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BFD Expert Voices - Private Credit

BFD Expert Voices

Crypto startup Ethena, which is developing a stablecoin secured by ethereum derivatives, raised $6 million in seed funding led by Dragonfly, the company tells Ryan exclusively.

Why it matters: Developed in response to Terra's failure, the new stablecoin has a novel approach to maintaining its dollar peg.

How it works: Ethena has developed a stablecoin, USDe, that maintains its dollar peg by using collateral from users to hedge price exposure by shorting ethereum using perpetual swaps.

By holding equal amounts of staked ETH and perpetual swaps, it ensures that any gains or losses by either asset are essentially canceled out.

It is developing a digitally native, USD-denominated internet savings bond that generates yield from a combination of staked ETH and swap margins.

State of play: Ethena hopes to differentiate itself from previous attempts at building an algorithmic stablecoin — like Terra, which collapsed soon after it got knocked off its dollar peg last year.

It also differs from current stablecoin leaders USDC and USDT, which are mostly backed by fiat-based assets like Treasuries.

That approach is seen by most investors as safer, but it still relies on the traditional banking system to function.

What they're saying: "In crypto, you're trying to create a parallel financial system, but the most important financial instrument in the entire space (the stablecoin) is still completely tethered to the existing system," Ethena founder Guy Young says.

"We're trying to create something that exists outside of the banking system."

Of note: Ethena's financing includes backing from crypto derivatives exchanges like Deribit, Bybit, OKX, Gemini and Huobi.

It is also supported by BitMex founder Arthur Hayes and his family office — which is notable because Hayes himself has called for the creation of an algorithmic stablecoin (NakaDollar, or NUSD) backed by bitcoin derivates.

Between the lines: Young says he drew inspiration for the creation of USDe from a piece Hayes wrote — in the wake of the Terra collapse — that described how a crypto derivative-backed stablecoin might work.

What's next: The company hopes to fully launch its stablecoin and bond asset in the coming months after completing the testnet phase in the third quarter.

1 big thing: A new kind of stablecoin

Illustration of several different coins combined to form one glitching coin

Thunes, a cross-border B2B payments company, raised another $12 million in Series C funding, closing the round at $72 million.

Why it's the BFD: Visa, which has been amping up its cross-border chops, is investing in the round that values Thunes at over $900 million, the company confirmed.

Details: Singapore-based Thunes was valued at about $800 million prior to this round.

The first $60 million of this round was led by Marshall Wace and included Bessemer Venture Partners.

Other investors in this $12 million boost include EBDI and Endeavor Catalyst.

Context: Visa launched B2B Connect, a network that sought to speed up cross-border payments for corporate customers in 2019. CEO Ryan McInerney said in the company's Q2 earnings calls that "B2B is the largest component of new flows."

Notably, cross-border spending tends to come with higher returns for the company than domestic payments.

Of note: Visa invested in TerraPay, another cross-border payments company, in May.

B2B payments company Thunes gets a $900M valuation

2. The BFD: Thunes' $900M valuation

Illustration of the earth on a large pile of money

Raisin CEO expects deposits will reach €50B this year (Bloomberg)

The Berlin-based company expects deposits will increase from the current €43 billion, CEO Tamaz Georgadze said in an interview. More than half of the growth will come from outside the euro region, mainly the U.K. and U.S.

Y Combinator eliminated its growth investment arm in March, and Social Capital abandoned plans to raise a $1 billion fund earlier this year. Venture firms raised seven funds with at least $1 billion in the firms half of this year, a slower annual pace than the 33 raised in all of 2o22.

Biggest U.S. banks show earnings resilience (WSJ)

JPMorgan's profit soared 67% in the second quarter, while Wells Fargo's jumped 57%. Citigroup's profit dropped 36% overall, though it beat analyst expectations.

3. Credit score

Illustration of a dart in the bullseye of a dartboard that says "credit score."

Looking for a deal story? Search the Axios Pro Deals Tracker beta.

• Certificial, a Raleigh, North Carolina-based business insurance monitoring company, raised $15m of funding led by Nyca Partners. Other investors include IA Capital, Fin Capital, and Cofounders Capital. https://axios.link/3pZJLsG

• Flash, an Egyptian cashless payments startup, raised $6m in seed funding led by Addition, with participation from Flourish Ventures. https://axios.link/44Iaiu1

• Roi, a New York-based investing app, raised $3.6m. Spark Capital led and was joined by Gradient Ventures, 35 Ventures, 500 Startups and Contrary Capital. https://axios.link/3JTfeDR

• Neuberger Berman, Palos Capital, and Fintech Ventures agreed to take Canadian commercial lender IOU Financials private for C$0.22 per share. https://axios.link/3JYyUpT

• Smart Pension, backed by Acquiline Capital Partners, acquired Evolve Pensions, a U.K.-based workplace pension services provider. https://axios.link/3DeWZoA

• Augment, a newly formed Lond0n-based reinsurance broker, raised $100m from Altamont Capital Partners. https://axios.link/44Pm2dy

• BNP Paribas' €120 million-acquisition of Kantox, a London-based currency risk management company backed by Idinvest Partners and Partech, has been approved. https://axios.link/3Ddqyad

• HyperPay acquired Sanad Cash, a Saudi spending management fintech backed by 500 Global and Hala Ventures. https://axios.link/3NNqS44

• Nav acquired Tillful, a San Francisco-based business credit and cash flow fintech. https://axios.link/44qwf0v

• Standard Chartered has agreed to sell its subsidiaries in Angola, Cameroon, The Gambia and Sierra Leone to Nigeria’s Access Bank for an undisclosed sum. Access Bank will also acquire Standard Chartered’s consumer, private and business banking (CPBB) business in Tanzania. https://axios.link/3K0MSaB

• Distributed Ventures, raised $100m to invest in insurtech, fintech and healthtech. https://axios.link/3Q0oiuC

4. Deals

• Binance reportedly will lay off 1,500 to 3,000 employees by year-end. https://axios.link/3rrdJ9n

5. It's personnel

Situational awareness: The prolonged bear market for startups is prompting some venture firms to unwind investments and scale down expansion plans, the WSJ reports. (See more below in Credit Score.) 

@Lucinda had too many Girl Scout Cookies.

@Ryan was elated to watch the Phillies dismantle the Padres over the weekend. That's what's in.

Thanks to George Moriarty 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.

July 17, 2023

1 big thing: A new kind of stablecoin