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BFD Expert Voices - Private Credit

BFD Expert Voices

🪙 Situational awareness: Latin American e-commerce giant MercadoLibre has launched its own dollar-backed stablecoin. 

Investors in checkout tech company Bolt Financial have until the end of next week to say whether they plan to participate in a massive new funding round that would include the return of controversial company founder Ryan Breslow as CEO.

But they aren't being told the lead investor's identity.

"I've never seen anything like this," says one of Bolt's larger venture backers, who adds that he's not even convinced the new money is legit.

Catch up quick: Bolt, which previously raised nearly $1 billion from VCs despite meager revenue, this week emailed investors to inform them of a pending $200 million Series F investment at a $14 billion valuation. 

That's the same valuation that Bolt tried and failed to get a couple years ago, after having previously raised at $11 billion.

Zoom in: There's also more hair on this deal than in a barber shop's dumpster, as reported by Newcomer. 

For example, it includes a pay-to-play provision that could cram down existing shareholders (despite its being an up round) and $250 million in influencer marketing credits by something called The London Fund.

But the capper is what's given to Breslow: A $2 million bonus for becoming CEO, $1 million in purported backpay, lots of new stock options, and an indemnification agreement (which matters, because investors have sued over Breslow's failure to repay a company loan).

Bolt also would invest in another Breslow company called Love and into The London Fund (where Breslow would join the board). In short, he seems to be fashioning himself as a mini-Elon — viewing his separate businesses as a de facto conglomerate.

But back to that investor: The letter included a signature line for Brad Pamnani, who is identified as working for investment bank Silverbear Capital, but Pamnani tells me it was a misunderstanding and that Silverbear isn't involved.

Instead, Pamnani says he also works for a Cayman Islands-based private equity firm that "has done over 65 deals," but he wouldn't share the firm's name.

He explained that the Caymans firm is a limited partner in an SPV formed to raise the $200 million for Bolt but that it will be managed by a new private equity fund in the UAE that hasn't yet received government approval for registration in that country. 

Pamnani also declined to provide the names of anyone on that new UAE team, except for himself, and said there's a risk that registration won't come, which could scuttle the entire deal.

When asked why he was being so coy about names, which he insisted would be shared with investors prior to deal close, he repeated: "Because we don't need to disclose."

Zoom out: Bolt plans to use the money, if it comes through, to build out a super-app. 

Pamnani says he "is not interested in the Bolt U.S. market" and that the deal includes his group "acquiring international expansion rights."

By the numbers: Newcomer reports Bolt is on pace to generate just $28 million in 2024 revenue, which means the $14 billion is a Truth Social-like valuation multiple.

The company is said to require 51% shareholder approval to proceed with the deal. In aggregate, existing preferred shareholders must commit at least $20 million to avoid the cramdown.

The bottom line: Some Bolt investors believe that the company's model, if not its execution, has been validated by PayPal's recent Fastlane rollout. But they don't seem close to sold on its new financing plan, and they have lawyers digging in.

Bolt's hairy offering

Illustration of an electric bolt wobbling atop a cliff

Siepe, a software and services provider to the private credit industry, raised $30 million in a Series B led by WestCap, it tells Axios exclusively.

Why it's the BFD: Private credit is one of the fastest-growing alternative asset classes, but it's plagued by inconsistent data and manual processes.

How it works: Siepe provides a SaaS platform that offers hedge funds and asset managers data warehousing, data analytics and portfolio management.

Its service offerings include middle office services to track loans and activity for the underlying assets, a collateral administration offering to provide investor-facing reporting, and an IT business to set up infrastructure for asset managers.

"The more complexity they have, the more value we provide to the client," Siepe CEO Michael Pusateri says. "So if they have listed mutual funds, and ETFs, and private credit, and CLOs — that's our target market."

The big picture: The private credit market topped $2.1 trillion globally last year, according to the IMF.

Blackstone Credit and Insurance's global chief investment officer, Michael Zawadzki, recently estimated it could grow into a $25 trillion market.

"A lot of that growth is ... [because] the regulatory pressures that banks are getting put under means they can't lend money to small to medium businesses," Pusateri says. "Private credit providers are filling that gap." 

Yes, but:  Technology has not caught up with the growth in the private credit market.

"In the bank debt and private debt world ... there's been a lot under-investment in the technology, and some of that was to build moats for previous service providers," Pusateri says.

He argues those providers didn't want to invest in technology or automation, because "then they would lose their competitive advantage."

Zoom in: In addition to the funding, Dallas-based Siepe hired private credit and CLO veteran Mark Schultis as president.

WestCap partner and co-COO Kevin Marcus and WestCap principal Ryan Benevides will join the Siepe board.

Flashback: Siepe had previously raised a $5.1 million Series A round in 2020, which included investment from Citi and Virtus Partners founder Rob Tomicic.

$30M software exclusive

Illustration of a person holding out a bag of money surrounded by abstract shapes and money elements.

Reproduced from Public Citizen; Chart: Axios Visuals

The crypto industry accounts for almost half the money contributed by corporations to political action committees so far in 2024, according to a new report from Public Citizen, a consumer advocacy group.

Why it matters: Crypto is pioneering a strategy for direct corporate election spending — and if it works, it could usher in a new era of spending by big companies to get the outcomes they want in elections, the organization argues.

By the numbers: Blockchain companies have supplied 48% of the $248 million of corporate money donated to influence federal elections this cycle, according to the research.

Fairshake, the crypto industry's dominant political action committee, has raised a whopping $202 million.

And though some of that money comes from wealthy individuals, Fairshake's been a magnet for business dollars, with nearly $114 million coming from corporate backers.

Contributions have come primarily from Coinbase, the largest U.S. crypto exchange, and Ripple, the company behind a stablecoin called XRP. Both companies have been at the forefront of crypto's battle with regulators for legitimacy.

Zoom out: The crypto sector is breaking with the tradition of industries' siding primarily with one party or the other. 

Fairshake has been backing or opposing candidates on both sides of the aisle, based on whether a candidate is viewed as helpful or harmful to crypto.

It endorsed equal numbers of Democrats and Republicans in House races this year (for a total of 18). 

And its decision to back two Democrats and one Republican in the Senate races (so far) has drawn ire from partisans on both sides. 

Crypto dominates PAC funding

 🏛️ VP Kamala Harris will back measures to help grow digital assets, says a policy adviser to her campaign. (Bloomberg)

💸 TD Bank set aside $2.6 billion for fines it will probably face from U.S. regulators due to weakness in its anti-money-laundering practices. (WSJ)

💳 Apple Card turned 5 but remains U.S.-only. (MacRumors)

Credit score

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

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

• BSX Exchange, a DeFi derivatives protocol built on Base, raised $6.2m in seed and pre-seed funding led by Blockchain Capital. Bankless Ventures, No Limit Holdings, Cadenza Ventures, Breed VC and Maelstrom also participated. Go deeper

• Workpay, a Kenyan HR and payroll startup, raised $5m. Norrsken22 led and was joined by Visa, YC, Saviu Ventures, Axian, Plug n Play, Verod-Kepple Africa Ventures and Acadian Ventures. Go deeper

• Revenew, an SF-based payment operations and optimization platform, raised $4.55m led by Fika Ventures, with participation from Dash Fund and TTV Capital. Go deeper

• Magie, a Brazilian AI-powered financial assistant, raised a $4m seed led by Lux Capital. Go deeper

• Stork Network, a web3 oracle provider, raised a $4m seed led by Lightspeed Faction, with participation from Lattice, CMS and Wintermute. Go deeper

• Thera, a provider of back-office fintech tools, raised $4m in seed funding from YC and 10x Founders. getthera.com

• Arsenal Capital agreed to buy Knowtion Health, a Boca Raton, Fla., provider of revenue cycle insurance claim resolution services, from Sunstone Partners (which will retain a stake). knowtionhealth.com

• Oaktree Capital is in talks to buy a majority stake in two units of B. Riley Financial (Nasdaq: RILY), which recently received a takeover offer from its co-founder, per Bloomberg. Go deeper

• THL Partners is nearing a deal to acquire a majority stake in YA Group, a Nashville-based provider of property damage consulting services for insurance carriers and claims services firms, per Bloomberg. Go deeper

• DMI Finance, an Indian shadow bank, is raising funding from Mitsubishi UFJ at around a $3b valuation. Go deeper

• Klarna acquired the assets of defunct BNPL firm Laybuy in New Zealand. Go deeper

• General Atlantic sold its remaining $127m stake in listed Indian mortgage lender PNB Housing Finance. Go deeper

• Paytm sold its entertainment ticketing business to Zomato for $244m. Go deeper

Deals!

• Kris Kovacs, CEO and founder of Constellation Digital Partners, was appointed to America's Credit Unions business advocate advisory committee. Go deeper

• Rajesh Kini, former CFO and head of the corporate accounting group at Infosys, joined Perfios as CFO. Go deeper

• Tobin McDaniel, former head of SoFi Invest, was named president of NinjaTrader. Go deeper

• Adam D'arcy, former chief product officer of Prodigy Finance, joined Trustly as CPO. Go deeper

It's Personnel

 ☕ @Lucinda is figuring out her coffee dosage.

 📺 @Ryan finished "Lost" and is now trying to figure out what to watch next.

Thanks to George Moriarty and Rob Reinalda for today's edits.

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

1 big thing: Bolt's hairy offering

2. The BFD: $30M software exclusive

3. Crypto dominates PAC funding

4. Credit score

August 22, 2024

1 big thing: Bolt's hairy offering