From: RegTech Analyst
Last week proved a huge win for challenger banks and the Latin American FinTech sector. Check out these funding rounds to find out why.
Investment rounds worth over $300m are rare and few between. So, when two of them happen at the same time, in the same sector and in the same country, then you better sit up and pay attention. That was the case last week when Brazilian challenger banks Neon Pagamentos and Nubank both raised $300m funding rounds.
The news about these two challenger banks highlight two important trends in the FinTech sector. Firstly, they shed new light on the current struggles of other challenger banks and the overall WealthTech sector. Secondly, these two deals demonstrate that people better pay attention to the Latin American FinTech space. Let’s start with the challenger bank and WealthTech segment of the discussion.
It should come as no surprise for neobank aficionados that the segment has had its fair share of obstacles to overcome over the past few months. From rumours circulating about them going bust and being criticised for how they provide Covid-19 support to SMEs to headlines about them sacking staff members and treating employees poorly, the industry has faced its fair share of problems, many of which having either been caused by or exacerbated by the ongoing pandemic.
The struggles facing these ventures have come to the forefront over the past month as Revolut, Monzo and Starling Bank have all reported massive losses in the last year. Additionally, Tandem has – much like Monzo – reportedly suffered a down round that slashed its valuation by 40%.
The issues facing neobanks are symptoms of the overall struggles of the entire WealthTech sector. Challenger banks have long been reaping in the biggest funding round in the sector, but if they struggle it begs the question of what that will mean for the rest of the sector.
The WealthTech sector is heading towards its worst year of funding since 2017, when it collected $6bn in total around the world, according to FinTech Global’s research. The sector attracted $3bn across 179 deals in the first six months of 2020.
That would mean the end of a long winning streak for the sector, which has gone from strength to strength over the past five years. Back in 2015, the global WealthTech sector attracted $1.8bn across 296 rounds. Over the next four years the number of deals and the amount injected into the industry grew expectationally until the record year of 2019 when investors invested $8.2bn across 379 deals with WealthTech companies.
With that in mind, Neon and Nubank successfully closing $300m investment rounds should provide some relief for people worrying about the sector, especially given that Mexican challenger bank Fondeadora recently bagged $14m in a Series A round.
As mentioned above, these raises also highlights the strength and opportunities of the Latin American FinTech sector.
The region’s FinTech industry enjoyed a period of growth before the pandemic broke out. Back in 2016, ventures in Latin America raised $350.4m in total, according to FinTech Global’s research. That figure skyrocketed to $2.74bn in the record year of 2019.
However, the first quarter of this year gave little assurance that they would be able to achieve same results. The sector only raised $475.1m in the first six months of 2020. However, Neon and Nubank’s investment rounds means that the Latin American industry has surpassed the investment levels seen in 2018 when the sector raised a little over $1bn in total.
PropertyGuru raised the third biggest funding round we reported on last week. The PropTech venture collected a total of $220m in investment.
The news comes as the PropTech sector is dealing with its fair share of coronavirus-related problems. Still, they are seemingly not as profound as the ones faced by the WealthTech sector. While the global PropTech industry collected a record $13.9bn across 250 deals in 2019, the sector has raised $4bn across 113 deals in the first half of 2020.
Even though that might be a long way away from the levels seen last year, it still already more than the $2.9bn collected collectively by PropTech companies in 2018.
Brazilian neobank Neon Pagamentos closes $300m Series C
As mentioned above, Brazilian challenger bank Neon Pagamentos closed a whooping Series C round on $300m last week. General Atlantic led the raise. The round was also backed by investors such as BlackRock, Vulcan Capital, PayPal Ventures, Endeavor Catalyst, Propel Venture Partners, BBVA, Monashees and Flourish Ventures. The round would be split into two tranches of $150m.
Neon Pagamentos will use the cash to go on a hiring spree, scale its user base and further develop its platform. Neon also plans to launch new products and features and pursue mergers and acquisitions.
The neobank noted that it may be able to benefit from Covid-19, saying that the pandemic may enable it to accelerate its growth trajectory, with more people looking to alternatives to in-person banking solutions. It has seen a 26% increase in new customers since March.
Nubank raises $300m in new funding round
The second Brazilian challenger bank to raise a big round that we reported on last week was Nubank, which reportedly bagged $300m in new funds, according to a filing with the U.S. Securities and Exchange Commission. While five investors had participated in the raise, none of them were named. While the filing had been made on June 19, the news about only surfaced after a Brazilian financial blog noted it.
The news comes after the challenger bank opened in Mexico in the first quarter of 2020. The digital bank had first announced the move in August 2019.
PropertyGuru scores $220m in private equity led funding round
Southeast Asia PropTech platform PropertyGuru has scored $220m in a new funding round that the company said would enable it to meet the fast-evolving needs of the market. The investment was led by global private equity firms TPG and KKR. KKR tapped its $9.3bn KKR Asian Fund III for the deal.
With this equity burst, the company has identified three key areas for growth. These are to continue to support its newly launched PropertyGuru Finance service, increase the data capabilities for clients in Southeast Asia and further develop its PropertyGuru FastKey service.
LendingUSA picks up $200m to keep expanding its business
Point-of-sale financing provider LendingUSA has closed a new credit facility and received a total financing package of up to $200m from Atalaya Capital Management. The privately held investment advisory firm based out of New York previously backed LendingUSA back in 2019 with a $250m investment. LendingUSA will use the money to keep expanding its business and development of new products.
Viva Republica said to raise $173m in new investment round
South Korea-based peer-to-peer money (P2P) transfer platform Viva Republica has reportedly raised $173m in a new funding round.
The investment was led by Sequoia Capital China. Viva Republica also enjoyed backing from Aspex Management, Kleiner Perkins Digital Growth Fund, Altos Ventures, Goodwater Capital and Greyhound Capital.
Viva Republica will use the money to build a one-stop shop for customised financial product recommendations from banks, securities and insurance companies, the article said.
PasarPolis bags $54m in Series B round
Indonesian InsurTech innovator PasarPolis has secured another $54m in a funding round to improve its AI-based claim automation platform and into its onboarding platform for agents. LeapFrog Investments, SBI Investment, AlphaJWC, Intudo Ventures, Xiaomi and Go-Ventures all participated in the Series B round, TechCrunch reported.
FireMon secures $40m
Network security policy management company FireMon has received $40m in debt financing from Silicon Valley Bank (SVB). FireMon was recently “deemed critical” to national security by the United States Treasury. This entitles it to US government loans, which have been supplied by SVB.
InCountry bags $18m funding round to support its international growth
Data residency and compliance solution InCountry has bagged $18m in a funding round led by Caffeinated Capital and Mubadala Capital. Accenture Ventures and previous InCountry backers Arbor Ventures, Felicis, Ridge Ventures, Bloomberg Beta, and Team Builder Ventures also participated in the raise. The RegTech will use the money to fund its global expansion efforts.
InfoSum collects $15.1m in new funding
Secure data sharing startup InfoSum has raised $15.1m in a Series A round led by venture capital firms Upfront Ventures and IA Ventures. Ascential, Akamai, Experian, ITV and AT&T’s Xandr also supported the raise.
Cybersecurity platform Cloudentity closes Series A on $13m
Cloudentity, a provider of application security and identity-aware authorisation, has closed its Series A round on $13m. ForgePoint Capital led the round, with contributions also coming from WestWave Capital. Cloudentity will use the money to fuel its growth and bolster its go-to-market efforts.
Zilch exits stealth on the back of $10m round
London-based FinTech Zilch has raised $10m to fund the rollout of its buy now, pay later platform, aiming to compete with companies like Klarna and Afterpay. Having launched its beta product in August 2019, Zilch has been in stealth since. Nevertheless, it claims to have successfully attracted on average 10,000 new customers per month, predominantly among the millennial and Gen Z segments of then market. It has now exited stealth on the back of the new investment.
Trust Stamp closes crowdfunding campaign on $6.5m
AI-powered authentication company Trust Stamp has raised $6.5m through a crowdfunding campaign on SeedInvest. The company held the fundraise at a pre-money valuation of $25m. Proceeds from the round have been earmarked for research and development efforts for its identity solutions.
Global 66 closes seed round on $4.6m
Chile-based Global 66, an international money transfer platform, has reportedly closed its seed round on $4.3m. Investors included Venrex and Genesis Management, as well as angel investors William Armitage, Andrew McKay and Mario Solari, according to a report from Contxto. This group of investors now hold a combined 25% stake in Global 66. Global 66 will use the money to continue its expansion efforts, with plans to enter the Canada market.
ProNavigator capitalises on strong growth to close $4.2m funding round
AI-powered insurance assistant ProNavigator has seen adoption of its technology accelerate during the pandemic, helping it to close a $4.2m round. Luge Capital, GreenSky Capital and MaRS IAF co-led the raise. iNovia Capital, BDC and CIBC Innovation Banking also contributed to the funding round.
Proceeds from the round will be used to support its continued expansion across the US and Canada, as well as the launch of new products. The InsurTech currently supports personal lines within home and auto insurance, but is hoping to launch commercial support in the future.
FinTech recruiter Storm2 has secured $3m from Puffin Point Investment
Founded in 2019, FinTech recruiter Storm2 has collected $3m in additional funding from Puffin Point Investments to fuel its acceleration efforts. Since the launch, the company has partnered with 100 FinTech companies across major global financial centres. In that time, it has also grown its staff from one to 40 employees.
Cryptocurrency startup Yellow Card bags $1.5m investment
Cryptocurrency startup Yellow Card has picked up $1.5m from investors such as Polychain, Andreessen Horowitz, and Celo. The news comes on the back of the venture having expanded its services from Nigeria to South Africa and Botswana. Yellow Card will use the money to expand even further, aiming to become the dominant cryptocurrency exchange in Africa.
Switzerland-based i2 Invest said to close $1.4m in funding round
Switzerland-based i2 Invest has reportedly closed a new funding round on $1.4m to help it launch two funds in Autumn. The capital was supplied by unnamed business angels, according to a report from Born2Invest. Funds will be used to expand the company’s team, increase growth and launch two funds.
India-based IDfy said to raise $2.1m in its new funding round
Digital KYC solution IDfy has reportedly raised around $2.1m in funding to support its growth and expansion plans. The capital was supplied by previous IDfy backers Millenna FVCI III, NB Ventures and Dream Incubator. Of the Series A funding, Millenna supplied around $2m, Dream Incubator deployed $100,000 and NB Ventures injected $50,000, it said.
Cachet closes seed round on €1.1m as it eyes expansion into Nordics
Estonia-based InsurTech Cachet has closed its seed round on €1.1m as it looks to expand its services to enter new markets such as Poland, the Nordics and the UK. Icebreaker.vc led the round. Techstars, Barclays and Lemonade Stand also invested in the company alongside a number of angel investors, including Outrun Ventures founding partner Chris Adelsbach and Techstars’ Barclays London Accelerator managing director Kartik Varma.
Cryptocurrency company Bifrost secures $600,000 seed investment
Cryptocurrency startup Bifrost picks up $600,000 to solve trading issues on decentralised finance (DiFi) markets. NGC Ventures, SNZ Holding, Consensus Lab, Digital Renaissance, Youbi Capital, DFG and Longhash were among the backers of the round.
RegTech platform Zero Hash closes Series C round
Zero Hash has closed its Series C round, which was led by tastytrade, a Chicago-based holding company. Other participants of the round included Bain Capital TradeStation, CMT Digital and Monday Capital. While the amount of capital raised in the round was not disclosed, Zero Hash will use the new funds to improve its automated lending infrastructure and expand its tools to include ACH processing.
The Money Club said to close its seed round
The Money Club, which helps users to save, invest and borrow, is said to have raised a seed funding round. India-based seed and angel investors firm Venture Catalysts led the round, with participation also coming from LetsVenture and the Keiretsu Forum, according to a report from VCCircle.
Cybersecurity startup Dark Cubed closes Series A round
Cybersecurity software as a service (SaaS) platform Dark Cubed has closed its Series A funding round. The investment was led by cybersecurity-focused investor Option3Ventures. Dark Cubed uses publicly available and proprietary threat information to supply online security to small and medium businesses. Furthermore, its data analytics approach helps to provide access to anonymised real-time data on customer networks to enable advanced analytics and threat hunting capabilities.
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