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BFD Expert Voices - Private Credit

BFD Expert Voices

Last valued at $1.4 billion, subscription investing app Stash is laying off about 25% of its workforce, Lucinda has learned.

Why it matters: Fintech companies continue struggling to adjust in the post-pandemic era.

Details: The layoffs affect about 80 people, bringing its total headcount to around 220. At its peak, Stash had a roughly 500-strong workforce. CEO Liza Landsman announced the layoffs in a note to employees this morning.

"Though we've seen promising green shoots across many aspects of our platform, that growth hasn't materialized as quickly as we'd planned," Landsman wrote.

By cutting costs, she told Axios in an interview, the company will be able to hit cash-flow break-even in the final quarter of 2024, rather than in 2025.

It will also remove pressure to launch new products while waiting for its current bets to come to fruition.

What's next: Stash has refocused on its core customer base — long-term investors — and stepped back from short-term traders that flooded in during the pandemic.

The cost of servicing less-engaged short-term accounts exceeded the revenue they brought in, so the company has been migrating them off the platform. The company now has about 1.5 million active subscribers, down from 2 million last year.

Last year, Stash unveiled a customer onboarding experience aimed at bolstering trader engagement, and it plans to launch an employee benefits offering this year.

Stash raised a $40 million convertible note led by T. Rowe Price, announced in October.

Flashback: Valued at $1.4 billion in 2021 by investors including T. Rowe Price and Eldridge, Stash has had multiple rounds of layoffs over the past few years and has changed its executive team.

Axios previously reported that the company had laid off about 120 people over the course of a year by May 2023 and had gradually added positions.

Landsman joined as CEO in February 2023, CTO Chien-Liang Chou joined in August, and in October, Amy Butte was named independent audit chair.

Between the lines: Stash gets roughly 80% of its revenue from subscriptions, which tamps down on volatility. But Stash has also not benefited from rising interest rates to the same degree as its peers.

Stock-trading startup Robinhood in the fourth quarter derived most of its revenue from net interest rather than trading.

By the numbers: The company earned $104 million last year, with $3.4 billion in assets under management.

Landsman previously told TechCrunch that it ended 2022 with revenue a little below $125 million, though it had been increasing gross profit margins.

1 big thing: Stash deepens cuts

an illustration of a halftone briefcase on a rust colored background

Cache, which provides an exchange fund product to accredited investors, has raised $8.5 million in seed funding, the company tells Ryan exclusively.

Why it's the BFD: Previously, exchange funds were available only to ultrahigh-net-worth clients at elite Wall Street banks.

Driving the news: First Round Capital and Quiet Capital led the seed round, which included 40 notable angels from Silicon Valley and Wall Street.

How it works: Cache's exchange fund makes it easier for accredited investors with concentrated stock portfolios to diversify their holdings.

It does that by pooling investors with concentrated stock holdings into a diversified fund, which is not considered a taxable event.

After seven years, investors can withdraw a diversified basket of stocks and defer capital gains taxes until they sell.

Zoom out: Exchange funds have existed since the 1930s, but access is limited to investors with private bankers at investment firms like Goldman Sachs and Morgan Stanley.

They are usually accessible only to "qualified purchasers" with more than $5 million in investment assets and require a minimum investment of $500,000 to $1 million.

Furthermore, due to the appreciation and demand around pooling certain stocks — like Apple, Microsoft, Amazon, Alphabet and Meta — it can take several months before those holdings can be added to an exchange fund.

Cache charges 0.4% to 0.8%, depending on the contributions, lower fees than for comparable products that range from 1.5%–2.25%.

Zoom in: Cache's exchange fund, by contrast, is open to all accredited investors — i.e., anyone making over $200,000 per year or having a net worth of over $1 million — and has a lower limit ($100,000) than comparable funds.

Because it is indexed to the Nasdaq 100 rather than broader market indexes like the Russell 3000, it can absorb holdings from investors with those assets much more quickly.

Between the lines: For now, Cache is targeting long-term employees at companies like Apple, Google and Meta who have seen their holdings massively appreciate in value.

But it is also working with wealth management firms and advisers to help bring their clients on board.

By the numbers: The company's first exchange fund includes stocks from more than 50 companies and has an average commitment of $625,000.

It's working through a waitlist of more than 1,000 people, with reservations totaling over $900 million across more than 125 companies.

2. The BFD: Democratizing exchange funds

Illustration of an infinite stack of Wall St. bulls.

📈 Payments volume rises 25% at Stripe (Stripe) 

Volume rose 25%, to $1 trillion, in 2023 over the year prior, the company said. That pace accelerated from 7.6% in 2022. The company expects to stay cash-flow positive in 2024.

💱 Crypto gets blamed for a real-life currency crisis (WSJ)

Because the Nigerian government rationed who could exchange the local currency for the U.S. dollar and at what exchange rate, many in that country sought refuge in stablecoins.

The stablecoin trade, in essence, became a black market, displaying an unofficial exchange rate between the naira and the dollar that was much weaker than the government's rates.

💰 Goldman Sachs seeks to expand private credit portfolio to $300B (Reuters)

Goldman's private credit aspirations are larger than those of its peers, including Morgan Stanley, which aims to double its private credit portfolio to $50 billion as it gathers funds from large investors.

⛓️ BNY Mellon, Goldman test interbank blockchain network (Bloomberg)

The network, called Canton Network, was launched last May by Digital Asset Holdings. Participants executed over 350 simulated transactions on the blockchain for tokenized assets, fund registry, digital cash, repo, securities lending and margin management.

3. Credit score

Illustration of an exam answer sheet with the words "credit score" hand written in red ink.

Go deeper into our full database in the Axios Pro Deals Tracker.

• Monad Labs, a high-performance blockchain developer, is in talks to raise $200m in new funding led by Paradigm, per Fortune. https://axios.link/4a65dh8

• PPRO, a London-based payments platform, raised €85m in a dual-tranche round of funding. Investors included Eurazeo, HPE Growth, Sprints, PayPal Ventures, JPMorgan, Citi Ventures and BlackRock. https://axios.link/3Ty8i43

• Perfios, an Indian B2B credit decisioning SaaS provider that's reported to be prepping an IPO, raised $80m from Ontario Teachers' Pension Plan at a valuation north of $1b. https://axios.link/48UdnZ8

• Eye Security, a Dutch cybersecurity startup, raised €36m in Series B funding. JPMorgan Growth Equity Partners led and was joined by insiders Bessemer Venture Partners and TIN Capital. www.eye.security

• Nanonets, an SF-based workflow automation platform, raised $29m in Series B funding. Accel India led and was joined by insiders Elevation Capital and YC. www.nanonets.com

• Big Sur AI, an AI-based e-commerce sales company, raised a $6.9 million seed, per Axios Pro Retail. Lightspeed Venture Partners led, with participation from Capital F and several angel investors. https://axios.link/49MX6qf

• Metica, a London-based revenue optimization platform for mobile games, raised $5m in seed funding from Play Ventures, Firstminute Capital and Riccardo Zacconi. www.metica.com

• Blockus, a web3 gaming tech stack and payments provider, collected $4m in pre-seed funding led by Maple VC. https://axios.link/3VfKQdo

• Synch, a New York-based GTM tool for sales teams, raised $3m in seed funding co-led by AltCap and Haystack. www.withsynch.com

• Frazier Healthcare Partners acquired Revspring, a Nashville-based health care payments and communications platform from GTCR. https://axios.link/4c6NYhH

• Apex Fintech Solutions acquired AdvisorArch, a portfolio management company and rebalancer for financial advisers. https://axios.link/4acehky

• Repay Holdings (Nasdaq: RPAY), an Atlanta-based payments company valued at about $1b, has hired bankers to seek private equity buyers, per Fortune. https://axios.link/3T72i0U

• CoinShares, a European fund manager, closed its acquisition of investment advisory Valkyrie Funds. https://axios.link/3VcclVb

4. Deals!

• Ronnie Cheung, a former Credit Suisse exec, joined Bank of Singapore as its COO of Greater China. https://axios.link/3IAHN7S

• Jake Miller and Matt Reed, co-founders at Opto Investments, were named chief solutions officer and chief technology officer, respectively. https://axios.link/3PmoHGy

5. It's personnel

📉 Situational awareness: Employees at tech startups are receiving 37% less equity in their companies on average compared with 18 months ago, according to data from Carta.

 😢 @Lucinda would like it if she stopped getting "Dune: Part Two" spoilers.

🎤 @Ryan is excited to see Danny Brown at the TLA tonight.

☘️ @George is gearing up for St. Patrick's weekend, aka, the high holy days.

Thanks to Rob Reinalda for today's edits.

And thanks to you for reading this edition of Fintech Deals. Please tell your fintech friends and Irish culture lovers about this newsletter. They can sign up here.

March 13, 2024

1 big thing: Stash deepens cuts