Catalyst Fund gets $15M from JP Morgan, UK Aid to back 30 EM fintech startups

The Catalyst Fund has gained $15 million in new support from JP Morgan and UK Aid and will back 30 fintech startups in Africa, Asia, and Latin America over the next three years.

The Boston based accelerator provides mentorship and non-equity funding to early-stage tech ventures focused on driving financial inclusion in emerging and frontier markets.

That means connecting people who may not have access to basic financial services — like a bank account, credit or lending options — to those products.

Catalyst Fund will choose an annual cohort of 10 fintech startups in five designated countries: Kenya, Nigeria, South Africa, India and Mexico. Those selected will gain grant-funds and go through a six-month accelerator program. The details of that and how to apply are found here.

“We’re offering grants of up to $100,000 to early-stage companies, plus venture building support…and really…putting these companies on a path to product market fit,” Catalyst Fund Director Maelis Carraro told TechCrunch.

Program participants gain exposure to the fund’s investor networks and investor advisory committee, that include Accion and 500 Startups. With the $15 million Catalyst Fund will also make some additions to its network of global partners that support the accelerator program. Names will be forthcoming, but Carraro, was able to disclose that India’s Yes Bank and University of Cambridge are among them.

Catalyst fund has already accelerated 25 startups through its program. Companies, such as African payments venture ChipperCash and SokoWatch — an East African B2B e-commerce startup for informal retailers — have gone on to raise seven-figure rounds and expand to new markets.

Those are kinds of business moves Catalyst Fund aims to spur with its program. The accelerator was founded in 2016, backed by JP Morgan and the Bill & Melinda Gates Foundation.

Catalyst Fund is now supported and managed by Rockefeller Philanthropy Advisors and global tech consulting firm BFA.

African fintech startups have dominated the accelerator’s companies, comprising 56% of the portfolio into 2019.

That trend continued with Catalyst Fund’s most recent cohort, where five of six fintech ventures — Pesakit, Kwara, Cowrywise, Meerkat and Spoon — are African and one, agtech credit startup Farmart, operates in India.

The draw to Africa is because the continent demonstrates some of the greatest need for Catalyst Fund’s financial inclusion mission.

By several estimates, Africa is home to the largest share of the world’s unbanked population and has a sizable number of underbanked consumers and SMEs.

Roughly 66% of Sub-Saharan Africa’s 1 billion people don’t have a bank account, according to World Bank data.

Collectively, these numbers have led to the bulk of Africa’s VC funding going to thousands of fintech startups attempting to scale payment solutions on the continent.

Digital finance in Africa has also caught the attention of notable outside names. Twitter/Square CEO Jack Dorsey recently took an interest in Africa’s cryptocurrency potential and Wall Street giant Goldman Sachs has invested in fintech startups on the continent.

This lends to the question of JP Morgan’s interests vis-a-vis Catalyst Fund and Africa’s financial sector.

For now, JP Morgan doesn’t have plans to invest directly in Africa startups and is taking a long-view in its support of the accelerator, according to Colleen Briggs — JP Morgan’s Head of Community Innovation

“We find financial health and financial inclusion is a…cornerstone for inclusive growth…For us if you care about a stable economy, you have to start with financial inclusion,” said Briggs, who also oversees the Catalyst Fund.

This take aligns with JP Morgan’s 2019 announcement of a $125 million, philanthropic, five-year global commitment to improve financial health in the U.S. and globally.

More recently, JP Morgan Chase posted some of the strongest financial results on Wall Street, with Q4 profits of $2.9 billion. It’ll be worth following if the company shifts its income-generating prowess to business and venture funding activities in Catalyst Fund markets such as Nigeria, India and Mexico.

2019 saw a stampede of fintech unicorns

Two years ago, we created the Matrix FinTech Index to highlight what we saw as the beginnings of a 10+ year mega innovation wave in financial services.

The trillion-dollar financial services industry was going to be turned on its head over the next decade, and we were just getting started. At the time, the top 10 publicly traded U.S. fintech companies had just surpassed the $100 billion mark in terms of total market capitalization, 12 unicorns had emerged in the category, and the U.S. VC industry had just poured in $6.7B — a record at the time.

As we predicted last year, the innovation cycle continues, and we are transitioning into its mid-phase. So what happened in U.S. fintech in 2019? In short, monster growth.

On the public side, fintechs delivered resoundingly. PayPal alone gained $26B in market capitalization. On a return basis, the public Matrix FinTech Index continued to crush every major equity index as well as the financial services incumbents. Nicely matching our forecasts, our Index delivered 213% returns over the last three years. The Index outperformed the financial services incumbents by 151 percentage points and the S&P 500 by 170 percentage points.

Report: WeWork cofounder Adam Neumann may have to unload property to pay off a giant loan

Adam Neumann may be out of the daily flow of WeWork, but he seemingly remains top of mind to some of the company’s bankers.

According to a new Business Insider piece, Neumann is working with JPMorgan, UBS, and Credit Suisse to consider new terms for a $500 loan that he took out before WeWork filed to go public, and from which Neumann has already drawn down $380 million. Since he can no longer pay the loan with proceeds from selling WeWork shares publicly (it yanked its S-1 earlier this week), he may have to put up some of his properties or other assets as collateral for the loan, according to one of BI’s sources.

“No terms have been set,” a spokeswoman for Neumann tells the outlet.

Per earlier reports, Neumann has plenty to offload if it comes to it, having acquired numerous residential and commercial properties over the years.

Among his reported investments is a $10.5 million Greenwich Village townhouse; a farm in Westchester, New York; a home in the Hamptons where he reportedly weathered the storm with his family ahead of resigning as CEO last week; and a $21 million, 13,000-square-foot house in the Bay Area with a guitar-shaped room.

According to an earlier WSJ report, Neumann has also bought several properties through investor groups that he had leased back, in some cases, to WeWork.

WeWork, and Neumann, have both enjoyed a close relationship with JPMorgan in recent years. As recently reported in the NYTimes,  JPMorgan “lent Mr. Neumann money personally (with his inflated shares as collateral), provided equity and debt for the company, served as a corporate adviser for the I.P.O. and secured nearly $6 billion in financing as part of the now scotched offering.”

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).

crypto mafias

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

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Zoom addresses CFO’s past workplace conduct ahead of IPO

Zoom, the only profitable unicorn in line to go public, priced its initial public offering at between $28 and $32 per share Monday morning. The video conferencing business plans to trade on the Nasdaq under the ticker symbol “ZM.”

Zoom, valued at $1 billion in 2017, initially filed to go public in March. According to its amended IPO filing, the company will raise up to $348.1 million by selling 10.9 million Class A shares. The offering will grant Zoom a fully diluted market value of $8.7 billion, a more than 8x increase to its latest private market valuation.

Although the company has garnered praise for its stellar financials — Zoom posted $330 million in revenue in the year ending January 31, 2019, a remarkable 2x increase year-over-year, with a gross profit of $269.5 million — the road to IPO hasn’t been without hiccups.

The company’s founder and chief executive officer Eric Yuan last night published an open letter concerning the conduct of Zoom’s chief financial officer Kelley Steckelberg. According to the letter, Zoom was recently informed by an anonymous source that Steckelberg had an “undisclosed, consensual relationship” during her tenure at a previous employer.

Steckelberg was most recently the CEO of the online dating site Zoosk; before that, she was a senior director in consumer finance at Cisco . The letter does not specify where the relationship took place, when or with whom.

Losing a CFO mere days before an IPO would have been a major loss for Zoom. CFOs often become the face of the IPO, handling the grueling tasks associated with crafting an IPO prospectus, leading the roadshow and more, while also maintaining day-to-day financial operations.

Yuan writes that the Zoom’s board of directors conducted a full investigation into the matter and determined that Steckelberg would stay on as Zoom’s CFO: “Kelly expressed regret for what transpired at her former employer, took ownership for the situation, and made clear to us that she had learned valuable lessons from the experience,” he wrote.

“We appreciated Kelly’s openness and candor during this process,” he continued. “It is clear that this matter related only to circumstances at her former employer. During Kelly’s tenure at Zoom, she has been an incredible contributor, as well as a model steward of our culture, values, and high standards since joining the Company.”

We reached out to Zoosk for comment. Zoom declined to comment further.

Zoom, expected to make the final call on its IPO price next Wednesday, will likely price at the top of range and see a clean pop on its first day on the markets given its clean track record and positive financials. The business was founded in 2011 by Eric Yuan, an early engineer at WebEx, which sold to Cisco for $3.2 billion in 2007. Before launching Zoom, he spent four years at Cisco as its vice president of engineering.

Zoom has raised $145 million to date from investors including Emergence Capital, which owns a 12.2 percent pre-IPO stake, Sequoia Capital (11.1 percent pre-IPO stake); Digital Mobile Venture (8.5 percent), a fund affiliated with former Zoom board member Samuel Chen; and Bucantini Enterprises Limited (5.9 percent), a fund owned by Li Ka-shing, a Chinese billionaire and among the richest people in the world.

Morgan Stanley, JP Morgan and Goldman Sachs are leading its offering.

Zoom, a profitable unicorn, files to go public

Zoom, the video conferencing startup valued at $1 billion in early 2017, has filed to go public on the Nasdaq as soon as next month.

The company joins a growing list of tech unicorns making the leap to the public markets in 2019, but it stands out for one very important reason: It’s actually profitable.

Zoom was founded in 2011 by Eric Yuan, a co-founder of WebEx, which sold to Oracle for $3.2 billion in 2007. Before launching Zoom, he spent four years at Cisco as its vice president of engineering. In a conversation with TechCrunch last month, he said he would never sell another company again, hinting at his dissatisfaction at WebEx’s post-acquisition treatment being his motivation for taking Zoom public as opposed to selling.

Zoom, which raised a total of $145 million to date, posted $330 million in revenue in the year ending January 31, 2019, a remarkable 2x increase year-over-year, with a gross profit of $269.5 million. The company similarly more than doubled revenues from 2017 to 2018, wrapping fiscal year 2017 with $60.8 million in revenue and 2018 with $151.5 million.

The company’s losses are shrinking, from $14 million in 2017, $8.2 million in 2018 and just $7.5 million in the year ending January 2019.

Zoom is backed by Emergence Capital, which owns a 12.5 percent pre-IPO stake, according to the IPO filing. Other investors in the business include Sequoia Capital (11.4 percent pre-IPO stake); Digital Mobile Venture (9.8 percent), a fund affiliated with former Zoom board member Samuel Chen; and Bucantini Enterprises Limited (6.1 percent), a fund owned by Li Ka-shing, a Chinese billionaire and among the richest people in the world.

Morgan Stanley, JP Morgan and Goldman Sachs have been recruited to lead the offering.

Revolut CFO resigns following money laundering controversy

This hasn’t been a good week for challenger bank Revolut . The company, which offers digital banking services and is valued at $1.7 billion, confirmed today that embattled CFO Peter O’Higgins has resigned and left the business.

The startup and O’Higgins have been under pressure after a Daily Telegraph report that revealed that Revolt switched off an anti-money laundering system that flags suspect transactions because it was prone to throwing out false positives.

According to the Telegraph, the system was inactive between July-September 2018, which potentially allowed illegal transactions to pass across the banking platform. Revolut did not contact the Financial Conduct Authority to inform the regulator of the lapse, Telegraph reporter James Cook said.

O’Higgins, who joined the company from JP Morgan three years ago, made no mention of the saga in his resignation statement:

Having been at Revolut for almost three years, I am immensely proud to have taken the company from £1m revenue to £50m revenue during this time. However, as Revolut begins to scale globally and applies to become a bank in multiple jurisdictions, the time has come to pass the reigns over to someone who has global retail banking experience at this level. My time at Revolut has been invaluable and I’m so proud of what myself and the team have achieved. There is no doubt in my mind that Revolut will go on to build one of the largest and most trusted financial institutions in the world.

In a separate statement received by TechCrunch, Revolut CEO Nik Storonsky said that O’Higgins had been “absolutely pivotal to our success.”

The resignation caps a terrible few days for Revolut, which was the subject of a report from Wired earlier this week that delved into allegations around its challenging workplace culture and high employee churn rate.

“Former Revolut employees say this high-speed growth has come at a high human cost – with unpaid work, unachievable targets, and high-staff turnover,” wrote guest reporter Emiliano Mellino, citing the experiences of numerous former employees.

Those incidents included prospective staff being told to canvass for new customers as part of the interview process. The candidates were not compensated for their efforts, according to Wired. Revolut later removed the demands from its hiring processes.

Revolut is headquartered in the UK, where it launched its service in the summer of 2015. Today, it claims over four million registered users across Europe — it is available in EEA countries — although it plans to extend its presence to other parts of the world are taking longer than expected.

The company said last year it aims to launch in Singapore and Japan in Q1 of this year — so far neither has happened — while it also harbors North American market plans. Entries to the U.S. and Canada were supposed to happen by the end of 2018, according to an interview with Storonsky at TechCrunch Disrupt in September, but they also appear to have been delayed.

Revolut is generally considered to be the largest challenger bank in Europe, in terms of valuation and registered users, but other rivals include N26, Monzo and Starling. Even Transferwise, the global remittance service, now includes border-less banking features and an accompanying debit card.