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BFD Expert Voices - Private Credit

BFD Expert Voices

The fintech sector is grappling with an issue that all fast growing industries face at some point in their cycle: layoffs. Lucinda analyzes two sector heavyweights and how each managed growth and employee efficiencies during their rise and fall in market value.

Driving the analysis: Coinbase produced about $2.1 million of revenue per employee in 2021. By comparison, Robinhood produced around $477,632 per head, Axios calculated, from securities filings.

Why it matters: Though imperfect, the metric offers a glimpse into factors behind the recent staffing moves by crypto exchange Coinbase and stock trading company Robinhood, and the differences between the two. 

Coinbase is slowing its hiring. Robinhood took a more drastic path, opting to layoff 330 employees.

Background: Both companies hired heavily during the pandemic to meet surging demand. Robinhood in particular did so more aggressively. The company grew its headcount 6x from 2020 to 2021, filings show. During that stretch, revenue doubled. 

In the same period, Coinbase roughly tripled its employee base from 1,249 to 3,730. Revenue outpaced that, rising 6x. 

What happened: After the hiring boom, the economic picture changed. Rates rose. Investors took risk off the table. 

Robinhood's Q1 revenue fell 43% compared to the same quarter a year earlier, to $299 million. Coinbase's dropped 27%, to $1.2 billion.

Coinbase planned to triple headcount this year, and already added some 1,218 employees to its roster by the end of the first quarter.

Before Robinhood's layoff announcement, hiring had slowed to a trickle.

Bottom line: Both Robinhood and Coinbase had a much rosier image of what 2022 could look like. Robinhood acted on that view much more aggressively and faster — and is now paying the price via layoffs and weaker income margins.

1 big thing: Coinbase vs. Robinhood

The only two mega rounds in today’s newsletter come from Europe.

Driving the news: Modulr, an embedded payments company based out of London raised $108 million (£83 million) in Series C funding. Thought Machine — also headquartered in the U.K. — raised $160 million in Series D funding valuing it at $2.7 billion.

Why it matters: While funding to fintech companies around the world dropped in the first quarter, Europe continued to grow. 

By the numbers: European fintechs raised $7.9 billion in the first quarter, up 39% compared to the previous quarter, according to CBInsights. But Global fintech funding fell 18%.

Europe, for the first time ever, also outpaced Asia last quarter for the most total fintech unicorns (though still putting it in second place overall behind the U.S.)

Of note: It’s not just the European ties that set Modulr and Thought Machine apart — they are also pick-and-shovels plays. Modulr gives other companies the ability to embed payments into their services. Thought Machine sells banking software.

Details: General Atlantic led the round in Modulr, with participation from others, including Blenheim Chalcot, Frog Capital, Highland Europe, and PayPal Ventures.

Temasek led the round in Thought Machine.

Thought bubble: Funding in Europe has continued in part because the U.S. — the world's most well-funded market — has become overly saturated.

But that raises the question: Is Europe simply lagging behind the wider fintech selloff?

General Atlantic's co-head of financial services, Aaron Goldman, certainly thinks so. "The U.S. and Europe will probably begin the move in lockstep," he tells Lucinda. "The exit opportunities are in the U.S."

2. The BFD: A fintech bright spot

Tether users withdraw over $7 billion (CNBC)

The largest stablecoin by market cap has also been affected by the fallout from terraUSD and luna last week. Tether's circulating supply has fallen from $83 billion to $76 billion in a week.

Mastercard launches payments via face or hand (The Guardian)

The credit card giant is rolling out a program that will allow shoppers to pay with a smile or the wave of a hand over a reader.

Crypto.com enabled on Shopify (Crypto.com)

Crypto.com Pay is now available to Shopify merchants, allowing merchants to receive crypto payments from Crypto.com users.

Robinhood to launch crypto wallets (The Verge)

Robinhood announced it is working on a second wallet that is non-custodial, meaning users will be in control and responsible for the crypto they hold.

3. Credit score

• Arrived, a single-family rentals investment platform, raised $25m in Series A funding. Forerunner Ventures led and was joined by Bezos Expeditions, Good Friends, Spencer Rascoff, Core Innovation Capital, Neo and PSL Ventures. http://axios.link/afrm

• Column Tax, a New York-based personal income tax software startup, raised $21.7m in Series A funding. Bain Capital Ventures led and was joined by insiders Core Innovation Capital and South Park Commons. www.columntax.com

• QuestBook, a funding platform for web3 developers, raised $8.3m in Series A funding. Lemniscap led and was joined by Coinbase Ventures, Alameda Research, Dragonfly, Hashed and Polygon. http://axios.link/F9lS

• Pigeon Loans, a Miami-based P2P lending startup, raised $2.5m in seed funding. FundersClub led and was joined by 305 Ventures, Ascendo VC, Dhuna Ventures and Pareto Holdings. http://axios.link/J3tp 

• DT One, a Singapore-based B2B digital micropayments company, raised funding from Apis. http://axios.link/Zavd

• TaxBit, a Salt Lake City-based tax and accounting software provider for the digital assets, named Haun Ventures as an investor. taxbit.com

• Q2 Holdings, an Austin-based banking-software provider, is weighing options, including a sale. http://axios.link/AWIz

4. Deals of the day

• Talos hired Pamela Lee as head of APAC sales, Karan Dalwani as director of customer success for APAC, Phillip Beasley-Harling as VP of engineering for EMEA, and Conor Shea as head of marketing and communications. talos.com  

5. It's personnel

6. Memes and mumbles

Situational awareness: Lucinda has held down the newsletter fort for this week, while Ryan is on assignment (actually, vacation). We're now all headed to D.C. for an Axios retreat. (But don't worry, we'll keep publishing!) 

Tell your fintech friends, family, crypto pals, and others about this newsletter. They can sign up here.

May 18, 2022

1 big thing: Coinbase vs. Robinhood