Data says there are only two seasons for fundraising and one secret window

One of the top things that keeps a startup CEO up at night is the worry of running out of money. As a second-time founder and CEO of DocSend, I consider raising money and keeping my startup sufficiently funded a primary responsibility.

If “don’t run out of money” is a universally accepted warning, then the next question becomes when should you raise your next round of funding? There’s a lot to consider in coming up with an answer. If you start too soon before you have some wins to share, you might fail. If you wait too long you might put yourself in a bad negotiating position or worse, run out of money altogether!

DocSend has been used by over 20,000 founders and VCs for fundraising, and over the years we have published data-backed findings about pitch deck sharing and viewing. Recently, I contributed an article about the seasonality in fundraising and when VCs actually look at the decks.

The data included in this research came from companies that explicitly opted in to participate by responding to an automated email sent to them. We are incredibly appreciative to these founders for making this research possible. You can read more about our startup opt-in process and other aspects of our methodology here.

In this article, I’ll talk about how to apply some of the key takeaways from this research to inform your fundraising efforts.

There are really only two main fundraising seasons

I’ve often heard these anecdotes: “Don’t raise in August because VCs are on vacation,” and “VCs come back in January looking to do a deal.” But this is the first time there’s ever been data to support or disprove these statements. (See the analysis here). 

My first big takeaway is that there are two big spikes during the year when VCs review a ton of pitch decks: October and November, then March. The summer definitely flattens out a bit, but August is not as bad as people think and December is actually way worse than most anticipate.

Sure, you might be the exception to this data and you might have pulled off a fundraise over the summer or in December. But if you have control over your timing, why take that risk?

How to think about runway and when to raise

Image via Getty Images / runeer

A startup’s “runway” is how much time they have until they run out of money. The assumption here is that a startup isn’t profitable yet, and is using VC investment to grow their business more quickly at the expense of short-term profitability.

Often a founder will raise a Series Seed and plan to “burn through” all that money in 18 months either investing in product or growing the team. To raise a round successfully at a good valuation you need to be growing at a crazy high rate (which is what you’re burning money on).

YC says you should be growing 7% a week, although that applies to very early stage pre-funding. Once you’ve gotten a bit of traction, the conventional wisdom is that you need to be on the “triple triple double double” path (see the detailed overview here).

So if you raise a Series Seed or A at $2m in ARR, you need to get to $6m in ARR in twelve months (that’s a 9.6% compounding monthly growth rate). If you’re only on track to double in a year, you are likely not VC-fundable and need to go the bridge round route and steer the business towards profitability.

In other research from DocSend we’ve found that the median time spent to fundraise is about three months. If as a CEO you can’t raise capital at the right price, the responsible thing to do is to leave a bit of buffer so you can either reduce your burn rate to extend your runway or find a buyer for your business. Again, the CEO’s main goal is to not run out of money.

This means that ideally you begin to fundraise no less than six months before you anticipate running out of cash. So if you raise capital for 18 months of runway, you need to be back out in the market a short 12 months after popping the champagne to celebrate your last round.

The Q4 fundraising trap you need to avoid

The fundraising data at the end of each year tells a fascinating tale of hope and then a rising fervor of activity before falling off a cliff in December. The lesson in this is that if you can’t get your round closed by the end of November, you run the risk of losing momentum during the holidays and having to reset your process or deal with worse terms by having fewer potential investors at the table. As a VC, you also run the risk of missing out on a hot deal if you can’t get it closed before the holiday.

The story the data shows is that VC visits start low in August at the end of the summer low season and steadily build to their annual peak in November before falling off sharply in December. Entrepreneurs sending decks starts low and steadily builds to a peak in October, which makes sense because you need to send your decks in advance of VCs being able to view them.

So if you are scrambling to get your deck out to VCs in October, realize that you are behind the ball and are at risk of missing the window which means you might be better off waiting until the new year (if you have that luxury).

The secret window

Another surprising discovery in the data was when pitch decks get the most attention. It’s a time of year when relatively few pitch decks are sent, but the viewing of those pitch decks by VCs is incredibly high. This means if you do go out to fundraise in this window, you’ll get significantly more attention than you would at other times of the year. To see the data deep dive on this as well as the overall monthly sending and viewing stats, check out the deep dive in Extra Crunch.

Smart windows to raise capital

This research highlights the need for CEOs to pay closer attention to timing their fundraising activities. Let’s say you raise your Series Seed round in March. You might assume that you should go out to the market again in 12 months.

However, knowing what we do, it could be more advantageous to start raising money a couple months earlier, in January. You’ll get a whole lot more attention and will beat the entrepreneur rush in March. Plus, you don’t want to be caught fundraising in summer.

If there are four things you should take away from this research, they are:

  • Peak fundraising times are in October/November and in March.
  • Don’t spend too much time celebrating after raising; you’ll like need to go out for your next round in just 12 months.
  • Budget a minimum of 6 months to go out and fundraise and try to time to your advantage.
  • If you’re raising at the end of the year, you should get started in September at the latest unless you think you’re in a very strong position to raise your round quickly.

Good luck and happy fundraising!

Kabbage secures $200M to fuel its AI-based loans platform for small businesses

Kabbage, the AI-based small business loans platform backed by Softbank and others, is adding more firepower to its lending machine: the Atlanta-based startup has secured an additional $200 million in the form of a revolving credit facility from an unnamed subsidiary of a large life insurance company, managed and administered by 20 Gates Management, and Atalaya Capital Management.

The money comes on the heels of a $700 million securitization Kabbage secured just three months ago and it is notable not just for its size but its terms: it’s a four-year facility, a length of time that underscores a level of confidence in the company’s performance.

Kabbage, which loans up to $250,000 in a single deal to small and medium businesses, has built a platform that harnesses the long tail of big data from across the web. It uses not just indicators from a company’s own public activities, but it also sources comparative information from across a wider group of similar companies, with “2 million live data connections” currently helping to feed its algorithm.

Together, these help Kabbage determine whether to provide the loans, and at what rates. Notably, the whole process takes mere minutes, making Kabbage disruptive to the traditional route of applying for loans from banks, which can come at higher rates, often take longer to close and may never get approved.

The company was last valued at $1.2 billion in its most recent equity round from the Vision Fund in 2017, with about $500 million raised in equity to date from it and other investors including BlueRun Ventures, Mohr Davidow Ventures. Rob Frohwein, the co-founder and CEO, confirmed to me via email that there are “no plans on the equity side right now.” We’ve asked about IPO plans and will update if we learn anything more on that front.

More importantly, alongside its equity story is the company’s business story: Kabbage has to date loaned out $7 billion in capital — amassed through securitizations and other facilities alongside that — to 185,000 businesses, and the company has seen an acceleration of business activity over the last two years. Nearly $700 million was loaned out in Q2 of this year, passing the record in Q1 of $600 million. This puts Kabbage on track to loan out between $2.4 billion and $3 billion this year.

“This transaction further diversifies Kabbage’s committed sources of funding and prepares us to meet the escalating demand for capital access among small businesses,” said Kabbage Head of Capital Markets, Deepesh Jain, in a statement. “2019 has proven to be a tide-shifting year as customers accessed more than $670 million from Kabbage in Q2 2019, well surpassing our previously set record last quarter.”

While a lot of Kabbage’s business has come out of its direct consumer relationships, it’s also been expanding by way of more third-party relationships. It has white-label partnerships with banks to power their own loans offerings for SMBs, and earlier this year it was also tapped by e-commerce giant Alibaba to provide loans to its small business customers of up to $150,000 to help finance purchases, part of the latter company’s redoubled efforts to build out its business in the US by way of its quiet acquisition of OpenSky.

The IPO’d learn investing at First Round’s Angel Track

Startups depend on the angel lifecycle. A few flush post-exit individuals put the first cash into a fresh venture. With some skill and plenty of luck, the early team grows the company into a big success. It sells or goes public and those team members earn a fortune. They then pay it forward by investing in the next generation of startups.

If they hoard their spoils they starve the early-stage ecosystem or leave founders stuck with dumb money from non-strategic financiers. If they redistribute their winnings, they can influence startup culture by deciding what, and more importantly, who gets funding.

But how does a co-founder or VP learn to be a mini-VC? That’s the goal of First Round Capital’s Angel Track, a free three-month workshop series in San Francisco and New York for learning how to source, vet, close, and support angel investments.

Angel Track Class 1

A scene from Angel Track’s first cohort

Every two weeks, an expert on some part of the investing process like finding deals or interviewing founders talks to the class, does Q&A, and then leaves the group to openly discuss what they learned and how to use it. Angel Track sessions have been tought by some of the smartest people in the valley like growth master Elad Gil, #ANGELS founding partner and former Twitter VP of corp dev Jessica Verrilli, and Precursor Ventures managing partner Charles Hudson.

Hundreds of startup execs apply for the 15 spots on each coast. After two classes in SF and one in NYC, today First Round unveiled its recently-graduated third cohort from programs in both cities. Those include Lucy Zhang who sold Facebook her chat startup Beluga that became the foundation of Messenger, and Mented Cosmetics co-founder and CEO KJ Miller. By the end of the program they’re taking joint pitch meetings from startups, showing each other the best questions to ask.

As with Y Combinator, it’s as much about the fellowship between new investors as the education. “It’s both a community and a masterclass” says First Round general partner Hayley Barna who oversees the NYC Angel Track. “It’s about bringing a talented group of emerging angels together to build a productive cohort of collaborators.”

She says diversity and inclusion is a big goal of the program, and it features 50% women and 20% underrepresented minorities. Being rich is not a pre-requisite. Barna declares “We’re not pulling in the bankers and the traders doing angel investing as a side-hustle.”

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LOS ANGELES, CA – MARCH 29: Confetti falls as Lyft CEO Logan Green (C) rings the Nasdaq opening bell celebrating the company’s initial public offering (IPO) on March 29, 2019 in Los Angeles, California. The ride hailing app company’s shares were initially priced at $72. (Photo by Mario Tama/Getty Images)

After a slew of big 2019 IPOs from Uber, Lyft, Pinterest, Slack, and Zoom, there are plenty of newly-minted potential angels for First Round to teach. The venture firm benefits by building a cadre of co-investors or alternative backers for deals it vets, and through added visibility into the next top fundraises. Unlike some VC scout programs, there’s no formal obligation to send opportunities to First Round or pledge funding alongside it. That keeps it appealing to future investors that innovation hubs need to keep the circle of life flowing.

First Round Logo 

“A lot of angel investors that got their start in the mid-to late 2000s, they’re almost all fund managers now. They went from angels or super angels to venture investors” First Round partner Brett Berson tells me. “There haven’t been a lot of people who’ve come in and filled that gap”, which could stunt the ecosystem’s growth. Graduates ramp up their angel investing while often staying in their operating roles, though some like former Pinterest head of culture Cat Lee who became a partner at Maveron turn investing into their day job.

First Round VP Ben Cmejla who helped launch the program explains that “Some people are doing it for the financial return. Some people want access to new ideas and are curious. Some people have a specific type of community they want to support with their investments.”

What Investors Learn From Angel Track

Becoming a successful angel means a lot more than evaluating term sheets. Just like how ideas are a dime a dozen and it’s about who can execute, fundraises are frequent but getting into the right ones takes hard work. First Round focuses on many of the soft skills required to win. Participants receive mentorship on how to:

  • Develop an area of expertise and personal brand
  • Mine their network for deals and post-investment assistance
  • Assess market opportunities rigorously
  • Judge an unproven startup’s team and product
  • Convince a founder to let them into a round and negotiate terms
  • Support their portfolio companies without being annoying

How to approach the delicate power balance of meetings with entrepreneurs can be especially tricky, so I spoke at length with First Round’s Phin Barnes about the session he teaches on founder interviews. I wanted to get a taste for what it’d be like in the classroom, despite First Round declining to let me attend the real thing. Turns out having a journalist in the room can disrupt a safe learning environment for budding angels.

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First Round partner Phin Barnes

“Investing is a sell-side product” Barnes stresses. “Capital is a commodity, especially in this market. What you’re saying with a term sheet is that you think the founder’s equity is worth more than your dollars.” That means investors have to close the value gap with sweat.

Barnes gives me what he calls the ‘chocolate soufflé or brownies’ scenario. “The danger of being a smart, talented executive or entrepreneur is that when a founder talks to you about sugar and flour and butter, you start imagining a molten lava soufflé cake you’d build with the ingredients. You invest, and then the founder comes back with a tray of brownies. ‘That’s not what I thought I invested in!'”

The mistake comes in envisioning what you’d do rather than really listening to the founder — the one who’s cooking. Instead of trying to hijack the roadmap or being disappointed by the direction, angels need to help make those brownies as tasty as possible. That means entering into interviews with an open mind.

“You should be positively inclined to invest and have some critical questions. If you don’t think you should invest, you shouldn’t have the meeting in the first place” Barnes explains. “You want to hold that perspective loosely and as new information comes to light, you want to check ‘Am I still interested?’ By the end you want to know what you don’t know, and the open questions you need to answer to validate your hypothesis.”

The four main areas of evaluation are:

The market — Why does this category of product need to exist? What would the world look like if they dominate the category? Can they clearly explain to a five-year old the problem they’re trying to solve? What’s their contrarian thinking? And what motivation will keep them persevering to address the problem despite setbacks and opportunity cost?

The product — Is addressing this specific customer problem unique and defensible? It’s less about if the product is good or bad, or should the button be red or blue. It’s more about how the founder took the inputs and made the decision and how they process information. Have them walk you through the go-to-market plan and see how they shift between high-level strategy and ground-level tactics.

The team — Do they have on-paper talent like PhDs or experience? Can they iterate quickly? You have to weed out victims and look for people who are learners that evolve when faced with adversity. Do your homework on who they are before so you can dig deeper into how they tick. Ask how they show trust in their team and how they get their team to trust them. Have them tell you about the most important thing that happened at the company in the last week to understand their priorities and emotional connection to the process.

The relationship with the founder — Investors need to ask what the best way to work with them is, and what founders are looking for in support from an investor. Do they want a hands-off investor who only chimes in when summoned, or do they expect frequent co-building sessions? Do they need more help accessing a bigger network for hiring and partnerships, or industry-specific expertise to navigate complex decisions?

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“We have two roles. We interview and then we coach” Barnes says, providing tips for both. “The very best questions are open-ended. They start with a how/what/why and end with a question mark. Double-barreled questions are terrible. Ask them what would you do, and stop. Get comfortable with silence. They’ll usually fill the silence with something off-script that reveals a deeper truth.” Only once has a founder asked Barnes ‘are you ok?’ in response to his inquisitive stare.

Being able to summarize what you’ve learned lets you quickly cross-check your assumptions with the founder and get helpful corrections. That helps you figure out what questions you still need to ask and keep a diligent list of what you’ll need to research after.

When it comes to giving an answer on whether you’ll invest, “Second best to a quick yes is a quick no with a strong point of view and information for the entrepreneur. The worst is ghosting people. 90% of people operate that way but that’s not the way to do it” Barnes emphasizes. “If you walk out without a yes, no, or what to learn more about in specific detail, you’ve failed as an investor and wasted the time of the entrepreneur.”

The antidote to dumb money

“It was like the perfect mix of your favorite college seminar and a super practical apprenticeship” says Ariana Poursartip, the VP of product for fintech startup Petal who was in the first NYC Angel Track class. “I came away with a better sense of my personal investing approach, and a community of fellow angel investors who I’ll continue to learn from for years.”‘

Fostering better educated angels is crucial for enabling founders. “Dumb money” from investors without expertise in a relevant space, connections they’ll leverage to help, or an understanding of what startups need can be dangerous. It can lead founders to raise more but inefficient capital and make slower progress that puts them at risk of a future down-round that can trigger a startup death spiral.

First Round Angel Track Cohort 3

First Round’s Angel Track cohort 3

First Round is far from the only one trying to fill the angel gap. “Initiatives like Spearhead, YC’s Startup Investor School, and scout programs help lower the barrier to entry for many people who will be terrific and helpful investors for startups” says Cmejla. Sequoia, General Catalyst, Village Global and more run their own scout networks. There are some questionable programs out there too, though, like Venture University which charges from $4,000 to $65,000 for its programs that require students to source deals in exchange for a hazy profit-sharing agreement.

Cmejla insists “It isn’t about providing the capital, a short crash course, or a path to becoming a full-time VC, but about building a durable community that members can lean on and lean into as they level up.” Instead, First Round scores a way to connect founders it funds with relevant angels from its classes. That incentivizes the firm to teach savvy etiquette. Barna warns “You want to be thorough, but if you’re putting in a small check, you can’t ask founders to jump through too many hoops . . . and spend five hours just to get that dinky paycheck.”

Past Angel Track participants like Poursartip and Instacart VP of growth Bengaly Kaba tell me they wish the program got them spending more time together both during and after the class, which could spur deeper alliances. “Currently the program ends and there is no formal programming to keep the alumni cohorts engaged and connected” Kaba notes. Many already back startups brought to the class by their peers. Still, Square Cash app product lead Ayo Omojola wanted a stronger structure like perhaps a syndicate so cohort-mates could do more investing together. 

What they all cited was the massive value of learning to codify what they’re looking for and what they bring to the table. Kaba highlighted how he enjoyed “Hearing how Elad Gil, [Floodgate co-founding partner] Ann Muira-Ko, Charles Hudson and other guest speakers defined their investment theses around macro trends, industry specific insights, and founder traits.”

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When the lock-ups expire on recent IPOs and employees start getting liquidity, “you’re going to see a whole new generation of investors get going over the next couple of years” says Berson.

Not every company spawns the same quality of investor, though. Companies like Uber that empower less-senior team members as the ride sharing company does with regional general managers tend to develop talent with the self-direction and conviction to be great angels. Looking back, you similarly see more angels and founders emerging from more decentralized Google than top-down Apple.

As software eats the world, unicorns proliferate, and the proceeds of tech’s winning streak are spread wide, more and more people will be ready to write angel checks. “It will most likely materially accelerate over the next 12-24 months” Berson concludes. Those without the skills could squander what they’ve earned. Angels who know what makes them special and can evaluate startups without getting swept up in the hype will crown the queens of tomorrow.

UK fintech Jaja pays $671M in cash to acquire the Bank of Ireland’s UK credit card business

Fintech has been one of the bigger stories of the UK startup world — due in no small part to the fact that its capital, London, is also one of the world’s major financial centers. Today, one of those startups made a big splash by buying an incumbent business, and taking on an equity investment alongside that, to scale up its position in the market.

Jaja, a mobile-first business that provides digital and physical credit cards and other financing services, today announced that it will be acquiring the UK credit card accounts for an initial cash consideration of £530 million (or $671 million at current rates). It will also become the consumer credit card issuer for the Bank’s UK business and the AA. At the same time it’s also getting an equity investment of £20 million in its own business.

“This announcement with Bank of Ireland UK is an exciting and important development in Jaja’s journey and is part of our strategy to create partnerships that will help more people embrace a simpler way of managing credit,” said Neil Radley, CEO of Jaja Finance, in a statement. “Our vision is to enable a new generation of mobile-first credit card products with unrivalled functionality, service and security. We’re excited to be welcoming Bank of Ireland UK customers as cardholders.”

The Bank of Ireland’s UK credit business includes a number of key accounts covering the AA (UK’s Automobile Association), the Post Office, as well as a card branded Bank of Ireland itself. (It excludes the bank’s commercial card business in the Republic of Ireland.)

The Bank had put the business up for sale some time ago as part of a bigger strategy to divest of its capital-intensive, competitive operations in a push to grow profitability by improving its loans and mortgages business: amid that, the Bank’s wider UK business has been a challenge for it, with investors going so far as to value the UK business at zero earlier this month.

“Jaja is an innovative company which shares our commitment to delivering outstanding customer service. We are proud to partner with them and bring their next generation credit card to customers across the UK,” said Bank of Ireland UK CEO Des Crowley in a statement. “Today’s announcement demonstrates the Bank’s continued progress in delivering against its strategic targets for growth and transformation to 2021, as set out at its Investor Day in June 2018.”

Jaja’s deal is being done in partnership with KKR, Centerbridge Partners and other unnamed investors, who are helping finance the acquisition and are also putting £20 million ($25 million) of equity investment into Jaja (pronounced “yah-yah”) alongside it. Prior to this, Jaja had raised about about $16 million, including about £3 million by way of the Seedrs crowdfunding platform.

The company is not disclosing its valuation amid this $671 million purchase.

A spokesperson for Jaja said the startup is not releasing any numbers today that point to how much the company’s current services are being used. The company, which is today active only in the UK, has taken the route of keeping a waitlist to onboard new users, and it was reported to have some 6,000 people on it back in February just ahead of the Jaja launching its cards.

The company also has a deal with Asda, the UK business of Walmart, to provide financing at the point of sale for its online storefront George.com (an Amazon-type everything store akin to Walmart.com). Given that Jaja has up to now not operated on a massive scale — even if it took on its whole waitlist, that would only number 6,000 customers, for example — it’s likely that this latest acquisition will be adding a sizeable number of users, and key brands, into its stable in one fell swoop.

Jaja was founded by Jostein Svendsen, Kyrre Riksen and Per Elvebakk — London-based Norwegian entrepreneurs who have previously found and sold other financial and tech startups (Svenden, for example, sold a previous company to American Express) — and is currently led by CEO Neil Radley, who had previously been the MD for Barclaycard in Western Europe.

Its key mission has been to bring a more modern approach to the world of credit and credit cards. That in itself is not hugely unique — it is essentially the purpose of all consumer-facing credit startups today — but given that the vast majority of credit services, and transactions, are still handled through traditional channels, it’s disruptive nonetheless.

The company describes itself as digital, mobile-first business, which in its case means that you apply for and initiate services through the company’s app — using your phone’s camera to snap your ID and an AI-based algorithm that takes in other data about you to provide what Jaja describes as “near instant” credit decisions within minutes. Jaja provides physical cards (Visa is its credit card partner), but it also allows people to use the cards through their digital wallets immediately. The company does not change for foreign currency exchanges and offers free cash withdrawal fees, with an annual percentage rate (APR) of 18.9%. And in keeping with what is now par for the course for challenger fintech services, you can use the app to get real-time updates on your account, modify repayments and more.

On that note, in addition to the challenge of onboarding a number of established brands and a large number of users on to a new platform that up to now has been adding users intentionally slowly, it will be interesting to see how and if Jaja can inject more modern infrastructure into those established operations, and a customer base that’s used to the traditional way of doing things. For now, it says that customers of those services will continue to use them as they have done.

The rise of the new crypto “mafias”

In the early 2000s, journalists popularized the term “PayPal mafia” to describe the PayPal founders and employees who left to start their own wildly successful tech companies, including Peter Thiel, Reid Hoffman, and Elon Musk. Drawing from that idea, this article seeks to cover the formation and flow of talent within the crypto landscape today.

The crypto world is in a constant state of flux, with new startups entrants joining the industry every single day. These new startups have the potential either to be superstars within a portfolio company or to start the next Coinbase. Additionally, there are already impressive spin-outs from some of the more established crypto companies.

For ease of framing, I’ve separated these early-forming mafias into four categories: CryptoTechWall Street, and Academia. Since 2009, there have been 186 spinout companies originating from those four categories (33% from Academia, 28% from Crypto, 24% from Tech, and 15% from Wall Street).

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Obvious but important disclaimer: this article does not intend to promote organized crime within crypto.

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Warburg Pincus announces new $4.25 billion fund for China and Southeast Asia

Warburg Pincus, the private equity fund with over $60 billion under management, is doubling down on Asia after it announced a $4.25 billion fund dedicated to China and Southeast Asia.

The firm has been present in China for 25 years, and it has invested over $11 billion in a portfolio of over 120 startups that includes the likes of Alibaba’s Ant Financial and listed companies NIO (a Tesla rival), ZTO Express (a courier firm)among others. The new fund will work in tandem with the firm’s $14.8 billion global growth fund which was finalized at the end of last year.

What’s particularly interesting about the new fund is that it has expanded to include Southeast Asia, where internet adoption is rapidly expanding among 600 million consumers, for the first time. It is the successor to Warburg Pincus’ previous $2.2 billion ‘China’ fund and, with the addition of Southeast Asia, it’ll aim to build on initial investments in the region that have included Go-Jek in Indonesia (although it is going regional) and Vietnamese digital payment startup Momo from its Singapore office.

Indeed, the firm’s head of Southeast Asia — Jeff Perlman — said in a statement that Southeast Asia is “exhibiting many of the strong investment themes and trends which have driven our China business over the last 25 years.”

While there is plenty of uncertainty around China, and more widely Asia, due to the ongoing trade battle with the U.S. — which has ensnared Huawei and other tech firms — Warburg Pincus said it had received strong demand for LPs whilst out raising this new fund.

Though it declined to provide details of its backers — and you’d wager that few, if any, are U.S-based — it said it surpassed its initial target of $3.5 billion for the China-Southeast Asia fund. That’s despite evidence suggesting that China’s investment space is experiencing a slowdown in total funding raised despite more deals.

In terms of target investments, the firm said it intends to focus on areas including consumer and services, healthcare, real estate, financial services and TMT — technology, media and telecommunications.

Warburg Pincus is already one of the largest investors in Southeast Asia in terms of potential check size, although it has been fairly selective on deals at this point. The fund’s move to include the region alongside will be a boon for companies looking for growth-stage deals that are hard to find in the current venture capital ecosystem.

More broadly, it is also a major endorsement for Southeast Asia as a startup destination. The region has long been seen as having immense growth potential, but it often sits in the shadows of more mature regions like India and China.

TransferWise’s new debit card for the US fires the starting gun on a new war for travelers

International money transfer service TransferWise, has made a significant incursion into the US market today, launching a MasterCard debit card alongside a multicurrency account. Mirroring the card it has already launched in the UK and Europe last year, the card will work in over 40 currencies without balance limits, and conversion fees will be competitive with current exchange rates. A similar card aimed at businesses will follow the consumer launch.

Co-founder Taavet Hinrikus told me that the card effectively makes the average person able to act like a millionaire when they are traveling. “Alternative ‘travel’ cards are four times more expensive for every dollar spent and are only available to the top 10% of people who pass credit checks and also pay hundreds of dollars per year,” he said.

He believes this card will democratize the whole market. That means it’s likely that US tourists in Europe or elsewhere will be hugely attracted to this card because they will be charged as if they were a local person, in the local currencies, without all the normal fees.

Transferwise is also pushing an immigration angle to the launch featuring Tan France (pictured), star of “Queer Eye For The Straight Guy”.

Key features of the account and debit card include international bank details for the UK, the US, Europe, Australia, and New Zealand, meaning account and routing numbers that are unique to the account holder. Additionally, if a holder swipes a card in a currency they don’t have in their account, the card knows to choose the cheapest option from their available balances. The card is also free to get, with now no subscription, no sign-up fees, and no monthly maintenance fee. Holders can also freeze/unfreeze the card from the Transferwise app and receive push notifications every time they spend. It will also sync with Apple Pay, Google Pay, and Samsung Pay.

Hinrikus added: “Our goal is to offer bank details for every country in the world through one account — the world’s first global account — and we’re starting with five of the world’s top currencies. The 40-currency debit card completes the package, so we’re excited to be releasing the card in the US.

Earlier this year TransferWise said it was now valued at $3.5 billion after closing a $292 million secondary funding round. In November it reported an annual post-tax net profit of $8 million for the year ending March 2018. At the time it said it had five million users transacting $5 billion across its platform a month.

While Transferwise competes with the smaller Revolut and WorldRemit, as well as incumbents like Western Union and MoneyGram, with the launch of this new card it will also be breathing down the neck of Paypal.

Its investors include Old Mutual, Institutional Venture Partners, Andreessen Horowitz, Lead Edge Capital, Lone Pine Capital, Vitruvian Partners, BlackRock, Valar Ventures, Baillie Gifford, PayPal founder Max Levchin, and Virgin Group founder Richard Branson, among others.

TransferWise’s new debit card for the US fires the starting gun on a new war for travelers

International money transfer service TransferWise, has made a significant incursion into the US market today, launching a MasterCard debit card alongside a multicurrency account. Mirroring the card it has already launched in the UK and Europe last year, the card will work in over 40 currencies without balance limits, and conversion fees will be competitive with current exchange rates. A similar card aimed at businesses will follow the consumer launch.

Co-founder Taavet Hinrikus told me that the card effectively makes the average person able to act like a millionaire when they are traveling. “Alternative ‘travel’ cards are four times more expensive for every dollar spent and are only available to the top 10% of people who pass credit checks and also pay hundreds of dollars per year,” he said.

He believes this card will democratize the whole market. That means it’s likely that US tourists in Europe or elsewhere will be hugely attracted to this card because they will be charged as if they were a local person, in the local currencies, without all the normal fees.

Transferwise is also pushing an immigration angle to the launch featuring Tan France (pictured), star of “Queer Eye For The Straight Guy”.

Key features of the account and debit card include international bank details for the UK, the US, Europe, Australia, and New Zealand, meaning account and routing numbers that are unique to the account holder. Additionally, if a holder swipes a card in a currency they don’t have in their account, the card knows to choose the cheapest option from their available balances. The card is also free to get, with now no subscription, no sign-up fees, and no monthly maintenance fee. Holders can also freeze/unfreeze the card from the Transferwise app and receive push notifications every time they spend. It will also sync with Apple Pay, Google Pay, and Samsung Pay.

Hinrikus added: “Our goal is to offer bank details for every country in the world through one account — the world’s first global account — and we’re starting with five of the world’s top currencies. The 40-currency debit card completes the package, so we’re excited to be releasing the card in the US.

Earlier this year TransferWise said it was now valued at $3.5 billion after closing a $292 million secondary funding round. In November it reported an annual post-tax net profit of $8 million for the year ending March 2018. At the time it said it had five million users transacting $5 billion across its platform a month.

While Transferwise competes with the smaller Revolut and WorldRemit, as well as incumbents like Western Union and MoneyGram, with the launch of this new card it will also be breathing down the neck of Paypal.

Its investors include Old Mutual, Institutional Venture Partners, Andreessen Horowitz, Lead Edge Capital, Lone Pine Capital, Vitruvian Partners, BlackRock, Valar Ventures, Baillie Gifford, PayPal founder Max Levchin, and Virgin Group founder Richard Branson, among others.

The changing nature of venture capital

SoftBank and Andreesen Horowitz (a16z) recently announced new funds that reinforce the increasing scale of the venture industry. SoftBank announced its intent to raise a second Vision Fund through a public offering, a first for any venture firm. A16z announced two new funds, an early-stage $750 million fund and a growth-stage $2 billion fund.

A16z is the latest firm to launch a family of funds, four in the past 18 months totaling $3.5 billion, including the earlier announced Bio and Crypto funds. A16z joins GGV, Lightspeed and Sequoia as firms that have raised families of funds that cover specific sectors, stages or countries. In the last 18 months, Sequoia has raised nine funds, with nearly $9 billion committed; Lightspeed four funds for nearly $3 billion; and GGV four funds with $1.8 billion.

These funds and others like them will change the nature of venture capital. Venture is no longer a cottage industry where partners sit around a conference table on Mondays meeting companies and discussing which to support. Venture no longer operates as a collection of individual practitioners like a dental clinic. Venture firms are moving from job shops to scaled organizations with an armada of specialists in human resources, marketing, finance, engineering, legal and investor relations to support their investment and fundraising activity. Once firms with just a few partners, SoftBank, Sequoia and GGV now have teams of hundreds of people working to support continual fund raising, origination and portfolio development in the United States and abroad.

Funding startups is an inherently local business.

Investment banking and private equity firms provide a road map for how the venture capital may develop. The leading investment banks and private equity firms were closely held partnerships for many decades, before increasing capital intensity required a change of corporate structure. Founded in 1914, Merrill Lynch, a securities brokerage firm, was considered an interloper in the cloistered investment banking world. But as more capital entered public securities markets, securities trading houses such as Merrill Lynch encroached on Goldman Sachs, Morgan Stanley, Lehman and Kuhn Loeb, which then dominated highly profitable investment banking.

A wave of consolidation followed as partnerships gave way to full-service investment banks armed with capital to backstop their lucrative mergers and acquisition and financing practices. Founded in 1854, Lehman acquired Kuhn Loeb in 1977, which was then acquired by American Express in 1984, combining Lehman’s banking practice with Shearson’s brokerage business. The last bulge bracket investment banking partnerships Morgan Stanley and Goldman Sachs went public in 1993 and 1999, respectively.

Private equity firms soon followed. Like investment banks, partnerships prevailed in private equity. But as their appetite for capital grew to finance ever-larger acquisitions, private equity tapped the public markets for larger, more stable capital. Today, the five largest private equity firms are all public. Apollo Global Management, a PE firm now with $250 billion under management, went public in 2004. Blackstone, the largest PE firm, with $470 billion under management, followed with an IPO in 2007. Carlyle, KKR and Ares soon followed with public offerings.

Venture capital has been insulated from the capital intensity that fueled consolidation of the investment banking and private equity industries. Funding startups is an inherently local business. Technology innovation has historically been capital-efficient as early technology leaders such as Microsoft and Oracle went public after raising less than $20 million in private funding. And venture is a risky, volatile business, where profits vary substantially, failure rate is high and returns are highly cyclical.

Innovation is costlier as entrepreneurs and investors seek to disrupt rather than enable industries.

But like the investment banking and private equity industries, venture capital is becoming more capital-intensive. Innovation is costlier as entrepreneurs and investors seek to disrupt rather than enable industries.  Startups require more capital to achieve escape velocity with the ever-present, growing threat from technology incumbents. Startups are moving into new industries competing with larger incumbents. And “lean startups” that rely more on company-building services offered by their investors are not “lean” for venture firms that must build out service capacity in talent acquisition, sales, product marketing and finance to accelerate venture growth. Today, staff devoted to supporting startup development often exceeds investment professionals in large venture firms.

The venture industry is highly fragmented, with more than 200 venture firms in Silicon Valley alone. Hundreds of venture firms are starting in cities and countries that were previously considered deserts for technology innovation. The venture industry is likely to consolidate significantly in the next decade as funding confers greater advantage to large venture investors.

A few boutique investment banks and private equity firms have withstood the scale and capital advantages of bulge bracket firms. Similarly, seed and early-stage venture firms will resist SoftBank-style institutionalization. Venture firms with expertise in specific technologies, industry sectors or geographic markets will still produce superior returns. However, capital intensity is rising. The venture industry will ultimately be dominated by a few global venture firms supported by independent seed and early-stage funds with proprietary access to high-potential startups.

India’s Open ‘neo-bank’ raises $30 million to help businesses automate their finances

Open, a Bangalore-based startup that operates a “neo-bank” to help businesses automate and run their finances, has bagged $30 million in a new funding round as investors look to replicate a globally tried and tested business idea in emerging markets.

The Series B financing round for the two-year-old startup was led by Tiger Global with Tanglin Venture Partners Advisors and existing investors 3one4 Capital, Speedinvest, BetterCapital AngelList Syndicate also participating in it. The new round valued Open at $150 million, a person familiar with the matter said. The startup has raised about $37 million to date.

Open operates as a neo-bank that offers nearly all the features of the bank with additional tools to serve the needs of a business. Millions of small and medium sized businesses in India struggle with maintaining multiple bank accounts, bookkeeping of their daily spending, and bandying out payments to employees.

Open offers them a platform that automates much of this task. It lets them keep track of each transaction — who it came from, where it is going, and what sales it made across accounts.

“We have a small business owner from Ahmedabad on our platform. They see 59 transactions from their customers in its bank account every few hours. Prior to using our service, they were juggling all day to figure out where these transactions originated from or went to,” he explained. “Because on their bank statement, they only see one-line description of a transaction’s detail.”

Traditional banks have either not addressed these small needs, or charge huge amount for their own solutions that is not feasible for a small business, he added.

The startup says it already has over 100,000 customers, with as many as 20,000 coming onboard each month of late. It processes about $3.5 billion in transactions each year.

In an interview with TechCrunch, Anish Achuthan, founder and CEO of Open, said the startup saw an opportunity to serve the businesses and wanted to open a better bank. “But building a bank in India comes with its own set of regulatory challenges, so we looked at what fintech startups were doing in other parts of the world for inspiration,” he said.

And it found that inspiration quickly enough. One of its early investors is Speedinvest, which has funded Tide and N26 ‘neo-banks’ in European markets. In India, Open has partnered with ICICI Bank, one of the biggest banks in the nation, for creation of accounts. On ICICI Bank’s internet banking website, Open has integrated its tools including a payment gateway, Achuthan explained.

Achuthan said the startup will use the fresh capital to significantly expand its business — build more products, and sign up more customers. Open will soon also launch Open+ card, a business credit card with a 30-day interest-free credit line for venture backed startups, and Layer, a programmable bank account for developers.

Open raised its Series A of $5 million earlier this year. When asked if it’s a very capital intensive business, Achuthan said they needed the money to get a first-mover advantage. The startup was in talks with another investor to raise an additional $20 million, but Achuthan said they did not need that much money at this stage.

Open today competes with a handful of startups including InstantPay, but Achuthan said much of the market remains untapped.