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BFD Expert Voices - Private Credit

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GovForce, a compliance tech startup for federal government contractors, raised $2.5 million in seed funding from QED Investors and Humba Ventures, the company tells Lucinda exclusively. 

Why it matters: Federal contracts are lucrative, with the U.S. spending $650 billion last year across several industries. But contractors struggle with the complex requirements that come with a government agreement. 

Details: Other investors in the round include Cambrian and NextGen Venture Partners.

With seven employees, GovForce is still in testing mode and will use fresh funds to launch in beta next month.

How it works: GovForce acts as a monitoring platform for small to mid-size government contractors and subcontractors, ensuring both are up to date on reporting and compliance with the relevant regs.

What we're watching: How GovForce might integrate fintech products, given the team's career experience; DeSorrento hails from SoFi, and head of growth Brendon DiBella was CRO for StreetShares.

GovForce has discussed "how we might be able to use software helping contractors and subcontractors with compliance as a wedge to then build out into a financial services business," says QED Partner Matt Burton, who sits on the board of Fairplay and Capchase.

1 big thing: Untangling red tape

Govforce's founders, Tonio DeSorrento, Brendon DiBella and Jason Mitchell. The tech startup raised $2.5 million.

GovForce co-founders Tonio DeSorrento, Brendon DiBella and Jason Mitchell. Photo: Courtesy of Govforce

U.K.-based supermarket chain Tesco is about to kick off a strategic review of its banking arm, Sky News reports, in a deal that could fetch   £1 billion.

Why it's the BFD: While some retailers and major tech players in the U.S. are seeking to expand their financial services offerings, one major U.K. player could be getting out of the banking business, Ryan writes. 

Details: The grocery giant has reportedly lined up Goldman Sachs to advise on the future of Tesco Bank.

According to the report, the company could pursue a partial sale, or a joint venture could be in the cards for the banking unit.

The paper said an analyst estimated the division is worth around   £1 billion, based on book value.

Context: Launched in 1997, Tesco Bank offers personal banking and insurance products, including personal loans, credit cards, car insurance and pet insurance.

By the numbers: The unit has 5.2 million customers across its banking and insurance businesses, and it holds nearly £6 billion in customer deposits.

In the first half of fiscal 2023, the unit recorded an adjusted operating profit of £67m, down 6.9% from the prior year. Meanwhile, revenue grew 24% year over year.

In 2019, Tesco Bank divested its residential mortgage portfolio to Lloyd's in a deal worth £3.7 billion.

2. The BFD: Tesco mulls options for banking arm

Illustration of a bag of groceries and money.

Fintech threat to big banks fizzled amid rising rates (Reuters)

A Moody's analyst report says the slowdown in funding to consumer-facing fintechs will make it difficult to compete against big banks.

Beijing gives Hong Kong's crypto ambition a nod of approval (Bloomberg)

Though China itself has banned crypto, Beijing has recently shown signs of support for the industry in Hong Kong. The city yesterday outlined a plan to allow retail investors to trade Bitcoin and Ether. Now, both mainland and overseas firms are returning from abroad. 

Inside Stripe’s $55 Billion Pitch to Investors (The Information)

Stripe is looking to pitch investors on its growth, as well as other potential lines of revenue outside of payments, even as its valuation takes a hit.

Hedge fund Galois closes after assets trapped on FTX (FT)

Galois Capital, which last year was managing about $200m in assets, told investors that it had halted all trading and unwound all its positions as it was no longer viable.

3. Credit score

Illustration of a credit score meter with emoji faces showing sad, neutral, and happy emotions.

• Pliant, a Berlin-based corporate card startup, raised $28m in Series A funding led by SBI Investment, with participation from Alstin Capital, Motive Ventures, and neosfer. https://axios.link/3kmOulr

• Mintoak, a Mumbai-based SaaS payments platform, raised $20m in Series A funding led by PayPal Ventures, with participation from British International Investment, HDFC Bank and Pravega Ventures. https://axios.link/3xENlsB

• Puzzle, a San Francisco-based accounting and financial data platform, raised $15m in Series A funding led by General Catalyst. https://axios.link/410iRP4

• Polyhedra Network, a Web3 infrastructure startup, raised $10m in a round led by Binance Labs and Polychain Capital. Animoca Brands and Dao5 also participated. https://axios.link/3SjAaa0

• SendOwl, a San Francisco-based payments startup focused on digital products, raised $9m in seed funding. TheGP led and was joined by Defy.vc and Alumni Ventures. www.sendowl.com

• Vexi, a Mexican credit card startup, raised $8m in Series A funding. Magma Partners led, joined by Redwood Ventures, Rebalance Capital, Alpha4Ventures, Noa Capital and Pomona Impact. https://axios.link/3k20cSm

• Stelo, a crypto wallet security startup, raised $6m in seed funding led by Andreessen Horowitz. https://axios.link/412gBXx

• Renegade, an anonymous decentralized exchange, raised $3.4m in seed funding led by Dragonfly and Naval Ravikant. https://axios.link/3Io53p0

• Workpay, a Kenyan HR payroll startup, raised $2.7m in pre-Series A funding raised from Launch Africa, Saviu Ventures, Acadian Ventures, Proparco, Fondation Botnar, Kara Ventures, Axian, P1 Ventures, and Norrsken. https://axios.link/3Ij0KLJ

• HedgeFlows, a London-based SME cash-flow management platform, raised £2m in funding. https://axios.link/41ezjeL

• PCF Insurance Services, a Lehi, Utah-based insurance brokerage, raised $500m in preferred equity funding co-led by HGGC and Carlyle's global credit group at a $4.7b valuation. Owl Rock and Crescent Capital also participated. www.pcfins.com

• Sequoia Financial Group, an Akron, Ohio, financial planning and wealth management firm backed by Valeas Capital Partners, agreed to buy Zeke Capital Advisors, a Berwyn, Pennsylvania-based multifamily office with $6.2b in AUM. https://axios.link/3Yw1OCZ

• Freedom Holding, a Kazakhstan-based brokerage, agreed to buy New York-based investment bank and wealth manager Maxim Group for around $400m in cash and stock. https://axios.link/415FrWS 

• Mysten Labs founder Evan Cheng is seeking to raise $100m for a VC fund focused on web3 investments. https://axios.link/3xFSRep

4. Deals!

• Visa CFO Vasant Prabhu is stepping down Sept. 30. https://axios.link/3XPXsWf

• WealthKernel, a U.K.-based digital investment infrastructure startup, named Michael Rigby as its chief compliance officer. https://axios.link/3YM8hdh

• Karel Kubat, CTO of DeFi startup Composable Finance, is leaving the company. https://axios.link/3XTnR5f

• Chipper Cash, an African cross-border payments platform, conducted another round of layoffs just 10 weeks after it cut about 12.5% of its workforce. https://axios.link/3xCvQJo

• Polygon Labs announced plans to reduce headcount by 20%, with about 100 staffers affected. https://axios.link/3YOAcsJ

5. It's personnel

"back to work vibes after a 3 day weekend"

6. One fun thing

Good morning! We hope everyone had a fun-filled Presidents Day.

Situational awareness: Amsterdam-based neobank Bunq reached profitability for the first time ever in the last quarter of 2022.

@Ryan is playing through "The Last of Us: Part 1" for the first time.

@Lucinda is playing BioShock 2 very, very slowly.

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 21, 2023

1 big thing: Untangling red tape