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BFD Expert Voices - Private Credit

BFD Expert Voices

Ethic, the socially responsible investing startup backed by Prince Harry and Duchess of Sussex Meghan Markle, has raised $50 million in Series C funding, the company told Lucinda exclusively. 

Why it matters: The funding round highlights the continued inflows into value-based investing even in a market downturn. 

It also shows how the new era of wealth management tech has turned to automating work for advisors rather than replacing them with robo-advisors.

Background: Ethic's assets under management has grown 53% since October 2021 to $2 billion, the company says (the S&P 500 fell about 9% during that same stretch). 

Ethic creates personalized portfolios based on investors' values, which may may include climate change, women's rights, and deforestation. 

It also helps users reduce their capital gains taxes — a feature that has become an important draw during the recent market volatility, CEO Doug Scott said in an interview.

Details: Jordan Park, an existing investor and client of Ethic, is leading the funding round. Other investors include UBS Next, Oak HC/FT, Nyca Partners, Sound Ventures, Urban Innovation Fund and Kapor Capital.

Joining Park in the round are Meghan and Harry, after joining the startup as "impact partners" and making their first investments late last year.

Though the company is not disclosing its exact valuation, Scott says that this is an up round. 

Context: Ethic is among the few index personalization firms that remain independent after a string of acquisitions in the space.

Last year's consolidation wave included Franklin Resources' acquisition of O'Shaughnessy Asset Management; Vanguard of JustInvest; BlackRock of Aperio; Morgan Stanley of Parametric Portfolio.

Ethic's financing round allows it to better compete against these peers, with Scott noting the company plans to remain independent.

Looking forward, the roughly 72-person firm plans to use the new capital to hire around 10 more people by the end of the year, expand into asset classes outside of equity (fixed-income being first), grow internationally, and expand into institutional investors.

"We're three immigrant founders," says Scott, noting the EU will likely be the company's first international market. "So we've always had a global mindset for Ethic."

1 big thing: Ethical investing gets royal treatment 

Illustration of a collage of money elements and a compass.  

Composer, an automated investing platform for retail traders, raised $6 million in new funding led by Left Lane Capital, Ryan writes.

Why it's the BFD: The amount may be small in the grand scheme, but the investment and the startup are part of the massive ecosystem of retail investing that grew post pandemic. 

The funding also shows that despite a pullback in the broader stock market, VCs still have an appetite for trading platforms that give retail traders better tools for making investments.

How it works: Composer gives retail investors an easy-to-use, no-code tool that can be used to build, backtest and auto-execute sophisticated algorithmic trading strategies that previously were not easily accessed by the typical retail investor.

Investors on the platform can create so-called "symphonies" — systematic investing strategies that react to market conditions and rebalance portfolios based on parameters that users define.

Once created, users can then backtest those strategies to see how they historically would have performed relative to the market, refine them, and share them with other investors on and off the platform.

Context: Founder and CEO Benjamin Rollert began building Composer after attempting to code his own systematic trading scripts. 

"This was to implement some basic systematic trading strategies that I knew that institutions and hedge funds were using," Rollert tells Axios. "It was through this process that I discovered it was actually extremely difficult to implement these types of strategies as a retail investor."

And he hopes to position Composer as an alternative to retail-focused stock-trading apps and automated investing platforms. "There are these very polarized set of offerings that are either very gamified trading apps or very stuffy, paternalistic roboadvisors," Rollert says.  

Yes, but: For users who aren't as adventurous or confident about creating their own trading strategies, Composer has an in-house investment team that provides templates its users can invest in directly or easily modify to their liking. 

Yes, and: Composer says it continues to grow despite a pullback in the broader stock market.

"There's more AUM on the platform than net deposits," Left Lane managing partner Harley Miller says. "Which shows in aggregate Composer clients are probably doing better than the market at large right now."

Of note: With this latest funding, Composer has raised a total of $11 million, which includes backing from investors such as First Round Capital, AVG Basecamp, Draft Ventures and Not Boring Capital.

2. Automated trading made easy

Illustration of a pencil writing sheet music with dollar and cents symbols

Celsius Network plots a comeback after crypto crash (NYT)

At a meeting with employees on Sept. 8, Celsius CEO Alex Mashinsky outlined a plan to rebuild the company with a focus on custody. The project was codenamed Kelvin, after the unit of temperature.

An e-commerce software provider for the flooring industry, Broadlume added payments processing to its platform — echoing Toast's role in the restaurant industry. Everything is fintech.

Checkout.com will eliminate about 5% of employees (Bloomberg)

The company confirmed that it was reducing its workforce by about 100 people, Bloomberg reports.

Bain Capital estimates embedded finance's size (Bain)

A heavy fintech investor, Bain says financial services embedded into other platforms accounted for about $2.6 trillion — or 5% of all U.S. financial transactions in 2021. It expects that figure to reach $7 trillion in 2026.

SEC chairman Gary Gensler wants the agency to have jurisdiction over basically all of crypto ... but he does not seem to have any interest in writing new rules to accommodate the market, Matt Levine writes.

3. Credit score

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

• Fazz, a Singapore-based digital financial services group, raised $75m in Series C funding from Tiger Global, DST Investment, B Capital, Insignia Ventures Partners and ACE & Co., Ilham Ltd., EDBI, InterVest, Michael Seibel and Hans Tung. The company also secured a $25m debt facility from Lendable. https://axios.link/3BDXnwL

• Doodles, a Vancouver-based NFT startup, raised $54m at a $704m valuation. The round was led by Alexis Ohanian's SevenSevenSix, with participation from Acrew Capital, FTX Ventures and 10T Holdings. https://axios.link/3BDHp5M

• Diamond Standard, a blockchain-based diamond commodities trading startup, raised $30m in a funding round led by Left Lane Capital and Horizon Kinetics. Other investors include Gaingels and Republic.co.  diamondstandard.co

• Goldsky, a data infrastructure company for crypto startups, raised $20m in a seed round led by Felicis and Dragonfly Capital. https://axios.link/3RGnetO

• Kafene, a lease-to-own financing startup, raised $18m in Series B funding led by Third Prime. Uncorrelated Ventures, Company Ventures, Xffirmers, Gaingels, and FJ Labs also invested. https://axios.link/3U1UFsl

• Power, a credit card issuance platform, raised $16.1m in seed funding and $300m in a credit facility. The equity financing was led by Anthemis and Fin Capital, with participation from CRV, Financial Venture Studio, Dash Fund, Plug & Play and a group of angel investors. https://axios.link/3qAW7nM

• PortX, the financial services arm of Seattle-based payments startup ModusBox, is spinning out with $10m in new funding led by Fuse, with participation from BankTech Ventures. https://axios.link/3Djwr6V

• Rosaly, a French salary advance startup, raised $7.5m in equity and $2.5m in debt. Fin Capital led the round and was joined by The Treasury VC, Haymaker, FJ Labs, Auxxo, LeFonds VC, Clocktower, Kraken Ventures, Audeo Ventures, Sie Ventures and Moving Capital. www.rosaly.com

• SavvyFi, a Nashville, Tenn.-based college savings and student loan repayment startup, raised $4.9m in Series A funding led by Aligned Partners. https://axios.link/3dd3VZS

• Claimer, a London-based startup for claiming financial incentives from the government, raised $4.2m in seed funding. Project A Ventures led and was joined by Moonfire Ventures, helloworld.vc, Errol Damelin (co-founder, Wonga), Matt Clifford (Chairman, Advanced Research and Invention Agency), and Ian Hogarth (ex-CEO, SongKick). claimer.com

• Neem, a Karachi, Pakistan-based embedded finance platform, raised $2.5m in a seed funding round led by SparkLabs Fintech, with participation from Arif Habib, Cordoba Logistics and Ventures, Taarah Ventures, My Asia VC, Concept Vines and Building Capital. https://axios.link/3LaIFR2 

• Far Homes, a platform for buying and selling real estate in foreign markets, raised $2.25m led by PSL Ventures. https://axios.link/3DrV7tV

• Bottomline Technologies, a B2B payments technology firm, is acquiring Nexus Systems, which focuses on accounts payable and payments automation software for the real estate and property management industries. https://axios.link/3BiX7C2

• BitGo is suing Galaxy Digital for more than $100m in damages after Galaxy abandoned its planned $1.2b acquisition of the crypto custodian. https://axios.link/3Dt3aqB 

• Northzone, a European VC firm, raised €1b for its 10th fund. https://axios.link/3LcpuGs 

• COSIMO Ventures, a crypto VC firm, aims to raise $200m to bet on Ethereum staking opportunities. https://axios.link/3qz1mof

• North Island Ventures, a crypto-focused venture firm, is launching a new $125m investment fund. https://axios.link/3xlEJra

4. Deals of the day

• PayPal has appointed former Expedia executive John Kim as its new EVP and chief product officer. He will take over the role from Mark Britto, who will retire at the end of this year. https://axios.link/3eIpNwJ

• Credit Suisse's Daniel Cavalli is joining Morgan Stanley as managing director and Amit Melwani is joining Bank of Montreal. https://axios.link/3QLRi5Q

• Former Currencycloud co-founder Steve Lemon has joined U.K.-based early-stage venture capital firm Volution as a partner. Volution.vc 

• GameStop’s head of blockchain Matt Finestone said in a Twitter post that he was leaving his position. https://axios.link/3xlKXXZ

5. It's personnel

Happy Wednesday, Fintech Deals readers. Despite yesterday's stock market rout, today's newsletter is all about new trading apps getting funded.

Thank you for reading! Please tell your family, musical composer friends, and royal family relations to sign up for this newsletter.  

September 14, 2022

1 big thing: Ethical investing gets royal treatment