Mercury CEO on the state of fintech investing

Mercury, a San Francisco-based fintech, reached a $1.6 billion valuation last year by serving as a bank to other startups. Immad Akhund helms the company.

Why it matters: Mercury to an extent has an overview of the health of the earlier-stage venture ecosystem, given its role managing the finances of young tech companies.

• Axios sat down with Akhund to hear more about what he's seeing across the fintech landscape. This conversation has been lightly edited for clarity.

What are you seeing in the data in terms of dealmaking for Q3?

• I would say this summer — basically starting in June — has been the worst fundraising climate I have seen since 2009. Everyone knows it's such a bad time to raise that the only people going out to raise are the ones that really need it.
• Crypto is the only thing that's still active. Crypto companies are about 20% of our deposits.
• I think that we're expecting, and most entrepreneurs are expecting, the dealmaking to pick up again in September since there's a lot of VCs with dry powder. But they definitely took the summer off.

It's been over a year since you raised capital. In theory, you should be out there again now.

• We, like a lot of other fintechs, raised a lot more money than we needed. So we're not on the market at the moment. We still have more than $90 million in cash in the bank, and we're making pretty good revenue. We're also continuing to grow. We were about 200 at the start of this year, now we're at 344.

What about inbounds from VCs? Fintechs last year seemed to be buried in those emails.

• Anecdotally, it's been super quiet through June, July. But I have seen growth investors at least come out to say, "Let's have a meeting."

• What's also interesting: I'm not hearing at all from the crossover funds. It's all dedicated VC funds. The crossover funds have completely disappeared.

And how are you being impacted by the interest-rate environment? Most of your revenue historically came from interchange.

• One thing that this environment helps is that we have a reasonably big deposit base, so higher interest rates lead to higher revenue for us. That's been the big growth drivers since interest rates have gone from zero to 2.5%.

You're an active fintech investor, too. You've invested in Jeeves, AtoB and Rappi. What's piquing your interest currently?

• Affinity banks. The idea is that previously, you used to have regional banks that were your city and because of that you'd bank them. Now there are affinity banks based around identity. There are a few that are like LGBTQ-focused, for example. There's one that's Spanish-focused.