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BFD Expert Voices - Private Credit

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eToro, an Israel-based stock and crypto-trading platform, has agreed to acquire Gatsby, a Robinhood competitor, for $50 million in cash and stock.

Why it matters: This deal pulls eToro deeper into the U.S. market and allows the company to offer options trading — the largest source of revenue for Robinhood.

Details: eToro will be able to offer options "in a faster manner, and potentially globally," strategy and corporate development VP Elad Lavi tells Lucinda. "The more assets you can provide, the more it increases customer retention."

Of note: Gatsby earns revenue through "payments for order flow," a controversial practice and a core breadwinner for Robinhood and many of its U.S.-based competitors.

This also marks eToro's entrance into the PFOF market, as eToro primarily operates outside the U.S., where the practice is less common.

Context: The deal comes as trading revenues are taking a hit across the sector.

1 big thing: eToro is bullish on Gatsby

CoinFund has raised $300 million for its latest fund focused on early-stage startups in the crypto space.

Why it matters: CoinFund has historically focused heavily on finding companies in the seed stage. This new fund — dubbed Ventures I — will focus on Series A rounds, filling what the firm sees as a major gap that has developed in the market.

Driving the news: "There's actually not that many crypto native firms that lead series A rounds," says David Pakman, managing partner at the firm. "There's lots of seed funds, and there were a bunch of Series A funds, but they got so big that they now write $50 million to $100 million checks."

Of course, $1 billion-plus funds like Andreessen Horowitz do invest in Series A deals, but Pakman says many are not "purpose-built" for a company that is just beginning to find product-market fit.

"We try to right-size our check for the stage appropriately," Pakman says.

He adds that the $300 million fund size — while small in comparison to some recent raises — was exactly what CoinFund set out to raise.

Details: Although its seed checks are typically in the $1 million to $2 million range, the new fund will seek to lead rounds and take board seats with $6 million to $10 million checks.

CoinFund is a registered investment adviser, allowing the fund to invest a significant amount in tokens alongside equity.

Portfolio investments from its previous fund include Blockdaemon, the Near Protocol and Dapper.

Of note: Limited partners in the fund include Teacher Retirement System of Texas, Adams Street Partners, StepStone Group and Accolade Partners, signaling continued interest in the crypto space among more traditional investors despite the downturn.

2. The BFD: From seed to Series A

In addition to Q2 earnings, bitcoin miner Stronghold Digital Mining Inc. announced a unique "debt extinguishment" agreement on Tuesday. Rather than extend or re-price the loan, the deal involves Stronghold returning 26,200 mining rigs to its lender.

Why it matters: The crypto price plunge and volatility has created a cash squeeze for companies and even forced several into bankruptcy protection. Some, however, have managed to keep cash flowing through innovative deals with lenders. 

Details: Stronghold Digital, a publicly held company with a $170 million market value, said its agreement with New York Digital Investment Group and another lender will eliminate all $67.4 million of equipment financing debt via the "consensual" return of the bitcoin miners, 18,700 of which are operating. 

The company also laid out additional debt work, including restructuring financing with WhiteHawk Finance LLC. 

The bottom line: Hard asset sales aren't something the Street would necessarily expect from the digital currency sector, but with volatility still high, companies will need to consider a kitchen sink approach to keeping the cogs churning. 

What they're saying: “By returning miners to NYDIG that served as the collateral for the non-recourse financing agreements and restructuring the WhiteHawk financing agreements and the Convertible Notes, we will be able to eliminate over half of our total principal amount of debt outstanding and the significant associated interest and principal payments," Stronghold CEO Greg Beard said.

3. Digging out of debt

Illustration of a pick axe hitting a Bitcoin with pieces flying everywhere. 

Crypto nomads move back to big cities (Bloomberg)

After leaving for cities with more beaches and waterfronts, crypto developers are returning to the world's major financial hubs, New York and London.

Goldman's David Solomon struggles to change the bank (FT)

Nearly four years into his tenure as CEO, the banking giant has struggled to meaningfully shift its revenue mix from trading and investment banking activities into more steady streams of revenue. Solomon's DJ gigs, meanwhile, have raised eyebrows in the boardroom.

Consumer finance still in favor (PitchBook)

Consumer finance startups raised $151.5 billion in the second quarter, by far the most of any fintech category. That comes despite some investors souring on consumer bets amid the downturn.

Alternative lending companies raised $56.8 billion, becoming the second most well-funded category.

4. Credit score

Illustration of a Scrabble board with letter tiles spelling "credit."

• Super Payments, a U.K.-based fintech company founded by Funding Circle's founder, raised £22.5m. Accel led and was joined by Union Square Ventures, and LocalGlobe. https://axios.link/3A4ypVj

• Pomelo, a San Francisco-based international money transfer company, raised $20m in equity and $50m in a warehouse facility. Keith Rabois at Founders Fund and Kevin Hartz at A* Capital led. Afore Capital, Xfund, Josh Buckley, the Chainsmokers, and the Weeknd also invested. www.pomelo.com

• QuotaBook, a Seoul-based equity management platform, raised $11m. Elefund led and was joined by Access Ventures, Hana Securities, Viva Republica, Draper Associates and Capstone Partners. https://axios.link/3bYymCv

• Ledgebrook, a Boston-based insurtech, raised $4.2m in seed funding. Brand Foundry Ventures led and was joined by American Family Ventures. www.ledgebrook.com

• Closinglock, an Austin-based real estate transaction platform, raised $4m in seed funding. LiveOak Venture Partners led and was joined by RWT Horizons and GTMfund. www.closinglock.com

• WellnessLiving, a Toronto-based payments platform for fitness and wellness operators, raised $46m from McCarthy Capital. CIBC Innovation Banking also invested $20m. https://axios.link/3JZw42y

• Remitly Global acquired Rewire, an Israeli cross-border neobank, for $80m in cash and stock. Rewire previously raised $62m from investors including Glilot Capital Partners, OurCrowd and Renegade Partners. https://axios.link/3SUWkze

• Shima Capital, a San Francisco-based early-stage blockchain investor, launched Shima Capital Fund I with $200m. Investors include Dragonfly Capital, Bill Ackman, Animoca, OKex, Mirana Ventures, Republic and Andrew Yang. shima.capital

5. Deals of the day

• 21Shares hired Marina Baudéan as its head of France and BeLux (Belgium and Luxembourg), Oliver Schäfer as head of Germany, and Sherif El-Haddad as head of the Middle East. 21shares.com

• Cornerstone FS has appointed James Hickman as its new CEO. He was previously CRO at Fire Financial Services. https://axios.link/3QMkPgc

• Solidus Labs, a crypto risk monitoring firm, named former CFTC commissioner Dawn Stump as an adviser. https://axios.link/3bViz7t

6. It's personnel

Situational awareness: Genesis CEO Michael Moro is stepping down after the company was hit by its exposure to Three Arrows Capital. 

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August 17, 2022

1 big thing: eToro is bullish on Gatsby