Issue #58: Nubank Snags Money From Boomershire Hathaway, Dave Is Going Public And Taproot Is locked In

👋 Hi, FR fam. I hope you’ve all had a great start to the week.

Let’s kick things off with this hilarious tweet (H/T @tobyeggleston). Warning, it might also trigger PTSD for anyone who’s ever had to partner with a bank. If you know, you know.

📣 The News Grab Bag

AUSTRAC gets ready to enforceSquare is investing $5 million to build a solar-powered bitcoin mining facility ⚬ Is the fintech v big bank war over? ⚬ Bank of Ghana is working towards CBDC pilot ⚬ Wealthfront is embracing crypto ⚬ Goldman Sachs buddies up Visa for corporate paymentsMeet the early-stage fintech startups luring in Gen Z ⚬ Federal appeal overturns New York block on US Fintech Charter ⚬ Yet another big NFT sale at Sotheby’s

📈 Notable Funding Announcements

It was another big week of funding announcements in the world of fintech. In total, 69 funding rounds were announced, totalling $4.2b.

🇧🇷 Nubank Raises Another $750m In Their Series G Extention

Last week, Brazilian challenger bank Nubank announced they’d raised $750m in an extended Series G round that had participation from Berkshire Hathaway, Sands Capital, CPP Investments, and MSA Capital.

🤓 My Take: I’ve written fairly extensively in previous issues of FR about the fintech Cambrian explosion currently underway in the LatAm market and, more specifically, about the jewel in the region’s fintech crown that is Nubank. Having said this, I never get tired of talking about the amazing success story that is Nubank.

This additional round of funding tops up Nubank’s January $400 million Series G raise, bringing the total round to $1.15b and raising their valuation by a lazy $5b (going from $25b to $30b that time). It’s easy to look at the eye-watering valuation and forget that Nubank is the largest challenger bank globally (and has been for a while) with over 40m customers across Brazil, Mexico, and Colombia. Moreover, according to this TechCrunch piece, they’ve added ~6m customer in the last six months — or around 45,000 per day. Now that’s some serious growth, even by fintech unicorn standards.

When looking at growth regions like LatAm (Africa, the subcontinent, South East Asia etc.), it is easy to get lost in the unbanked/underbanked part of the growth story — don’t get me wrong, it’s a significant part of it as Nubank’s CEO, David Vélez highlights in this comment:

Around 50% of the population in Latin America still does not have a bank account. Credit card penetration is, on average, 21%, while in the United States this number is over 70%.

However, what sometimes gets lost in the mix is just how good the product has to be in countries where you’re competing against hyper profitable entrenched providers (like is the case in Brazil) or in markets where you’re competing against cash — which in many instances can be the most challenging type of incumbent to displace. Nubank is an excellent example of a polished product that hits the mark in a way that has (obviously) resonated with its core market demographic.

This round also highlighted that the rest of the financial world is paying close attention to what Nubank is up to and, more importantly, opening up their chequebooks to get involved in their story. Specifically, in this round, Boomershire Hathaway (😂 ) came in with a hefty $500m cheque, showing that even the Oracle of Omaha gets that fintech in LatAm is the next big, big thing.

💰 Ledger Raises $380m

Crypto hardware wallet startup Ledger last week announced they’d closed a $380m funding round. The round was led by 10T Holdings and had participation from Cathay Innovation, Draper Associates, Draper Dragon, Draper Esprit, DCG, and Wicklow Capital. This round of funding brings the company’s valuation to $1.5b.

🤓 My Take: For those who aren’t HODLers, this might be the first time you’ve heard of Ledger. For the uninitiated, the French startup makes a hardware wallet that you use to secure your crypto. If you’ve ever heard the phrase “not your keys, not your crypto”, well Ledger allows you to hold your keys securely so that your crypto is, in fact, yours.

Ledger has to date sold 3m hardware wallets and has 1.5m people using Ledger Live every month — the company’s software product that allows you to manage your cold-stored crypto. This might not sound like much, but as crypto continues to go mainstream, the need to securely custody crypto is becoming critical — especially as we see more instos enter the space and concerns over cyberattacks continue to rise.

It’s an interesting market that continues to grow at a reasonably brisk pace1 and will only get bigger as more HODLers look to better secure their precious crypto and as we see more assets being put onto a blockchain.

☝️ Things You Should Know About

💸 Dave To Go Public Via A SPACs

Last week, personal finance app Dave announced they’d be going public by way of a SPAC. According to reports, it’s expected Dave will go out at a $4b valuation — which is a 4x increase in valuation over its 2019 capital raise.

When most think of US challenger banks, Dave isn’t one that usually comes to mind. In part, this is because Dave tends to be focused on the cash advance segment of the market, with their value proposition being focused on saving customers money on overdraft fees — vs the more transactional focused competition like Chime or Square’s Cash App. This might be why the investor presentation released by the company in preparation for the SPAC caught some by surprise.

Dave now has 10m customers and is on a $193m revenue run rate for 2021. Interestingly, the vast majority of their revenue comes from “services revenue”— this relates to revenue generated from users engaging in cash advances for overdraft protection. This is a vastly different revenue stream to what we usually see from challenger banks, who tend to generate the lion’s share of their revenue from interchange fees.

It’ll be interesting to see if the public markets take to the Dave story. Regardless of whether there’s pop on the first day of trading, it’s likely the listing will be a harbinger of what we’ll see when other challenger banks list. I’m sure the likes of Chime, Stash, and Current are all be paying close attention to this one.

🇸🇻 El Salvador’s Legislature Votes to Adopt Bitcoin as Legal Tender

What started with El Salvador’s President going full crypto lazer eyes ended mid last week with the country passing laws to accept bitcoin as a legal tender.

Again, this isn’t one that I had on my bingo card for 2021, and I think it caught many by surprise. Although it’s hard to say how this will impact El Salvador’s economy, it’s an interesting move that I’m sure has many countries currently pegged to the USD thinking about whether to follow suit.

Having said this, not everyone is drinking the crypto Kool-Aid. For example, in a client note, JP Morgan thought there was little tangible benefit from El Salvador's move to accept Bitcoin as legal tender.

As with the dollarization in the early-2000s, this move does not seem motivated by stability concerns, but rather is growth-oriented […] But it is difficult to see any tangible economic benefits associated with adopting Bitcoin as a second form of legal tender, and it may imperil negotiations with the IMF.


🌲 Taproot Is Locked In

Yes, this is another bit of crypto news—apologies in advance to all the non-HODLer FR readers.

I thought I’d add this one in as it’s been a while since we’ve seen a significant upgrade to the bitcoin network. In fact, we haven’t seen a significant update since the 2017 implementation of SegWit. Taproot brings with it a slew of changes. Most notably, it signals bitcoin’s move away from the current elliptic curve digital signature algorithm (ECDSA) to Schnorr signatures — improving transaction privacy and allowing for more complex types of transactions.2

Although this isn’t a radical change to bitcoin, it does open up new functionality that will likely lead to further innovation on a chain that could do with some.

🎧 Podcast Recommendations

As usual, this week, we have some recommendations that are sure to be great additions to your weekly podcast rotation. Here we go.

Running a Consumer Fintech Startup within Goldman Sachs → This is a little different to the podcast recommendations I usually make, but I promise it’s well worth clicking the ‘add to playlist’ button on this one. This podcast is an overview of the HBS case study on the challenges of launching and operating a startup within Goldman Sachs by the Prof who wrote it. Super interesting and well worth a listen.

Quicken CEO Eric Dunn – Pioneering Fintech and Transforming Personal Finance Technology → This is a fascinating and wide-ranging conversation with Quicken’s CEO, Eric Dunn, where he discusses his time at Quicken (35 years!) and what they’re up to now. Well worth adding to this week’s playlist.

❤️ Show Some Love For FR

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According to Mordor Intelligence, the global hardware wallet market is valued at around $200m as of 2020 and is expected to grow at a CAGR of 26.72% over the next five years.


If you want to know more about Taproot, check out this article for a concise explanation.