Issue #65: DriveWealth Secures The Bag, Robinhood Is Really A Crypto Exchange, And OnlyFans Feels The Squeeze

Aug 24, 2021

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

Let’s dive straight into this week’s issue with the News Grab Bag.

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📣 The News Grab Bag

Did fintech lenders facilitate PPP fraud? ⚬ Paypal drops BNPL late fees ⚬ Marqeta gets green(er) ⚬ Klarna says "Cześć!" to Poland ⚬ Thailand, Indonesia debut cross-border QR payment linkage ⚬ How Coinbase Ventures became one of crypto’s busiest VCs—without any full-time staff ⚬ CBA avoids court-ordered notifications in its banking app ⚬ How Revolut’s ‘Super App’ strategy could shake up U.S. banking ⚬ Selling an NFT on OpenSea — a UX case study ⚬ The hottest fintech market you aren’t paying attention to ⚬

📈 Notable Funding Announcements

It was a slightly quieter week for funding announcements in the world of fintech. In total, 44 funding rounds were announced, totalling $1.8b.

🚙 DriveWealth Raises $450M Series D Valuing the Company at $2.85B ⇢

Last week brokerage infrastructure provider, DriveWealth announced a monster $450m Series D round of funding led by Insight Partners and Accel. The round also had participation from Greyhound Capital, Softbank Vision Fund, Point72 Ventures, Fidelity International, Base 10, FTX, and FlightDeck.

🤓 My Take: If you’ve bought half a share in Google or Amazon in a fintech app outside of the US, DriveWealth was likely behind the trade’s execution. In fact, little known fact, DriveWealth powers over 100 fintech startups globally that provide fractional trading of US stocks, including Revolut, MoneyLion, Vested, and Stake, to name a few.

The vast majority of players are highly localised in the world of fintech infrastructure. Whether that’s BaaS companies that serve one market or a payments provider that services a specific region, it’s actually rare to find a company that has expanded into as many markets as DriveWealth. In fact, whether you’re in Nigeria or Australia, you’ll probably find a fintech startup using DriveWealth to power its US fractional share trading product. Don’t believe me? Just check the PDS.

I’ll be the first to admit there’s a bunch of froth in current fintech valuations — if you’re an ex-Stripe engineer building a fintech infrastructure product, VC dollars are not in short supply. However, under-discussed are players like DriveWealth, who are building actual global financial infrastructure that powers companies that are themselves garnering $100m+ valuations solely on the back of DriveWealths infrastructure. It’s easy to get excited about Stripe’s cool new landing page, spruiking a product only available in the US. However, quietly, platforms like DriveWealth (as in the Bill Gates definition of a platform) are being built that power important and profitable business lines for a whole range of fintech startups.

⚰️ Insurtech Breeze Raises $10 Million Series A Round ⇢

Insurtech startup Breeze, last week, announced a $10m Series A that Link Ventures led with participation from Northwestern Mutual Future Ventures & Silicon Valley Bank.

🤓 My Take: Insurtech has been a hot segment in fintech for a while. However, it’s actually been a thin slice of the insurtech industry that has garnered most of the interest and capital, for that matter.

Companies like Lemonade, Oscar and Root tend to take the lion’s share of media mentions. In fact, most of the capital flowing into the sector goes to the health, automotive and home insurance segments.

Source: As Insurtech Exits Spike, More VC Money Piles Into The Space, Crunchbase

This totally makes sense, given it does form a large part of the broader insurance sector. However, under-discussed are the more antiquated segments still dominated by insurers with the words ‘State’ or ‘Mutual’ in their name. A great example of this is life and disability insurance.

There’s some really interesting data, which suggests that policy coverage for life and disability insurance is still fairly low amongst Millenials. As Breeze notes in their press release announcing their round, “…over 25% of today's 20 year-olds will become disabled before they retire, yet the U.S. individual disability insurance market remains very small with only around $430 million written in premium in 2020”. Those are some significant numbers.

It’ll be interesting to see if, like what we saw with Lemonade entering the home insurance segment, a better product that actually clearly explains what you’re purchasing can make a dent in this antiquated industry.

☝️ Things You Should Know About

🤑 Brex Acquires Weav for $50m ⇢

Last week fintech unicorn, Brex, announced they’d acquired commerce API company Weav for $50m.

You may recall earlier this year, Brex announced they’d start offering instant payouts for certain types of e-commerce businesses. It turns out this product was powered by Weav, who provided the data pipes.

At this size of an acquisition, it might have been an acquihire. However, it might also be Brex realising that the middleware space is one worth having more exposure to — it’s worth noting Brex co-founders Henrique Dubugras and Pedro Franceschi were both seed investors in Weav. Regardless, it’s a clever acquisition that will not only open up Brex’s geographical talent footprint (Weav is an Israel-based company) but also provide it exposure to the growing e-commerce middleware segment.

🛑 OnlyFans Bans Sexually Explicit Content ⇢

OnlyFans this week announced they were pivoting away from sexually explicit content. In part, it was apparently to attract fresh capital from investors. According to reports, they’ve been having difficulty raising capital despite generating $375M net revenue in 2020.

Beyond the reported challenges around raising, it was also highlighted that OnlyFans was looking to subdue concerns from their payment processors.

If you’ve spent any time dealing with payment processors or banks, you’ll know that industries like porn are segments they tend to try to stay well clear of. In fact, they’re seen as such a high risk (rightly or wrongly) that in many instances, they’d rather stay away than service this highly lucrative sector. In the case of OnlyFans, it’d be incredibly lucrative on the numbers being reported by Axios.

Gross merchandise value (GMV):

2020: $2.2 billion
2021: $5.9 billion
2022: $12.5 billion

Net revenue:

2020: $375 million
2021: $1.2 billion
2022: $2.5 billion

As much as it pains me to say it, maybe this will be a catalyst for crypto payments. Watch out, here comes SpankChain!

🏹 Robinhood Is Really A Crypto Exchange ⇢

Robinhood released its first earnings report as a public company last week. The company reported revenue of $565m for the quarter and announced that it had doubled its base of monthly active users to 21.3 million, compared with 10.2 million a year ago. However, despite the growth, the trading platform reported a net loss of $502m.

Interestingly, the company also reported that nearly half of its revenue was from crypto — with more than 60% of the crypto volume being in Dogecoin.

It turns out Robinhood might actually be a crypto exchange after all.

🎧 Podcast Recommendations

Here are this week’s podcast recommendations. Enjoy👂

Modern Treasure: The 3 Pillars of Modern Treasury with Sam Aarons ⇢ I’ve written about payment ops in previous issues of FR and its growing importance to fintech companies. This is an excellent podcast on how one of the best infrastructure companies in the space helps fintech startups manage their payment ops function. Well worth a listen.

Are NFT Sneakers for Real or Just a Scam? Bobby Hundreds Explains ⇢ Need NFTs explained to you? Listen to this podcast as Bobby Hundreds enlighten you on why they’re so interesting to the fashion industry. Seriously, this is worth listening to — especially if you’re a sneakerhead.

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