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BFD Expert Voices - Private Credit

BFD Expert Voices

President Biden will issue a wide-ranging executive order today for multiple government agencies to develop policy recommendations on digital assets and cryptocurrencies.

Through the order, the White House seeks to understand the technology's risks and potential benefits.

Why it matters: The order is an acknowledgment that crypto is here to stay, and moves the government one step closer to a policy framework that would legitimize — and regulate — its use in the U.S.

State of play: With the executive order, Biden aims to create a national policy for digital assets by working with multiple agencies in tandem: 

The Treasury Department is expected to come up with recommendations on consumer and investor protections.

Treasury is also asked to produce a report on the future of money and payment systems, assessing how big of a role cryptocurrencies may have in it.

The Financial Stability Oversight Council is expected to identify economy-wide, systemic financial risks posed by crypto and offer up recommendations to address regulatory gaps.

The Commerce Department is asked to establish a framework that would leverage crypto technologies to reinforce U.S. leadership in the global financial system.

Finally, the order encourages the Federal Reserve to research the possible development of a U.S. central bank digital currency.

What's next: Each of the agencies has its own timeframe for developing policy recommendations — some are 60 to 90 days, others as long as 180 days.

"My expectation is that, once the reports are finished on the accelerated timeline the executive order requires, we would move quickly to act on the recommendations they have provided," one senior administration official said.

Worth noting: The order mentions the need to mitigate financial and national security risks posed by the illicit use of cryptocurrencies.

However, when asked about Russia using crypto to avoid sanctions, an official said, "The use of cryptocurrency we do not think is a viable workaround to the set of financial sanctions we've imposed across the entire Russian economy, and in particular, to its central bank."

What they're saying:  "Today’s Executive Order... represents a landmark for the web3 community. It signals a long-term commitment by the White House to support innovation and American leadership in the space, and ... it moves web3 closer to realizing its potential," writes Tomicah Tillemann, chief policy officer of Katie Haun's new firm. 

1 big thing: Biden's crypto EO

Illustration of a torn hundred dollar bill revealing binary code beneath

The "hidden unicorn" was how one investor in December described AngelList Ventures, a fundraising tech company that is known by all in the venture world yet had never publicly disclosed a valuation.

That changed in one fell swoop on Tuesday. The company revealed it raised $100 million at a $4.1 billion valuation, with Tiger Global leading the round. The raise, which also included Accomplice, came together in roughly two weeks.

Why it matters: Tiger Global may be pulling back from late-stage investing, but it's far from pulling out of venture capital. Betting on AngelList is akin to betting on an index of the industry.

Context: AngelList — whose goal is to make the complex fundraising process as simple as "the tap of a button" — had its start focusing on the earliest stages of investing and has grown rapidly as the venture capital industry has matured. 

The burst of IPOs last year certainly helped, turning its employees into thousands of new angel investors and solo capitalists.

A string of successful products, including the rolling fund, have also cemented the company's ubiquity in the industry — making it easier for an individual to become a VC.

While early-stage funds are still the largest mix on its platform, its tech has increasingly attracted the later-stage ecosystem. AngelList says 43% of U.S. unicorns have raised funding via its platform.

What they're saying: "This is an optionality fund," says CEO Avlok Kohli, quoting Warren Buffett's famous quote on being greedy when others are fearful. "We wanted to make sure we were well-positioned to lean in on opportunities because we are at a major inflection point."

The company is also "not thinking about an IPO at this point," he adds.

Of note: AngelList has in fact grown faster than the industry. 

By the end of 2021, the company's assets supported metric had grown to $10 billion — up more than three times from the year before, while U.S. venture funding roughly doubled in the same period.

2. The BFD: AngelList becomes a $4B company

Illustration of a giant cursor breaking the ground underneath it.   

Roughly a month after canceling its SPAC deal, Acorns is now raising $300 million in private funding from a group of investors led by TPG in a deal valuing it at around $2 billion.

Other investors in the round include BlackRock, Greycroft, Senator Investment Group, Torch Capital, Industry Ventures, Blue Owl, Bain Capital Ventures, Headline, Galaxy Digital, and Kevin Durant and Rich Kleiman’s Thirty Five Ventures.

Why it matters: Many of these names were existing Acorns investors that also participated in the SPAC's PIPE deal. In some ways, Acorns divorced the messy go-public portion of the SPAC — but kept much of the PIPE.

Context: Acorns in May said it would go public via a merger with Pioneer Merger Corp., adding it would also raise a PIPE from investors such as Wellington Management, Senator, Declaration Partners, Greycroft, and TPG's The Rise Fund.

Wellington is the only one on that list that was not already an investor in Acorns, meaning the fintech already had most of these relationships prior to the SPAC deal. 

In short, it didn't really need the SPAC to build the PIPE.

Yes, this new stay-private deal means Acorns is raising less capital ($300 million in Wednesday's funding round vs. $450 million it would've received from the SPAC). 

But it gives Acorns a higher pre-money valuation at $1.6 billion, compared to the $1.5 billion SPAC price. It also means less dilution for existing shareholders, and that Acorns no longer has to pay a sponsor promote.

More importantly, it is avoiding the untold cost of going public in a bad market, at a time when many fintechs, regardless of growth, are being hit hard. 

"We're raising $300 million in the private markets — it's a very important distinction," said CEO Noah Kerner when asked about the lower amount of capital raised.

Now the company plans to use the funding to get to profitability and, eventually, a traditional IPO.

The bottom line: One private market dollar is now worth more than a public one in the eyes of founders. Acorns is waiting for that calculus to shift.

Editor's note: This was corrected to show that Acorns’ higher pre-market valuation was $1.6 billion vs. the $1.5 billion SPAC price, not $1.7 billion vs. a $1.6 billion SPAC price.

3. Acorns cuts out the SPAC

Illustration of pipes shaped like a dollar sign.

The number of cryptocurrency lobbyists nearly tripled since 2018 (Public Citizen)

Lobbying spending attributable to the cryptocurrency sector quadrupled from $2.2 million in 2018 to $9 million in 2021.

The biggest lobbying spenders in the cryptocurrency sector were Coinbase, Ripple Labs, and Blockchain Association, each of which spent over $2 million on lobbying between 2018 and 2021.

Federal regulators accuse 2 siblings in $124M crypto scam (AP)

The SEC alleged in a civil lawsuit that John and JonAtina Barksdale used in-person road shows around the world and social media to sell fraudulent investments related to the so-called Ormeus Coin.

How Dapper Labs is making web3 safe for normies (Fast Company)

The success of Dapper's NBA Top Shot has led to deals with other A-list sports entertainment partners, like the NFL, La Liga, and the UFC.

4. Credit score

Illustration of a credit card headed towards a goal post to score a touchdown.

• Money View, an Indian online financial services provider, raised $75m in new funding from Tiger Global, Winter Capital, Evolvence India, and Accel. http://axios.link/OSOa

• Branch, an employee payment startup, raised $75m in Series C funding led by Lee Fixel’s Addition, with participation from General Atlantic, Drive Capital, Crosscut Ventures, and Indeed. http://axios.link/I6ut

• Argyle, an employment income verification startup, raised $55m in Series B funding led by SignalFire, with participation from Bain Capital Ventures, Bedrock, and Checkr. http://axios.link/W86d

• Forma (formerly Twic), a Fremont, Calif.-based discretionary benefits management platform, raised $40m in Series B funding. Ribbit Capital led, and was joined by insiders Emergence Capital, Stripe, Designer Fund, Upside Partnership and AngelPad. http://axios.link/RBQ8 

• Canal, an SF-based connected commerce startup, raised $22.5m in Series A funding led by Forerunner Ventures. www.shopcanal.com

• Selfbook, a New York-based provider of hotel payment software, raised $15m in new Series A funding led by Tiger Global at a $300m valuation. http://axios.link/1uTG 

• EthSign, a web3 infrastructure startup, raised $12m in seed funding from three units of Sequoia — Sequoia Capital, Sequoia Capital India, and Sequoia Capital China. Other investors include Mirana Ventures, Amber Group, Circle Ventures, NGC Ventures, HashKey Group, and Matrixport. http://axios.link/kxHK

• Key, a Toronto-based co-ownership proptech startup, raised C$11m in seed funding led by Luge Capital. http://axios.link/4Ti0

• WalletConnect, a web3 infrastructure startup, raised $11m in a Series A funding round led by Union Square Ventures and 1kx, with Coinbase Ventures, Semantic Ventures, Zerion and others participating. http://axios.link/GyeZ

• CoFi, a construction financing startup, raised $7m in seed funding from Blackhorn Ventures, Metaprop, and Tenacity. www.cofisoftware.com

• KurateDAO, a "curate to earn" database built on the blockchain, closed $6.85m in seed funding led by Polychain Capital. http://axios.link/VZB7 

• mmob, a London-based embedded finance startup, raised a £5m seed round. http://axios.link/XsQB

• Acasa, a Bogotá, Colombia-based “buy before you sell” financing firm, raised $4.7m in seed funding led by Quona Capital, with participation from Metaprop, Wollef, Y Combinator, and several angels. The platform also raised $33m in debt financing led by Architect Capital. https://www.acasa.com.co/

• Atlantic Money, a London-based money transfer startup, raised $4.5m in seed funding led by Amplo and Ribbit Capital, with participation from Kleiner Perkins, Index Ventures, Harry Stebbings’ 20VC, Elefund, Day One Ventures, and Susa Ventures. http://axios.link/LIYL

• Cega, a DeFi derivatives startup, raised $4.3m in seed funding. Dragonfly Capital Partners led, and was joined by Pantera Capital, Coinbase Ventures, Alameda Research and Solana Ventures. http://axios.link/b0nj 

• BearTax, a cryptocurrency tax startup, raised a $3.2m seed round led by Ascend VC, with participation from BAM Ventures, defy.vc, Draper Startup House, Hustle Fund, Tacoma Venture Fund, Sketchnote Partners, Liquid 2 Ventures, and more. http://axios.link/VQuZ

• Noh, a São Paulo-based fintech startup, raised $3m in seed funding led by Kindred Ventures, with participation from Positive Ventures, Twitter co-founder Biz Stone and Frederick Blackford’s Future Positive fund, The Twenty Minute VC, and Propel Venture Partners. http://axios.link/yG6D

• Yep!, a Nigerian digital banking startup, raised $1.5m in pre-seed funding led by pan-African VC Greenhouse Capital. http://axios.link/Sr0F

•  Blockdaemon acquired Gem, a cryptocurrency API company with a fiat-to-crypto on-ramp. https://gem.co/

• Social investing firm Public acquired Otis, a startup that allows consumers to buy and trade fractional shares in individual alternative assets. http://axios.link/gCHp

• Lovell Minnick Partners invested in STP Investment Services, a Philadelphia-based investment operations service provider. https://stpis.com/

• Cake DeFi launched a new corporate venture arm with $100m in funding to invest in web3, gaming, and fintech startups. The fund will be led by Cake DeFi co-founders Julian Hosp and U-Zyn Chua. http://axios.link/Gwvk

5. Deals of the day

• Fundbox, a financial platform for SMBs, hired Iskender Eguz as chief risk officer, Steve Greig as chief marketing officer, and Rebecca Sachs as chief people officer. http://axios.link/sQ8L 

6. It's personnel

Good morning, Fintech Deals readers. Happy Wednesday!

Situational awareness: Former Bolt CEO Ryan Breslow, known for his Twitter rant aimed at powerful Silicon Valley institutions, is now planning to develop drugs to treat sleep and pain problems though his new crypto pharma startup.

We'll be waiting for the "mob bosses of Silicon Valley" to stop this.

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March 09, 2022

1 big thing: Biden's crypto EO