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BFD Expert Voices - Private Credit

BFD Expert Voices

What if companies reported earnings not quarterly but in real-time? That's the future Dune Analytics founder Fredrik Haga is imagining — a strange new world of radical transparency.

Driving the news: The Norwegian crypto analytics company raised $69.42 million in Series B funding led by Coatue. Multicoin Capital and Dragonfly Capital also participated, vaulting the company to unicorn status.

How it works: In theory, open blockchains are viewable to anyone in real-time. So if a company logged loans individually on an open blockchain, investors would be able to see them. This possibility gets more interesting when considering all the subjectivity around earnings reports. 

Instead of relying on a company's adjusted EBITDA, for example, why not build your own model quite literally from the ground up?

Yes, it's hard to imagine existing giants jumping on the train. Former PepsiCo CEO Indra Nooyi, for example, reportedly advocated for a move away from quarterly reports during the Trump administration.

Haga notes, however, he is not building for the old "dinosaurs" — he is building for crypto projects he believes will be the next financial institutions. Meaning, this is effectively a bet on the growth of the crypto economy.

The dissonance: Venture capital-backed companies often waver and waffle over going public due to concerns that constant oversight can be a drag on innovation. It's why more companies have stayed private longer. 

Lucinda asked Haga about this, noting his company is now venture-backed. He admits this is not a tension he's thought about deeply — but he is taking it one step at a time and says he has seen significant interest on his platform.

"I don’t know what the outcome is, we are just building in the most open way," he says.

Bottom line: Those on the blockchain want to be transparent — but not everyone does. Look no further than the right to be forgotten, or the terrified reactions to China's social credit score. Whether the web3 cohort will usher in a new era of widespread radical transparency remains to be seen.

Yes, but: Outside-the-box thinking around how corporations are shaped and markets are built could have a lasting impact on what capitalism looks like in the next century.

1 big thing: Dune raises at $1 billion

Illustration of a hand holding out a glowing cube.

FTX is living up to its promise to make acquisitions after a big round of fundraising, with the purchase of Japanese crypto exchange Liquid Group.

Why it matters: The deal gives FTX an entry into the Japanese crypto derivatives market as it acquires one of the first exchanges to be licensed for trading those securities.

What’s happening: FTX will acquire Liquid Group and all of its subsidiaries, including Quoine Corporation and Quoine Pte. in Singapore. 

The acquisition is expected to close in March, and FTX users will be migrated to Quoine’s platform at the end of that month. Quoine will also integrate FTX's products and services into its offering.

Be smart: For FTX, this is less about acquiring the tech, and more about getting the local licenses it needs to be in compliance with Japanese laws and expanding service offerings to existing users.

The companies already have a financial relationship: Last year, FTX provided Liquid with a loan of $120 million after the Japanese crypto exchange was hacked and lost more than $90 million in bitcoin, ethereum, and XRP.

Between the lines: The acquisition comes after some major fundraising by FTX, which has used M&A as a major part of its growth strategy: It announced a $400 million raise at a $32 billion valuation on Monday.

At the time, CEO Sam Bankman-Fried estimated FTX and FTX US would make over $500 million worth of acquisitions in the next nine to ten months — adding there would be a fair bit of uncertainty around the total figure.

That does raise some questions about the valuation of Liquid, which was put at over $1 billion in April 2019.

2. The BFD: FTX goes deep in Japan

FTX CEO Sam Bankman-Fried. Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images (Note: The photo credit has been corrected.) 

Interactive Investor, a U.K.-based online investing and retail trading platform, agreed to sell for roughly $2 billion at the end of 2021 to Abrdn, an asset manager.

Why it matters: Buckle up, because this one's a roller coaster. The sale of the company near the peak of the market frenzy represents a rarely seen valuation comeback for a dot-com era bust — and a sizable return for Interactive Investor's main shareholder, J.C. Flowers.

Founded in the mid-1990s and then used as a board for traders to swap tips and pointers, Interactive Investor rode the dot-com era love of all things digital to a roughly £550 million ($742 million) valuation on its first day as a public company in the U.K. in early 2000.

When the bubble began to pop and retail trading interest died off a year later, Australian financial services giant AMP snapped up the business for about £52 million ($70 million). Not long after, Interactive Investor's CEO would helm a group to effectively buy back the business from AMP for a nominal price.

But the story doesn't end in the era of low-rise jeans and bad highlights: In 2016, J.C. Flowers became a majority shareholder, financing its acquisition of TD Bank Group's European direct investing business.

The company now has about £55 billion under management, with over 400,000 customers. Revenue in the first half of 2021 reached £76.1 million ($102.8 million).

The private equity firm made a 9x return on the investment for its fourth fund, and held about 70-75% of the company, a person involved with the deal tells Lucinda. 

That represents a return of over $800 million, net of fees, on the deal for J.C. Flowers' IV fund.

Bottom line: History really does repeat itself, just in different clothes. The Interactive Investor saga — its noted lack of profitability and subsequent fall-off in retail trading — seems oddly similar to the story unfolding for the likes of Robinhood. But it is a good reminder that a bubble and subsequent correction doesn't necessarily mean the death of a company.

3. The unicornization of a dotcom-era bust

NYC leads crypto-VC funding race over Silicon Valley (Bloomberg)

Last year, New York City attracted $6.5 billion in venture capital, accounting for 46% of funding to blockchain or crypto-centric companies, according to CB Insights. 

‘Pay’ product looks to boost stablecoin payments on Solana (CoinDesk)

New software co-developed by Solana Labs intends to help merchants accept crypto payments over the Solana network. Checkout.com, Circle, and Citcon support the product, which also integrates with crypto exchange FTX and ecosystem wallets Phantom and Slope.

Why is Matt Damon shilling for crypto? (New York Times)

Damon is just the latest star who has taken to hawking crypto. Tom Brady and Gisele Bundchen have appeared in commercials for FTX. Reese Witherspoon is a vocal booster, and Snoop Dogg is an NFT aficionado.

4. Credit score

Illustration of a credit score meter with emoji faces showing sad, neutral, and happy emotions.

• KOHO Financial, a Toronto-based fintech startup, closed a CA$210m Series D funding round led by Eldridge, with participation from Drive Capital, TTV Capital, HOOPP, Round13, and BDC. www.koho.ca

• Withco, a New York-based commercial property ownership platform for SMBs, raised over $30m from firms like Canaan Partners, Founders Fund, Initialized Capital, NFX, Enlightened Hospitality Investments and Lennar. http://axios.link/EMYZ 

• Metronome, a San Francisco-based startup getting companies into usage-based pricing models, raised $30m in Series A funding. Andreessen Horowitz led and was joined by General Catalyst, Elad Gil, Lachy Groom and others. http://axios.link/0XOF

• Tint, an SF-based embedded insurance startup, raised $25m in Series A funding. QED Investors led, and was joined by insiders Nyca, Deciens, YC and Webb Investment Network. www.tint.ai

• Casava, a Nigeria-based digital insurance company, raised $4 million in pre-seed funding. Target Global led and was joined by Entrée Capital, Oliver Jung, Tom Blomfield, Ed Robinson, and Brandon Krieg. http://axios.link/ix7g

• Moove, an African mobility financing startup, closed a $10m financing facility from NBK Capital Partners Mezzanine Fund II. http://axios.link/ariD

• GardaWorld, a global security company, acquired Dallas-based Tidel and Sweden-based Gunnebo Group’s cash management business to create Sesami Cash Management. garda.com 

4. Deals of the day

• Airwallex hired Ravi Adusumilli to be the company's SVP as well as its global head of partnerships and business development, and Jas Randhawa as its global head of financial crime compliance. http://axios.link/dWGn

• Kueski, a LatAm BNPL provider, appointed Krishna Venkatraman as its chief data officer. http://axios.link/vy4q

5. It's personnel

Alex Konrad on Twitter congratulates Tom Brady on retiring

🙏 Thanks for reading Axios Pro Fintech! If you're not a subscriber and you've made it this far, you should sign up today.

6. Memes and mumbles

Happy Wednesday, Fintech Deals readers, and welcome to Day 2 of this short month!

Situational awareness: PayPal shares fell about 25% after the company missed on earnings and reported weaker-than-expected guidance for the coming quarters. 

February 02, 2022

1 big thing: Dune raises at $1 billion