The Interchange: What's the deal with the one-click checkout space?
Welcome to the inaugural edition of The Interchange! If you received this in your inbox, thank you for signing up and your vote of confidence. If you’re reading this as a post on our site, sign up here so you can receive it directly in the future. Every week, I’ll take a look at the hottest fintech news of the previous week. This will include everything from funding rounds to trends to an analysis of a particular space to hot takes on a particular company or phenomenon. There’s a lot of fintech news out there and it’s my job to stay on top of it -- and make sense of it -- so you can stay in the know. Let’s goooo! Mary Ann
One-click checkout startup Bolt made headlines this week for more reasons than one -- and none of them were particularly good. Let’s start from the beginning.
On April 26, Bloomberg reported that Bolt was being sued by “its most prominent customer,” Authentic Brands Group (ABG), which owns dozens of retail brands. ABG alleged that San Francisco-based Bolt failed to deliver technology that it promised and that it missed out on over $150 million in online sales during the company’s integration with fashion retailer Forever 21. Oof. On top of that, ABG’s complaint went on to say that Bolt had raised funding “at increasingly high valuations” by “consistently overstating” the nature of its integrations with the company’s brands in an effort to make it seem like it had more customers than it actually did. For context, Bolt in January raised $355 million in a Series E financing that valued the company at $11 billion.
As TC’s Christine Hall wrote at the time, Bolt’s one-click checkout product aims to give businesses the same technology Amazon has been known for since 1997, and at the same time, incorporate payments and fraud services meant to ensure transactions are real and payments can be accepted.
Image Credits: Bolt
According to Bloomberg, Bolt reacted to the complaint by saying that ABG’s claims were without merit, and “a transparent attempt” to renegotiate the terms of the companies’ agreements.
Then on April 28, Insider reported that it heard from unnamed sources that ABG’s lawsuit was really an attempt by the firm to claim an ownership stake in the company. Apparently when ABG became a Bolt customer in October 2020, reported Insider, Bolt entered a deal to award the group stock warrants, which give the holder the right to buy shares at a specified price before a specified date — under certain conditions.
According to Insider:
The agreement said that if ABG implemented Bolt's checkout and loyalty products at brands like Forever 21 and generated a certain amount in transactions, ABG could buy shares in Bolt for a stake of up to 5%, according to the lawsuit and sources close to the company who also asked for anonymity in discussing pending litigation. Those shares had an estimated value of $20 million at that time, said a source, and could be worth $370 million at Bolt's Series E share price. In a court filing, ABG valued that stake at closer to $500 million.
The plot thickens.
Meanwhile, The Information reported on April 28 that Bolt is not as dissimilar as competitor Fast -- which recently imploded after raising $120 million over time -- as we all may have thought. If you recall, it was revealed that Fast had only generated $600,000 in revenue all of last year. According to The Information, Bolt’s revenue growth has “dramatically” slowed due to competitive pressure the company is likely feeling from the likes of giants such as PayPal and Shopify, who have launched their own one-click checkout services for merchants.
Bolt is no stranger to controversy. Its 27-year-old founder, Ryan Breslow, started the company after dropping out of Stanford. He stepped down as CEO in January, and is generally known for his very outspoken rants, such as this series of tweets and recent digs at the media. In an interview with TechCrunch’s Connie Loizos that same month, he said the company had signed roughly 10 major deals in the second half of last year, with each being bigger “than any that Bolt has signed in the company’s history previously.” He went on to say that those exclusive partnerships would “generate billions in revenue” when rolled out, although he did say the process takes time given the “large technical lift” of some of these “large merchants and commerce platforms.”
Despite all the challenges that Bolt and Fast have faced, newer players continue to emerge in the space. TC’s Mike Butcher last week reported on Volume, a new London-based checkout startup that closed a pre-seed round of $2.4 million led by firstminute Capital and joined by SeedX and Haatch Ventures. As Mike wrote, "Volume’s take on this checkout market is — it says — about making the checkout process shorter and reducing associated fees. It does this by using the Variable Recurring Payment mandate and also employing biometric security to finalize the purchase."
I reached out to Bolt about all of the above but due to a very crowded inbox, I was only able to connect with the company after this newsletter was published. Here is an update that was published on May 2.
A chat with Affirm's CTO, Libor Michalek
BNPL is not a new concept; it’s just taken off in recent years and become far more mainstream (TechCrunch+ subscription required).
Buy now, pay later lets people do exactly what its name suggests — buy something and pay for it later. The difference between BNPL and credit cards is that rather than charge the full amount of a purchase on a card, consumers can choose to pay for an item in installments.
However, there are some that argue BNPL is just another form of debt, which could lead to a discussion on whether companies that enable it are doing it responsibly. In the case of Affirm, one of the space’s largest players, co-founder Max Levchin (who also founded PayPal) has been vocal about what he describes as a “mission-based” approach.
Ukraine-born Levchin started Affirm in January 2012. The fintech went public in 2021, and while it’s trading considerably lower than its 52-week high (which stock isn’t?), Affirm is today valued at nearly $9 billion, and its executives remain bullish on the company’s future.
I sat down with Libor Michalek, president of technology at Affirm, to understand just how the company differentiates itself from its plethora of competitors, what is unique about its technology and strategy and why he thinks using BNPL is much better than using a credit card to pay for purchases. You can read all about it here (TechCrunch+ subscription required).
Image Credits: Affirm
Is Robinhood a takeover target?
Robinhood this week announced it was laying off 9% of its staff, or an estimated 300 workers. This follows Better’s move to cut some 1,200 or so people last week and Blend’s lay off of 200 workers in the wake of a challenging mortgage environment (among other things in the former’s case).
In the case of Robinhood, the company has reported some positive news in recent months — it saw its value rise 25% in March following news that it was extending its equity trading hours toward a goal of supporting 24-hour-a-day activity — but there have also been myriad struggles at the former unicorn.
The Financial Revolutionist shared last week a tweet from Ben Carlson of Ritholtz Wealth Management, who basically said that Robinhood appears ripe for an acquisition by Goldman Sachs or Fidelity. To quote FR:
Carlson identifies Robinhood’s excellent UX and young client base as its greatest assets: the latter especially for Goldman, which has doubled down on targeting younger customers through its Marcus line of products. But Fidelity, which is privately held, might be better suited to buying Robinhood because it doesn’t need to worry as much about Robinhood’s tarnished reputation (as compared to a publicly traded company that has to answer to opinionated shareholders). And any acquisition would have to handle Robinhood’s significant losses, in addition to a potential ban by the SEC on Robinhood’s payment-for-order-flow business model. Whatever the end result, Robinhood’s mission to ‘democratize finance’ has fewer clients—and employees—along for the ride than it did a year ago.
Infrastructure boom continues
Last week, I reported on two different infrastructure companies that raised venture funding: Streamlined and Minka.
Ex-Chime engineers Boris de Souza and Zhuo Huang founded Streamlined, an Oakland-based startup that emerged from stealth with a total of $4 million in funding. A lot of B2B payments tech is built on top of B2C tech, such as Stripe, that was engineered to handle consumer card transactions, according to de Souza. But Streamlined is different, he claims, in that it has “custom built” transaction infrastructure for B2B “from the ground up.” The company also touts that its infrastructure is designed to allow for faster merchant payouts and to “dramatically simplify” reconciliation, which he believes is one of the company’s biggest differentiators. Greylock and SignalFire led the company’s seed round.
Image Credits: Minka
Also, Bogota-based payments infrastructure startup Minka said it had secured $24 million in a funding round co-led by Tiger Global Management and Kaszek. In an interview, CEO and co-founder Domagoj Rozic described Minka as “an open network that aims to allow organizations such as banks and clearinghouses to ‘publish’ and move money in real time by exposing their ‘closed, outdated core systems’ to the web.
“This in turn enables them to collect, send or exchange money in real time without the need for reconciliation and with almost no cost,” Rozic told TechCrunch.
These two rounds are proof that infrastructure is an area that is proving to be thus far resilient in the face of a global funding slowdown.
Spend management -- again
Fleet management company Motive has launched the Motive Card, marking the company’s entry into the spend-management world, reported PYMNTS.
“With fuel representing the second-largest operating cost for fleets, fuel discounts are more important than ever for driving profitability,” Motive said in a news release issued on April 28.
The company said the “zero fee” card — which it claims is the first corporate card “natively integrated” with a fleet-management platform — offers businesses substantial discounts at fuel providers, including Love’s, TA, Petro Stopping Centers and TA Express, as well as savings on expenses such as tires and maintenance.
“Motive is unifying the management of financial and physical operations in one integrated platform,” Shoaib Makani, co-founder and CEO of Motive, said in a statement.
But Motive is not the only player in the space. In February, TechCrunch reported on Coast, which aims to help companies control fuel and fleet spending with its expense management software, and its $27.5 million Series A financing co-led by Accel and Insight Partners. Founded in late 2020 by Daniel Simon, Coast describes itself as the “modern financial services platform for the future of transportation.” It compares itself to the likes of Ramp, Brex or Airbase in that it has developed an expense management software platform for fleet operators and their employees. To that end, and like the aforementioned spend-management companies, Coast has created a commercial charge card designed for the businesses that operate vehicle fleets, such as trucking companies, plumbers, HVAC businesses or last-mile delivery companies.
Meanwhile, Rain raised $6 million in seed funding to provide corporate credit cards for decentralized autonomous organizations (DAOs), reported The Block. Lightspeed Venture Partners led the round, which also included participation from Coinbase Ventures, Uniswap Labs and Terraform Labs. Founded by Farooq Malik and Charles Naut, the startup aims to tap into the growth of DAOs by providing them with a corporate card and expense management tools.
Crypto, crypto and more crypto
Last week, I wrote about how teen-focused Copper raised a $29 million Series A led by Fiat Ventures. Since its launch last May, Copper has grown to have more than 800,000 users. That’s up from 350,000 last October. While the company would not reveal its valuation or hard revenue figures, it did say that its revenue growth is in line with its user growth, which — as noted above — has more than doubled since October 2021.
Seattle-based Copper offers features such as personalized debit cards, access to 50,000 ATMs and support for digital wallets like Apple Pay, Google Pay and Samsung Pay. And now, it wants to move into giving teens a way to invest “responsibly” in stocks, mutual funds and even crypto.
Anita recently wrote about Step’s efforts to also offer teens a way to invest in crypto. For more on the topic, listen to Alex Wilhelm and I riff about it on EquityPod here.
Meanwhile, the biggest retirement plan provider in the United States, Fidelity, last week announced plans to offer individuals the opportunity to invest in bitcoin through their 401(k) retirement accounts later this year. With 20 million plan participants accounting for $2.7 trillion in assets, Fidelity just brought a somewhat controversial strategy into the mainstream.
It’s not surprising that Fidelity was the first tradfi asset management firm to stake out its territory in this space — the company has been ahead of its peers in launching digital asset products under the tenure of CEO Abigail Johnson. It launched its first crypto-related offering in 2018 when it began to hold digital assets in custody for institutional investors.
The news marked a pivotal moment in the growing movement to expand access to alternative investments — a goal that can be seen as either laudable or risky, depending on whom you’re asking. Anita digs in here (TechCrunch+ subscription required).
Digital banking startup Cogni is joining the ranks of companies hopping on the crypto bandwagon. The mobile-based platform, founded in 2018 out of Barclays’ accelerator program (which is operated by Techstars), launched with the intent to offer personalized banking products suited to the lifestyles of those in the 18-to-35 crowd, CEO and founder Archie Ravishankar told TechCrunch’s Anita Ramaswamy. Now, Cogni has raised a $23 million funding round led by Hanwha Asset Management and CaplinFO with a new mandate — bringing Web 2.0 and web3 services together on one platform.
Ondo, founded by two alums of Goldman Sachs’ digital assets team, is capitalizing on crypto’s capital markets by building what it calls a “decentralized investment bank.” What that means is that Ondo acts as an intermediary between DAOs (decentralized autonomous organizations) that, like traditionally structured companies, need to raise money to fund their operations, and the investors who can provide them with that money. Last week, Ondo announced that it raised a $20 million Series A round, co-led by Pantera alongside Founders Fund. Coinbase Ventures, GoldenTree, Wintermute, Steel Perlot, Tiger Global and Flow Traders participated in the round as new strategic backers. More from Anita here.
Fundings and other fintech news
I reported last week that PayPal is shuttering its San Francisco office as it evaluates its global office footprint. Multiple sources told me that the payments giant is closing its San Francisco office on 425 Market Street, which housed its Xoom business unit, by June 3. PayPal acquired Xoom, which is focused on online money transfer technology and services, in 2015. A person familiar with internal happenings at the company said the employees that worked out of that office will work virtually, with the ability to work from the company’s headquarters office in San Jose. It is unclear how many employees are affected by the decision.
Self Financial, an Austin-based fintech that aims to make credit and savings accessible to U.S. consumers, announced that in addition to Equifax and TransUnion, it now also reports rent payments to Experian. Self claims that the move makes it “the first and only direct-to-consumer company to report rent to all three major credit bureaus.” The announcement follows Self’s February acquisition of rent and utility data furnishing company RentTrack and its consumer division LevelCredit. I covered the startup’s $50 million raise last September.
Kard announced last week that it raised a $23 million Series A round led by new investor Tiger Global, with participation from other new backers Fin Capital and s12f. Underscore VC, which led Kard’s seed round in 2020, also participated in the latest funding. Kard’s rewards-as-a-service API streamlines the card issuance process for issuers, allowing them to create a customized rewards program tailored to their particular customer base by choosing from Kard’s set of merchant partnerships. The startup plans to use its new capital to expand its merchant network and to launch new reward and loyalty-related products in the coming quarters. Anita Ramaswamy gives us the story here.
Ben Franklin once famously said that in this world nothing can be said to be certain, except death and taxes. But that doesn’t make dealing with either particularly natural and easy. Tech is rushing in to fill that gap, and last week a Berlin-based startup called Taxfix, which has built a popular mobile assistant to address the former of these, is announcing a big round of funding to fuel its growth. It closed a Series D of $220 million at a valuation of over $1 billion, money that the startup will be using both to build in more products to extend its touch points with customers beyond annual use around tax time, and to expand to new markets beyond its current footprint of Germany, Spain and Italy. Ingrid Lunden gives us all the details here.
São Paulo-based UME, a fintech specialized in "buy now pay later," has secured $10 million in funding, including $5.5 million in equity and $4.5 million in debt. Silicon Valley venture capital fund NFX and Brazilian VC firm Canary co-led the round. The startup plans to use the money to invest in a national expansion with the goal of allowing customers “to shop at any retailer in Brazil, whether physical or online.” UME says what differentiates it from other players in the space is its proprietary deep neural network ("deep learning”). “Bringing high-end technology to analyze customers' behavior in the retail space allows us to create underwriting models based on proprietary data that grants better credit to more people”, said founding partner Marco Cristo.
The company operates in the northern region of Brazil and has more than 70 retailers in its network, adding up to more than 350 stores. At the end of 2021, the startup had performed over 100,000 transactions and granted credit to more than 45,000 customers.
QuotaPath -- which has developed a commission-tracking solution for sales and revenue teams -- raised a $41 million Series B led by Tribe Capital with participation from Insight Partners and others. The funding comes nine months after its $21.3 million Series A round. During that time, the startup says it has tripled its revenue and doubled its team.
OneVest raised $5 million CAD in seed funding and the support of fintech-focused investors like Luge Capital and National Bank’s NAventures to accelerate the growth of its wealth management offering. More here.
Trust, a Los Angeles, Cakifornia-based “growth network” for emerging brands founded by a group of Snap alums, secured $30 million in debt and equity funding. That included $25 million in debt from Upper90 and $5 million in equity from existing and new investors, including Sapphire Sport and Michael Vaughan (Venmo’s former COO). Christine Hall covered the startup’s $9 million raise last August.
Carbon Collective, an online investment advisor “100% focused” on solving climate change, announced an oversubscribed seed round at $2.2 million, featuring Powerhouse Ventures, HyperGuap and Elevation Ventures. Founded in 2020, Carbon Collective has a B2C robo investment offering, a B2B Green 401(k) and claims to have compiled “the most comprehensive list of climate solution stocks in its 2022 Climate Index.
That’s it for this week. Thanks so much for reading. If you enjoyed it, please share. Hope you enjoy the rest of your weekend! Cheers, Mary Ann