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BFD Expert Voices - Private Credit

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Roughly a year and a half ago, Bain Capital Ventures Partner Matt Harris thought financial services would go from centralized to decentralized by 2050. With the closing of Signature Bank, he's rethinking the timeline.

Why it matters: Signature was one of the few banks that service the crypto industry. Its closing isolates crypto from a significant link with mainstream finance.

Driving the news: "I gave myself until 2050," Harris says of his prediction that the currently centralized financial system would become decentralized. "I would have said the movement would have picked up steam in the next three to five years. And now I think that's less likely. Or if it does pick up steam, it may well be in Singapore rather than in San Francisco."

Previously, Harris predicted in a Forbes essay that the world would be deeply in a DeFi revolution by 2050: Payments will be completed via stablecoins, insurance will be intermediated by protocols, and lending pools will become more mainstream.

"Signature's [closing] is an enormous blow," he says. "Regulators have crippled the crypto industry's access to the fiat infrastructure in the United States."

Context: Regulators have grown increasingly wary of crypto in recent months and have cracked down on the industry following a string of high-profile collapses.

Reuters this week reported that any buyer of Signature Bank would be required to give up its crypto business. But an FDIC spokesperson rejected that assertion.

The big picture: It's not just Signature's and Silvergate's closings that have Harris rethinking the timeline, but also government attitudes toward the industry.

"I think we're in a really pivotal and scary moment as it relates to crypto in the United States," he says. "I do hope that cooler heads prevail and our government decides that this is an exciting, new, important industry that we'd rather be in than out."

1. Signature's closing pushes out VC's crypto predictions

Screenshot of Axios' Lucinda Shen and Bain Capital's Matt Harris online conversation

Screenshot of Axios' Lucinda Shen and Bain Capital's Matt Harris. Source: Axios Events

Payabli, a payments infrastructure firm focused on vertical SaaS platforms, raised $8 million in new funding, the company said.

Why it matters: Vertical SaaS companies are increasingly becoming payments companies and need better technology to make payments a revenue driver.

Driving the news: The Miami-based payments startup raised a seed extension from established investors TTV Capital, Fika Ventures and Bling Capital.

Plus: Wednesday's Pro Rata, with — you guessed it — more SVB coverage, and Diamond Sports Group's bankruptcy. 

2. Payments startup raises $8M

Illustration of a hand cursor holding hundred dollar bills.

Silicon Valley Bank's failure has been likened to an earthquake sending shockwaves through the tech industry. Though earthquakes remain hard to predict, SVB executives should've seen the risks from miles away, says former FDIC Chairman William Isaac.

Why it matters: Founded in 1983, SVB was forged amid the savings and loan crisis, which was caused in part by rising interest rates. That should have been formative for the nascent SVB. But any lessons gleaned from that era have been lost or forgotten.

Flashback: Just three years before SVB's creation, First Pennsylvania Bank — then the largest bank in Philadelphia and the 23rd-largest in the nation — was collapsing.

Plus: Thursday's Pro Rata on Credit Suisse and the future of TikTok.

3. SVB repeats history

Illustration of Benjamin Franklin from a $100 dollar bill surrounded by clock imagery 

Tilia, a payments firm focused on serving metaverse projects and digital world platforms, raised $22 million in strategic funding from JPMorgan and others.

Why it matters: Microtransactions on metaverse and gaming platforms are a huge business, and Tilia has the expertise of managing payments for one of the longest-running digital worlds.

Plus: Tuesday's Pro Rata, with continuing coverage on SVB and Icahn's Illumina proxy fight. 

4. JPM backs metaverse payments startup

Illustration of a person walking along a gridded hallway towards a bright light

Corporate banking startups including Brex, Rho and Mercury saw a surge in customers last week as Silicon Valley Bank imploded.

Why it matters: These startups now must prove they're worthy of retaining that new business.

State of play: Corporate fintech platforms rose to prominence thanks to their speedy and better tech. That efficiency became crucial to their soaring popularity after SVB collapsed.

Plus: Monday's Pro Rata, on initial SVB fallout and Pfizer's Seagen deal. 

5. With crisis comes opportunity

Illustration of a hand holding a bank building.

Congratulations on reaching the end of a long, long week. Lucinda kicks us off this Friday, recapping her conversation with Bain Capital's Matt Harris. 

Situational awareness: SVB Financial Group filed for Chapter 11 bankruptcy this morning. 

Don't miss: Join Dan Primack and George Moriarty today at 1pm for a subscriber-only event discussing SVB, one week later. Register here.

🙏 Thank you for reading this week, and special thanks to editor Mike Flaherty and copy editor Rob Reinalda for so much great support this week. 

Have a great weekend and a happy St. Patrick's Day. Sláinte! ☘️

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March 17, 2023

1. Signature's closing pushes out VC's crypto predictions