to fill out a form on who you are, what’s your home, what’s your income, your credit score. That form is defining rules: Let me ask you your Social [Security number], and because you gave me your Social, let me go out and get your credit score, and because your credit score was over 700 I don’t need to ask you this next series of questions.”

Digital cards for employers and families

Company: Extend

What it does: Digital credit card distribution

CEO: Andrew Jamison

Founded: 2017

Funding: April 10, Series A, $11 million

Investors: Led by Point72 Ventures and Fintech Collective, with additional participation from Reciprocal Ventures and City National Bank

Bank partners: Five so far, including City National and Silicon Valley Bank

What it’s doing with the funds:

Extend plans to launch new features for its mobile app, develop open application programming interfaces, and recruit more talent across engineering, marketing and operations.

Currently the fintech’s cards allows employers to set unique spending limits, validity periods and other controls as well as track where purchases were made. Its platform is integrated into Mastercard and Visa.

In addition to its new funding round, Extend also announced a partnership with City National in Los Angeles.

With Extend's tech, employers can closely track spending from employees and subcontractors. Families with caretakers can set safeguards to avoid elder financial abuse. The cards will also encourage commercial customers to reduce their use of checks or cash to reimburse employees.

“Our entertainment clients lose their auditing trail with cash or check,” Vince Hruska, senior vice president and director of enterprise cards at City National, said in a recent interview. “We want their spend going through these cards, and Extend will give them more detailed reporting and categorize their transactions.”

Financial simulator

Company: Simudyne

What it does: Makes simulation software for financial services

CEO: Justin Lyon

Founded: 2017

Funding: April 8, Series A, $6 million

Investors: Led by Barclays, which was joined by Graphene Ventures, Gauss Ventures and others

What it’s doing with the funds:

Simudyne plans to hire more subject matter experts worldwide and expand its software beyond bank stress testing, financial risk and contagion management. Since its formation, Simudyne has raised $10 million.

Recently Simudyne worked with banks to identify market execution and anti-money-laundering as two new simulation products which are now in use. Banks typically spend between $475,000 and $3.25 million on the software annually, said Justin Lyon, CEO of Simudyne.

Using agent-based simulation, Simudyne provides prescriptive analytics. Clients can simulate millions of scenarios, test drive their decisions and fail without consequence.

“It’s the difference between training a pilot by having her watch a film on flying a plane over and over again versus training with a realistic flight simulator that adapts and reacts to how she flies it,” Lyon said.

While banks have been running simulations for decades, agent-based simulation allows the bank to build simulations models that encompass their entire operating environment: their businesses, markets and clients. Banks have also chosen Simudyne over competitors because bankers can keep both their data and models on the premises while using the software, Lyon said.

Andy Challis, managing director of Barclay’s principal investments, added in a press release: “Partnering with high-growth fintech companies like Simudyne is core to our technology strategy. As its adoption becomes more widespread, Simudyne’s platform will ultimately help cultivate a stronger, more efficient tech-enabled financial services sector.”

A digital bank for business

Company: Novo

What it does: Provides digital banking services to small businesses

CEO: Michael Rangel

Founded: 2016

Funding: April 1, Seed funding, $4.8 million

Investors: Crosslink led with participation from Red Sea Ventures, RRE, Hack VC, Rainfall and the Stanford Law School Venture Fund

Bank Partner: Middlesex Federal Savings

What it’s doing with the funds:

Novo is using the funds to help sign up new customers, develop partnerships that will help the company add products, and expand its customer success and compliance teams.

The company also plans to gain more partnerships with community banks and is considering selling Novo as a white-labeled digital bank.

Novo provides small businesses with a no-fee, federally-insured digital banking platform that includes a free business-checking account and debit card through a mobile app. The company also gives entrepreneurs real-time insights and notifications on the financial health of their small businesses. With Middlesex Federal Savings in Somerville, Mass., on the back end, Novo offers integration with Slack, Stripe, Xero, Zapier and Transferwise.

“We have been getting the attention from many startup founders, small-business owners and entrepreneurs from a wide mix of industries from internet-based businesses to a soap-making business,” said Michael Rangel, Novo’s CEO.

Cutting vehicle refinancing costs

Company: MotoRefi

What it does: Connects lenders with auto-refinancing customers

CEO: Kevin Bennett

Founded: 2016

Funding: March 27, Seed funding, $4.7 million

Investors: Led by Accomplice with participation from QED Investors and Motley Fool Ventures

Bank Partners: More than half a dozen credit unions and community banks

What it’s doing with the funds:

MotoRefi connects consumers to vetted credit unions and community banks.

Consumers can receive a new rate after filling out an online form or talking to an agent over the phone. Consumers can upload, email or text their documentation to the platform, and MotoRefi handles origination, title changes and loan payoff. Consumers can lower their monthly auto payments and buy total loss protection.

“Most Americans can’t afford a large, unexpected, out-of-pocket expense, and unfortunately many of these can come from your car, such as transmission problems or even losing your keys, which are now as expensive as iPhones,” said Kevin Bennett, MotoRefi's CEO.

The company claims customers save an average of $100 per month.

"People refinance their homes all the time, but almost never refinance their cars," QED Partner Matt Risley said in a press release. "MotoRefi's user-friendly platform reduces customers' monthly payment and, on average, cuts their interests rates nearly in half."