Money keeps flowing to fintechs

March 14, 2019 12:20 PM

Fintech funding reached a record high of $11.9 billion in 2018, and startups have continued to attract millions in investments from venture capital firms, private-equity players and banks this year.

The online challenger bank Chime announced a $200 million funding round at the beginning of March, the largest ever for a savings and lending fintech.

In the U.K., startups received financial support from big investors, including one that is backed by HSBC and Goldman Sachs.

Mike Cagney — the founder of SoFi, which ousted him in 2017 — has raised millions of dollars for his new home equity lending startup.

A crypto compliance firm has established partnerships with Barclays and others, and a small-business fintech is looking to add more lending partners to the list of large banks it already serves, including Bank of America, JPMorgan Chase, Wells Fargo, U.S. Bank and Citibank.

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

Record round

Company name: Chime

What it does: Digital bank

CEO: Chris Britt

Founded: 2013

Funding: March 5, Series D, $200 million

Investors: Led by DST Global, with participation from Coatue Management, General Atlantic, ICONIQ Capital, Dragoneer Investment Group and repeat investors Menlo Ventures, Forerunner Ventures and Cathay Innovation.

What it’s doing with the funds:

The company, based in San Francisco, is accelerating growth and launching new products, including a foray into lending.

This year Chime plans to double in size to more than 200 employees. Recently the company added Brian Mullins, former head of risk operations at Square, as its vice president of risk and Aaron Plante, former business unit leader for student loans at Social Finance, as its general manager of lending.

Its latest financing round was the largest by a U.S. challenger bank; the company in total has raised $300 million, which gives it a $1.5 billion valuation.

Chime offers debit cards, savings accounts and checking accounts to its members with promises of no hidden fees. The company earns around 1.5% of the fee on its debit card from Visa. This month Chime passed 3 million accounts.

European neobank on the rise

Company name: Starling Bank

What it does: U.K. challenger bank

CEO: Anne Boden

Founded: 2014

Funding: Feb. 13, Series C and an independent tranche, £75 million ($98 million)

Investors: Led by Merian Global Investors, including the Merian Chrysalis Investment Co. Ltd. and angel investor Harald McPike

What it’s doing with the funds:

Starling Bank plans to further develop its products and services and expand into Europe. Starling is a licensed digital bank that offers personal, business, joint and euro current accounts.

"Our ambition is to use our technology to build a next-generation global digital-banking platform, starting with our launch across Europe this year," Anne Boden, founder and chief executive of Starling Bank, said in a press release.

Since launching in May 2017, Starling has gained 460,000 personal current accounts and 30,000 business accounts. The bank expects to reach 1 million customers by the end of 2019.

It also operates a marketplace that provides customers with access to third-party financial services as well as payment services for banks, e-money institutions, the government sector and corporations. Its banking-as-a-service platform makes the bank’s proprietary banking and payments infrastructure available to third parties.

Starling’s latest product, a euro account, allows U.K. residents to hold, send and receive euros for free.

Mike Cagney's comeback?

Company name: Figure technologies

What it does: Home equity products

CEO: Mike Cagney

Founded: 2018

Funding: Feb. 27, Series B, $65 million

Investors: Led by RPM Ventures and DST Global, with participation from Ribbit Capital, DCM, DCG, Nimble Ventures and Morgan Creek

What it’s doing with the funds:

Figure Technologies aims to bolster its home equity loan product and expand into wealth management. It's all part of the comeback effort by Cagney after his ouster from SoFi two years ago.

Figure uses a combination of artificial intelligence and blockchain technology to shorten what is normally a 45-day process for home equity loan approval and funding. Figure’s loan applicants can receive approval in as little as five minutes and funding in five days.

Wendy Harrington, Figure's chief marketing officer, said last year that Figure’s technology reduces fees, high interest rates and the paperwork associated with home equity loans.

Figure says it has funded more than 1,500 loans across 36 states.

The company also introduced a product called Figure Home Advantage, which is meant to be an alternative to reverse mortgages. The service enables homeowners to sell their homes to Figure, receive cash upfront and stay as renters for as long as they want.

"We are encouraged by what we've accomplished in our first year, and this investment validates Figure's market potential," Cagney said in a press release. "We launched the fastest HELOC in the market, and we originate, finance and sell every one of our loans on the Provenance blockchain, an industry first.”

Small-business fintech

Company name: Nav

What it does: Free credit reports for small businesses, connects lenders and borrowers

CEO: Levi King

Founded: 2012

Funding: Feb. 11, Series C, $44.8 million

Investors: Led by Goldman Sachs Principal Strategic Investments, with participation from Point72 Ventures, Experian Ventures, Aries and CreditEase Fintech Investment Fund

Bank partners: Bank of America, JPMorgan Chase, Wells Fargo, U.S. Bank, Citibank and others

What it’s doing with the funds:

Nav wants to expand its lending partnerships and customer base as it matches small-business owners with the lenders most interested in them.

“Banks are looking for the highest credit quality and larger-dollar loan,” said Greg Ott, the president of Nav. “A small-business owner often has a less-than-perfect credit profile or a smaller-dollar need.”

Nav aims to help small businesses find financing and offers them free access to business and personal credit reports. Its app lets business owners know what sort of loan they qualify for before they apply.

“Imagine a single platform that uses data to anticipate and deliver all of a small-business owner’s financial needs,” Levi King, co-founder and CEO of Nav, said in a press release. “Because we can see the pattern of everything from who gets approved for financing to who has strong cash flow, we can solve for the myriad financial considerations for small businesses. This also means we’re doing legwork for lenders by matching them to the most appropriate candidate.”

Crypto compliance

Company name: Chainalysis

What it does: Cryptocurrency compliance

CEO: Michael Gronager

Founded: 2014

Funding: Feb. 12, Series B, $30 million

Investors: Led by Accel and joined by Benchmark

Bank partners: Barclays, among others

What it’s doing with the funds:

Chainalysis is funding development of new cryptocurrency-related products and opening a London office for research and development and regional expansion.

Over the past year, Chainalysis launched real-time anti-money-laundering and compliance software for cryptocurrencies, Chainalysis KYT (“know your transaction”) and expanded its coverage beyond bitcoin to include Ethereum, Litecoin, Bitcoin Cash and stablecoins.

More than 100 financial institutions and cryptocurrency exchanges signed up for Chainalysis KYT, which automates the process of screening transactions and monitoring user activity.

The company claims to have the biggest database in the world of connections between real-world entities and digital identifiers on blockchain.

“The crypto economy is growing, so insights into how funds are moving around the world in crypto also provide insights into the noncrypto economy and is of huge interest to analysts in banks,” said Michael Gronager, CEO of Chainalysis.

Bank support for API developer

Company name: Bud

What it does: Connects banks to fintech providers

CEO: Edward Maslaveckas

Founded: 2015

Funds raised: Feb. 3, Series A, $20 million

Investors: Co-led by HSBC and Goldman Sachs, with participation from ANZ, Investec, Banco Sabadell, 9Yards Capital and former Man Group CEO Lord Fink

Bank partners: HSBC among others

What it’s doing with the funds:

Bud is adding employees. The company aims to develop banking apps that meet the challenges of the U.K.'s open banking requirements, HSBC said.

Bud's First Direct brand team worked with HSBC Digital Services to develop Artha, which allows HSBC and non-HSBC customers to see all their accounts in one place and track where and how they were spending money. The app also includes features that prompt customers to shop for nonbank products like cheaper energy providers.

In a blog post on Medium, Bud CEO and co-founder Edward Maslaveckas wrote the funding was "proof that some of the world’s most forward-thinking investors think that our model (and our execution on it) represents a real opportunity to change the way people deal with money."

Getting bank applications in sync

Company name: ChartIQ

What it does: Financial applications for capital market institutions, banks and retail brokerages

CEO: Dan Schleifer

Founded: 2012

Funding: Feb. 7, Series B, $17.4 million

Investors: Led by the German growth equity firm Digital+ Partners, with participation from Illuminate Financial Management, Social Leverage and ValueStream Ventures

Bank clients: Nine of the largest global banks, according to the company

What it’s doing with the funds:

ChartIQ is expanding its headquarters, increasing hiring, developing its charting software for capital markets and adding more integrations to its Finsemble product, an application that brings together and syncs native and web applications on one screen.

“Finsemble is starting to be used well outside of capital markets in other parts of the financial institution,” said Dan Schleifer, CEO and co-founder of ChartIQ. “Parts of the institution where you have valuable employees in front of a computer trying to use a lot of different applications to do their jobs and service the customer.”

Currently the company has 50 employees around the globe with offices in New York and London.

“Our version of R&D is not guys locked in a dark room somewhere trying to invent the crazy next thing,” Schleifer said. “It’s sitting down with financial institutions and their heads of business and trying to understand the problems they have.”

At some banks a single user will have more than 20 applications across six to nine screens that are not synced, said Patrick Beitel, partner at Digital+ Partners.

"Part of what made Finsemble such a compelling investment opportunity for us is the use cases that banks are addressing in wealth management, loan origination, commercial banking, risk management or regulatory compliance like anti-money-laundering automation," he added. "Capital markets may be leading the charge, but what we're seeing is firmwide digital transformation."

Facebook veteran on transaction compliance

Company name: Beam

What it does: Transaction compliance

CEO: Ben Duranske

Founded: 2016

Funding: Feb. 28, Debt financing, $2 million

Investors: Led by Greycroft Partners, with participation from Canaan Partners, Broadhaven, Conversion Capital, Plug and Play and Slow Ventures

What it’s doing with the funds:

Beam is using the capital to expand its sales and engineering teams.

Beam’s technology allows banks to see multiple data streams at once and uncover patterns in that data, said Michael Gilroy, partner at Canaan Partners. With the company leadership’s background in compliance and regulation at Facebook, Xoom, PayPal and New York state, Beam beats its competition based on experience, Gilroy said.

“As an industry we’ve been boxed in by technology,” CEO Ben Duranske said in a recent interview.

“When computers got fast enough to review all transactions, regulators started to expect that’s exactly what banks would do," Duranske said. "So as new money laundering schemes, new human trafficking schemes, new terrorist financing schemes’ mechanisms developed, it became incumbent on banks to monitor for all those things. The way they did that was with these huge rule sets.”