Issue #49: Pilot Secures More Funding, Nike Gets Down With Social Commerce And Visa Settles A USDC Transaction
👋 Hi, FR fam. I hope you’ve all had a great week.
NFTs are going off right now! So in honour of the latest blockchain craze, let’s kick things off this week with a video that highlights just how crazy peeps are getting over NFTs 😆
📣 The News Grab Bag
MobiKwik eyes listing in India ◌ Westpac expands BaaS offering ◌ The FCA cracks down on Wirex ◌ Fiserv buys pineapple payments ◌ Afterpay launches virtual cards ◌ Revolut launches business accounts in the US ◌ Cash App users can now send bitcoin to each other ◌ Coinbase listing is pushed to April ◌ Wirecard Turkey gets snapped up by (checks notes)… a VC fund ◌ Walgreens launches a bank
📈 Notable Funding Announcements
It was another big week for financings in the world of fintech. In total, 63 funding rounds were announced, totaling $2.2b.
👨✈️ Pilot Raises An Additional $40m In A Series C Extention →
Back office-as-a-service provider, Pilot, last week announced they’d closed an additional $40m in an extension to their Series C funding round, which they announced earlier this year. The additional funds bring the total round to $100m and values the startup at $1.2b.
🤓 My Take: This week, I thought I’d discuss some rounds raised by companies servicing the SME space. To kick things off, let’s talk about back office-as-a-service provider, Pilot.
In case you haven’t heard of Pilot, they essentially provide accounting and tax services on demand using a “people + software” approach. The origins of the company, as you might expect, came from a personal pain point the founders experienced at a previous startup:
When we founded Pilot four years ago, Jessica, Jeff, and I wanted to solve a problem we’d faced ourselves at our previous startups: managing the back office is both really important and really painful for every business owner out there. Tending to our bookkeeping, taxes, R&D credits, and budgets was a costly distraction from running our actual business—but one we couldn’t ignore. We started Pilot to solve this problem for business owners everywhere, freeing them to focus on the actual reason they started their business in the first place.
Sounds great! There isn’t an SME owner who doesn’t hate doing the books, running the numbers for reporting, and managing tax obligations. Yuck! In the press release announcing the round, one of the investors puts their proposition in even stronger (and pitch deck friendly) terms: “[Pilot] is doing for the back office what AWS did for computing – making it easy, scalable, and on-demand.” Lucky Jeff Bezos is an investor!
Taking back-office tasks and converting them into software is the core of Marc Andresson’s now-infamous “software is eating the world” mantra. However, it turns out that converting services-based business into software can be incredibly hard and operationally complex. In the case of professional services, the magic lies in eking out every last drop of operational fat and marrying that with high-quality advice and service to match — think the operational excellence of DoorDash meets the intellectual rigour and client orientation of a Big 4 accounting firm.
Isn’t software perfect for solving this type of problem? It can be, but it’s damn hard, as Justin Khan illustrated when his legal services startup (essentially doing the same but for the law) shut down after raising $75m. As Justin Khan put it in a long tweetstorm reflecting on the startup’s closure:
It’s clear there is whitespace for companies to turn professional services businesses into software, and accounting seems like a logical place to do that — and clearly, companies like Pilot and Bench are doing well to garner the funding rounds they’ve been able to raise. However, these end up being logistics + human capital businesses more than anything else, and that’s a tough business to run. But then again, if it was meant to be easy…
🆔 Middesk Raises $16M Series A →
Middesk last week announced a $16m Series A round led by Sequoia Capital. The round also had participation from existing investors Accel Partners and Y Combinator.
🤓 My Take: If you run a fintech startup that has to onboard SME customers, you do a quick fist pump when your Google search turns up a company like Middesk.
For context, Middesk provides direct access to federal, state, and local governments records for the US market. More specifically, they allow companies to tap trusted government data on every registered business in the US via an API. This allows fintech startups to run compliance processes, monitor fraud, and even collect information to be used as a data point for underwriting decisions.
To those who haven’t had to collect this kind of data, it’s the worst. It’s usually the case that you’re asking customers to send you hard copies of documents to show when and where their company was incorporated. These tend to be months (if not years) old, which means information about the company could be out of date. As you can imagine, this quickly escalates into an unruly and paper-based process.
If you’re a regular reader of FR, you’ve probably picked up my affinity for the identity space. The number of solutions that this space still needs sometimes feels limitless, and Middesk is another great example of what looks like a niche problem that is, in fact, a massive pain point experienced by startups like Brex, Affirm, Mercury, Divvy, and BlueVine (all who are Middesk customers) daily.
☝️ Things You Should Know About
🪙 Visa Settles The First Transaction In USD Coin →
Visa has had a hard time of it lately. Firstly, having to pull the pin on their Plaid acquisition and then, more recently, the US justice department probing their debit card practices — it really must feel like the regulators are continuously torching them.
It’s clear that Visa has some serious existential concerns over being disintermediated by emergent payment rails — and so they should. If you recall from the Plaid acquisition, the infamous Volcano drawing hinted at the risk that open banking providers could disintermediate the schemes through direct payment initiation (PIS). Having said this, PIS seems like a small competitive risk when you compare it to the slew of cryptocurrencies out there that could operate as payment channels. In this regard, it’s not surprising that Visa is trying to get ahead of the curve and investigate how they can take advantage of programmable stable digital money.
👟 Nike Building In-house Social Commerce App Aimed at Gen Z →
In this week’s installment of “everything is fintech,” Nike is looking at launching its own social commerce app called, Nothing But Gold.
Back in issue #32, I discussed social commerce in the context of Shopify trying to get into the segment. As a reminder, social commerce is a huge business in markets like China. It’s estimated that China's live commerce market for 2019 was worth $63b (an increase of 220% over 2018), with 71% of users watching a live commerce event at least once per week. In this regard, it’s no surprise companies like Nike are trying to get into the world of social commerce.
However, what makes this such a challenging space to get into is that it requires distribution. Notably, most Chinese platforms in this space are social networks first and foremost and monetise through live social commerce. I’d imagine Nike takes the view that they can bring their massive reach to this new platform, and with 400m downloads of their SNKRs app, it seems like a fair assumption to make.
What’s interesting about this is that Nike is thinking about using commerce as a monetisation strategy. The days of advertising and more broadly monetising the user (vs. their actions on the platform) are over. Another great example of this was Clubhouse launching tipping as their first monetisation strategy this week. Yep, everything continues to become fintech.
🇧🇷 WhatsApp Payment Service Gets Go-Ahead For Brazil Relaunch →
After a horror start to their payment service in Brazil, WhatsApp is finally launching payments 🥳
According to the article, the messaging service owned by Facebook was granted a license that allows '“the usage of WhatsApp for initiating funds transfers among cardholders from Visa and MasterCard under the Facebook Pay program.”
Watch out Brazil, here comes another way to pay!
🎧 Podcast Recommendations
💳 Behind the Marqeta partnership with Deserve's Kalpesh Kapadia → It seems like every fintech is looking to launch a credit card. However, it’s a much more complex process than issuing a debit card, and that’s where program management as service companies like Deserve come in. In this podcast, Deserve’s Kalpesh Kapadia talks about their recent partnership with Marqeta and what that means for companies looking to roll out a credit card of their own.
🏦 Insights: Banking Architecture - How should banks structure their technology? → It’s been a while since I last dropped in an 11FS podcast into the recommendations section, but that’s because I assume everyone in fintech listens to the dulcet British tones of the 11FS team on the regular. Having said this, I’d highly recommend this episode — especially if you work in tech at a bank!
❤️ Show Some Love For FR
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