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BFD Expert Voices - Private Credit

BFD Expert Voices

Andreessen Horowitz says 2023 is a year for fintech M&A. 

Why it matters: Consolidation across the space has already begun, and a year of acquisitions could play a significant role in rescuing struggling fintechs that face dwindling cash piles, Michael Flaherty writes.

What they're saying: In its January newsletter, a16z points to the wisdom of Alex Rampell when it comes to evaluating the kinds of M&A we'll probably see:

Aquihire (want team, not business or product)

Product/"Trade Sale" (want product, or to repurpose it, and the acquirer has the distribution)

Business "left alone" (give existing business more resources to grow faster)

Of note: The newsletter post points to a quick wave of activity already.  

Fidelity acquiring Shoobx, Pagaya acquiring Darwin Homes, and startups buying other startups (Deel acquiring Capbase)

Zoom in: a16z fintech partner Marc Andrusko concludes the post with the following: 

"Plenty has been written about what life for startups will look like in this new market environment. We hope both incumbents and startups will consider joining forces to jointly accomplish their most pressing goals. If the pace of deal activity in the first month of the year is any indication of what’s to come, 2023 could be a big year for fintech M&A." 

1 big thing: Consolidation wave coming 

Ben Horowitz, co-founder of Andreessen Horowitz. Photo: David Paul Morris/Bloomberg via Getty Images

MNT-Halan, an Egyptian lending and payments fintech, raised $200 million and is in talks to raise another $60 million that would value it at $1 billion, the company announced today.

Why it's the BFD: It would be one of the few startups to gain "unicorn" status this year, Lucinda reports.

Background: Unicorn creation plunged last year as markets soured on the sector, with just four fintechs crossing the $1 billion valuation mark in Q4.

Details: Abu Dhabi-based Chimera Capital led the round, acquiring over 20% of the company for $200 million. 

The startup last raised $120 million in late 2021 from investors including Development Partners International, Apis Growth Fund II, and Lorax Capital Partners.

The big picture: Africa was one of the few fintech bright spots last year, being the only region to experience a year-over-year increase by deal count, per data from CBInsights.

 The Egyptian administration notably has actively promoted fintech innovation. Upon completing this raise, MNT-Halan would probably be the first unicorn headquartered in Egypt, according to Pitchbook. 

What we're watching: Chimera Capital. The Middle East-based investor has compiled a war chest that will make it a major player in the months and years to come.

It recently closed its second venture fund at $10 billion for "growth-stage companies" and a $2 billion private credit fund.

Its parent company, Royal Group, is planning to invest as much as $10 billion in total into hammered U.S. and European assets.

Egyptian lending fintech MNT-Halan reaches for unicorn status

2. The BFD: An Egyptian unicorn sighting

Illustration of a unicorn statue on top of a stack of cash.  

Treasury Prime, a San Francisco-based embedded finance startup, raised $40 million in Series C funding led by BAM Elevate.

Why it matters: Despite an overall slowdown in fintech funding, embedded finance continues to be a hot sector for dealmakers, Ryan reports.

How it works: Treasury Prime brings a marketplace angle to the banking-as-a-service (BaaS) sector, as it seeks to play matchmaker between banks and fintech startups.

Unlike some BaaS providers, which may partner with just one or two banks, Treasury Prime currently works with 16 different banks.

That gives it the ability to connect fintechs with specialized financial institutions (e.g., banks willing to serve the cannabis industry). 

It enables its fintech clients to seamlessly transfer funds between multiple banks they have relationships with.

Between the lines: Treasury Prime plans to use the funding to expand its banking relationships by signing up partnerships with more financial institutions.

It also hopes to expand its product capabilities to include lending in the future.

State of play: Dealmaking has picked up in the embedded finance space, where venture investors and potential acquirers are seeking out fast-growing startups that are building more modern tech infrastructure for fintechs and legacy financial institutions alike.

This week, publicly traded card issuing firm Marqeta agreed to acquire Power Financial, which built its own full-stack card issuing platform, for up to $275 million.

And Moov, which provides an open-source platform for accessing payments and banking services, announced yesterday that it had raised $45 million in Series B funding.

Of note: Banc Funds and Invicta also participated in the round, along with existing investors Deciens, QED and SaaStr.

The company has raised $73 million since its inception.

State of play: Embedded finance

3. Treasury Prime banks a C round

Illustration of dollar bills sticking out of a vault door.

PayPal to lay off 2,000 employees (Axios)

CEO Dan Schulman announced on Tuesday that the company will lay off around 2,000 employees, or around 7% of its global workforce, Axios' Dan Primack writes.

Britain sets out plans to regulate crypto industry (CNBC)

The U.K. formally laid out plans to regulate the cryptocurrency industry, proposing a number of measures aimed at bringing regulation of crypto asset businesses in line with that of traditional financial firms.

4. Credit score

Illustration of positive and negative trend lines coming out of center point.

• Lulalend, a South African digital lender focused on underserved SMEs, raised $35m in Series B funding. Lightrock led, and was joined by DEG, Triodos Investment Management, Women's World Banking and insiders IFC and Quona Capital. www.lulalend.co.za 

• Freemodel, a San Francisco Bay Area-based tech-enabled home renovation company, secured a $19.5 million series A investment led by QED Investors, in partnership with LL Funds. www.freemodel.com

• OpenEyes, an insurtech company serving commercial automotive fleets, raised $18m in Series A funding led by Insight Partners and Pitango First, with participation by MoreVC. www.openeyes-insurance.com. 

• Coverflex, a Portugal-based HR startup for managing compensation and benefits, raised €15m in Series A funding led by SCOR Ventures, with participation from Breega, MS&AD and others. https://axios.link/3HLbR18

• Passthrough, an investor onboarding startup, raised $8.4m in Series A funding led by Positive Sum with participation from Motley Fool Ventures, Broadhaven Ventures, Company Ventures and Great Oaks VC. The deal values the company at $50m. https://axios.link/3kOelTd

• Addressable, an Israeli web3 marketing tech startup, raised $7.5m in seed funding led by Viola Ventures and Fabric Ventures. North Island Ventures and Mensch Capital Partners also participated. https://axios.link/3wHbC0v

• Archimedes, a DeFi lending and borrowing marketplace, raised $4.9m in funding led by Hack VC. Uncorrelated Venture, Psalion, Truffle VC, Cogitent Ventures, Haven VC and Palsar also participated. www.archimedesdefi.com 

• TrueBiz, a KYC startup for fintechs, raised $2.4m in seed funding. Flourish Ventures led, and was joined by Homebrew, YC and The Fintech Fund. https://axios.link/3wHQGqv

• ValueBase, which automates the appraisal of both land and buildings, raised $1.6m from Hydrazine Capital. Former Github CEO Nat Friedman,  Sahil Lavingia, and Erik Torenberg joined. https://axios.link/3YwNPfZ

• Bud Financial, a U.K.-based open banking and data intelligence startup, received strategic investment from credit reporting agency TransUnion. https://axios.link/3XTD1sf

• Liberis, a London-based embedded finance provider, raised €30m in debt financing from Silicon Valley Bank UK. www.liberis.com 

• MUFG subsidiaries MUFG Innovation Partners, MUFG Bank and Indonesian commercial bank Danamon together launched a $100m fund to invest in Indonesian startups. https://axios.link/3Hpcjk7

5. Deals!

• Joe Lallouz and Aaron Henshaw, founders of Bison Trails, have left Coinbase, The Block reports. Coinbase acquired Bison Trails in 2021 to expand into infrastructure. https://axios.link/3HJLpop

• Upstart, a San Carlos, California-based lending firm, is cutting 365 jobs, or around 20% of its total staff. https://axios.link/40j2cWC

• SoFi, a San Francisco-based lending and banking firm, is laying off 65 members of its mortgage division, or around 5% of its 1,300-person workforce. https://axios.link/3DvL8Dh

6. It's personnel

Kevin Lai says, "i’m at the combination venture capital coffeeshop startup dentist"

7. One fun thing

Situational awareness: The Biden administration has called for a cap on credit card late fees in a move that could save consumers as much as $9 billion a year.

@Lucinda is really enjoying "The Last of Us."

@Ryan is learning a lot about canine epilepsy. 😟  

Thanks to Michael Flaherty and Rob Reinalda for today's edits.

And thanks to you for reading. Please tell your fintech friends about this newsletter. They can sign up here.

February 01, 2023

1 big thing: Consolidation wave coming