Maybe neobanks will break even after all

The Exchange is back after its brief hiatus. Anna and I have some really neat stuff planned, so stick with us every morning this week. — Alex

Building a consumer-facing fintech company is expensive. And if you want to build one in a sector crowded by both incumbent companies and richly funded startups, it can be super expensive.

That was the lesson we learned in late 2020 by examining operating results from a number of neobanks.

Neobanks are essentially software layers atop banking infrastructure, offering consumers digital-first, mobile-friendly and often lower-fee banking services. The push to rethink consumer banking is a global effort, with neobanks cropping up in essentially every market you can think of. Private investors have shown up in droves to fund competing neobanks because they have the potential to secure users — customers — that generate revenues for long periods of time.


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Investors have proven more than willing to fund huge investments in growth and product at many neobanks, leading to steeply negative operating results at the unicorns. In short, while American consumer fintech Chime has disclosed positive EBITDA — an adjusted profitability metric — many neobanks that we’ve seen numbers from have demonstrated a stark inability to paint a path to profitability.

That could be changing.

Recent results from Revolut that TechCrunch covered earlier this morning show that the company had a deeply unprofitable 2020. But if we dig into its quarterly results, there’s good news to be found. Neobanks could be maturing into their cost structure at last.

So today we’ll parse the key Revolut financial results and look at what we can dig up from Starling and Monzo. Perhaps the somewhat good financial news from Revolut is not merely to be found at just one neobank?

Revolut’s 2020

Our own Romain Dillet has a broad look at Revolut’s business here, if you would like a wider lens. We only care about its raw financial results at the moment.

Here are the big numbers:

  • 57% revenue growth from £166 million in 2019 to £261 million in 2020
  • Gross profit growth of £123 million in 2020, up 215% from 2019
  • Gross margin of 49% in 2020, what Revolut described as nearly a doubling
  • 2020 operating loss of £122 million from £98 million in 2019
  • Total loss of £168 million in 2020, up from £107 million in 2019

The gist of these figures is that the company’s revenue growth was solid, but improving gross margins allowed its gross profit to spike in 2020.

DataRails books $25M more to build better financial reporting tools for SMBs

As enterprise startups continue to target interesting gaps in the market, we’re seeing increasingly sophisticated tools getting built for small and medium businesses — traditionally a tricky segment to sell to, too small for large enterprise tools, and too advanced in their needs for consumer products. In the latest development of that trend, an Israeli startup called DataRails has raised $25 million to continue building out a platform that lets SMBs using Excel to run financial planning and analytics like their larger counterparts.

The funding closes out the company’s Series A at $43.5 million, after the company initially raised $18.5 million in April (some at the time reported this as its Series A, but it seems the round had yet to be completed). The full round includes Zeev Ventures, Vertex Ventures Israel, and Innovation Endeavors, with Vintage Investment Partners added in this most recent tranche. DataRails is not disclosing its valuation, except to note that it has doubled in the last four months, with hundreds of customers and on target to cross 1,000 this year, with a focus on the North American market. It has raised $55 million in total. 

The challenge that DataRails has identified is that on one hand, SMBs have started to adopt a lot more apps, including software delivered as a service, to help them manage their businesses — a trend that has been accelerated in the last year with the pandemic and the knock-on effect that has had for remote working and bringing more virtual elements to replace face-to-face interactions. Those apps can include Salesforce, NetSuite, Sage, SAP, QuickBooks, Zuora, Xero, ADP and more.

But on the other hand, those in the business who manage its finances and financial reporting are lacking the tools to look at the data from these different apps in a holistic way. While Excel is a default application for many of them, they are simply reading lots of individual spreadsheets rather than integrated data analytics based on the numbers.

DataRails has built a platform that can read the reported information, which typically already lives in Excel spreadsheets, and automatically translate it into a bigger picture view of the company.

For SMEs, Excel is such a central piece of software, yet such a pain point for its lack of extensibility and function, that this predicament was actually the germination of starting DataRails in the first place,

Didi Gurfinkel, the CEO who co-founded the company with Eyal Cohen (the CPO) said that DataRails’ initially set out to create a more general purpose product that could help analyze and visualize anything from Excel.

“We started the company with a vision to save the world from Excel spreadsheets,” he said, by taking them and helping to connect the data contained within them to a structured database. “The core of our technology knows how to take unstructured data and map that to a central database.” Before 2020, DataRails (which was founded in 2015) applied this to a variety of areas with a focus on banks, insurance companies, compliance and data integrity.

Over time, it could see a very specific application emerging, specifically for SMEs: providing a platform for FP&A (financial planning and analytics), which didn’t really have a solution to address it at the time. “So we enabled that to beat the market.”

“They’re already investing so much time and money in their software, but they still don’t have analytics and insight,” said Gurfinkel.

That turned out to be fortunate timing, since “digital transformation” and getting more out of one’s data was really starting to get traction in the world of business, specifically in the world of SMEs, and CFOs and other people who oversaw finances were already looking for something like this.

The typical DataRails customer might be as small as a business of 50 people, or as big as 1,000 employees, a size of business that is too small for enterprise solutions, “which can cost tens of thousands of dollars to implement and use,” added Cohen, among other challenges. But as with so many of the apps that are being built today to address those using Excel, the idea with DataRails is low-code or even more specifically no-code, which means “no IT in the loop,” he said.

“That’s why we are so successful,” he said. “We are crossing the barrier and making our solution easy to use.”

The company doesn’t have a huge number of competitors today, either, although companies like Cube (which also recently raised some money) are among them. And others like Stripe, while currently not focussing on FP&A, have most definitely been expanding the tools that it is providing to businesses as part of their bigger play to manage payments and subsequently other processes related to financial activity, so perhaps it, or others like it, might at some point become competitors in this space as well.

In the meantime, Gurfinkel said that other areas that DataRails is likely to expand to cover alongside FP&A are likely to include HR, inventory, and “planning for anything,” any process that you have running in Excel. Another interesting turn would be how and if DataRails decides to look beyond Excel at other spreadsheets, or bypass spreadsheets altogether.

The scope of the opportunity — in the U.S. alone there are more than 30 million small businesses — is what’s attracting the investment here.

“We’re thrilled to reinvest in DataRails and continue working with the team to help them navigate their recent explosive and rapid growth,” said Yanai Oron, General Partner at Vertex Ventures, in a statement. “With innovative yet accessible technology and a tremendous untapped market opportunity, DataRails is primed to scale and become the leading FP&A solution for SMEs everywhere.”

“Businesses are constantly about to start, in the midst of, or have just finished a round of financial reporting—it’s a never-ending cycle,” added Oren Zeev, founding partner at Zeev Ventures. “But with DataRails, FP&A can be simple, streamlined, and effective, and that’s a vision we’ll back again and again.”

Revolut revenue grew by 57% in 2020

Fintech startup Revolut has filed some financial results and is sharing details with the press. In 2020, the company reported $361 million in revenue (£261 million) — that’s a 57% increase compared to 2019 revenue of $229 million (£166 million).

Interestingly, those revenue figures have been adjusted to include fair value gains on cryptocurrency assets — it means that Revolut holds some crypto assets on its balance sheet. Revolut made $54 million (£39 million) in fair value gains on cryptocurrency assets.

Gross profit reached $170 million (£123 million) last year. At the same time, the company still reports operating losses. In particular, Q1 2020 was a particularly bad quarter with $76 million (£55 million) in adjusted operating loss.

In 2020, total non-adjusted operating loss reached $277 million (£200.6 million). Like many tech companies, administrative expenses are responsible for this loss. With a staff of 2,200 people, the company spent $367 million (£266 million) on administrative costs alone. But things seem to be improving as you can see:

Image Credits: Revolut

These trends aren’t that surprising as I reported that fintech startups spent most of 2020 focusing on profitability and improving their margins. At the end 2020, Revolut had 14.5 million personal customers and 500,000 companies using Revolut Business.

“As the extraordinary circumstances of 2020 drove the trend towards digital financial management we continued to innovate for customers to make their financial lives easier and accelerate daily use. We launched 24 new retail and business products, expanded into the US, Japan and Australia and launched banking services in Lithuania, all while significantly improving our profitability,” founder and CEO Nikolay Storonsky said in a statement. “We began 2021 with a more resilient and productive business that will enhance our trajectory towards rapid growth.”

When you compare Q1 2020 to Q1 2021, things are radically different for the fintech company. Revenue increased by 130% year-over-year and gross profit grew by 300% between Q1 2020 and Q1 2021.

Revolut has been launching a ton of products to diversify its sources of revenue. It is increasingly becoming a financial super app with current accounts, debit cards, trading services, insurance products, premium subscriptions, cryptocurrency trading and more.

Interestingly, interchange revenue from card transactions represents a good chunk of the company’s revenue. In 2020, cards and interchange generated $131 million (£95 million) in revenue. Every time a Revolut customer makes a card purchase, the card scheme (Visa or Mastercard) gives back some fees to Revolut. It’s an incredibly small percentage-based fee, but it can add up when you generate millions of purchases.

Foreign exchange and wealth generated $111 million (£80 million) in revenue. That’s another big one. And finally, subscriptions, such as Revolut Plus, Revolut Premium and Revolut Metal, accounted for $104 million (£75 million) in revenue.

Those are three strong pillars that all contribute to the company’s bottom line. They all represent a bit less or a bit more than a third of the company’s overall revenue.

Image Credits: Revolut

While the company has expanded aggressively over the years, the U.K. is still by far its biggest market. In 2020, 88.4% of the company’s (non-adjusted) revenue was related to its activities in the U.K. The European Economic Area without the U.K. represented 10.2% of revenue. The U.S., Japan, Australia and other markets were nearly negligible.

Revolut has also raised a mega round of funding in 2020 — a $500 million Series D round that was extended to $580 million in total. I wouldn’t be surprised if the company launches an initial public offering within the next 12 months.

Tiger Global in talks to back BharatPe at $2.5 billion valuation

Indian fintech startup BharatPe is in advanced stages of talks to raise about $250 million in a new financing round led by Tiger Global, two sources familiar with the matter told TechCrunch.

The new round, a Series E, is valuing the three-year-old New Delhi-headquartered firm at a pre-money valuation of $2.5 billion, sources said, requesting anonymity as the matter is private. The round hasn’t closed, so terms may change, sources cautioned.

BharatPe, which prior to the new round had raised about $233 million in equity and $35 million in debt, was valued at about $900 million in its Series D round in February this year, and $425 million last year.

Indian news outlet the CapTable first reported about the talks between Tiger Global and BharatPe and said the round would value the startup at over $2 billion. BharatPe declined to comment.

BharatPe operates an eponymous service to help offline merchants accept digital payments and secure working capital. Even as India has already emerged as the second-largest internet market, with more than 600 million users, much of the country remains offline.

Among those outside of the reach of the internet are merchants running small businesses, such as roadside tea stalls and neighborhood stores. To make these merchants comfortable with accepting digital payments, BharatPe relies on QR codes and point of sale machines that support government-backed UPI payments infrastructure.

The startup, which serves more than 6 million merchants, said it had deployed over 50,000 PoS machines by November of last year, and enables monthly transactions worth more than $123 million. It does not charge merchants for universal QR code access, but is looking to make money by lending. Grover said the startup’s lending business grew by 10x in 2020.

On Friday, India’s central bank RBI granted an in-principle licence to Centrum Financial Services to set up a small finance bank. Centrum Financial Services has collaborated with BharatPe for the license, according to local media.

The startup is additionally also working to launch two new B2C apps, one of which will enable credit on QR UPI, another source familiar with the matter told TechCrunch. The new products will launch as soon as this month, the source said.

Wise announces plans to go public via direct listing

Wise, the fintech company formerly known as TransferWise, has announced that it wants to become a public company on the London Stock Exchange. Instead of following the traditional IPO route, Wise plans to go public via a direct listing. This is going to be the biggest direct listing on the London Stock Exchange.

If you’re not familiar with Wise, the company specializes in cross-border money transfers. If you want to send money to someone living in another country, traditional retail banks charge a lot in foreign exchange fees, foreign transaction fees, etc.

Of course, there are some well-known alternative options, such as Western Union and MoneyGram. While those companies provide some convenient on-ramp and off-ramp methods, they’re still more expensive than Wise.

With Wise, users first upload money to their Wise account using a bank transfer or a debit card. They can then send money in another currency to a recipient’s bank account. The company tries to be as transparent and upfront as possible when it comes to fixed and variable fees.

Originally founded in 2011, Wise has grown quite a lot as its revenue grew from $422 million to $586 million in its most recent financial year (from £303 million to £421 million respectively). It represents $57 million (£41 million) in profit before tax — the company says it has been profitable since 2017.

Overall, Wise has 10 million customers who process around $7 billion (£5 billion) in cross-border transactions every month. More recently, the company diversified its revenue by adding new products.

For instance, customers can hold money in 56 currencies in their Wise accounts. They get account numbers in 10 different currencies as well as a debit card. This feature is particularly useful for freelancers who want to accept payments in another country or people moving abroad for a year or two.

The company has also expanded beyond B2C with Wise Business. Those accounts work a bit like regular Wise accounts, but with multiple users and additional features. Wise also powers cross-border transactions in third-party services, such as Monzo and N26.

Opting for a direct listing is an interesting move. A few companies have chosen direct listings in the U.S., such as Spotify, Coinbase and Slack. It means that you’re confident there’ll be enough interests from investors as banks aren’t helping you with your introduction.

It also means that Wise doesn’t need more money as a direct listing doesn’t let you raise additional capital.

Like many tech companies, Wise plans to introduce a dual-class share structure, which means that all of Wise’s existing shareholders will get more votes per share for a while. This is going to be an important listing for the European fintech scene and also for the British tech ecosystem. Now, let’s see how investors feel about Wise.

Unit raises $51M in Accel-led Series B to grow its banking-as-a-service platform

We’ve all heard the phrase, “Every company is a fintech.” 

But these days, that’s becoming more and more true as an increasing number of companies that are not even in the financial services space seek to add a fintech component to their offering.

A group of startups poised to benefit from this shift are those offering banking as a service. One such startup, Unit, has raised $51 million in a Series B round to further its goal of making it possible for companies and fintechs alike to build banking products “in minutes.”

Silicon Valley-based Accel led the round for Unit, bringing the company’s total raised since its 2019 inception to nearly $70 million. Existing backers Better Tomorrow Ventures, Aleph, Flourish Ventures and TLV Partners also participated in the latest financing

Founders Itai Damti and Doron Somech are no strangers to growing companies. The pair previously co-founded — and bootstrapped — Leverate, a Tel Aviv-based B2B trading tech provider. Unit has dual headquarters in Tel Aviv and New York City.

Damti and Somech founded Unit in late 2019 and spent the first year stealthily building out the platform with the mission of empowering companies to embed financial services into their product, accelerating their time to market. Unit officially launched its platform in late 2020, and over the last three months, it has seen deposit volume grow by more than 300% and new end users by 600% (albeit from a small base).

With its platform, Unit touts, companies in a variety of industries — such as freelance or creator economy and personal financial management, for example — can build financial products directly into their software. This gives them the ability to build and launch next-gen bank accounts, cards, payment and lending products. Customers include Wethos, Lance, Benepass, Moves and Tribevest, among others.

“Our mission is to expand financial access for all and we do it by empowering the next generation of fintech builders,” Damti said. Only about 20% of its customers are what might be considered true fintechs, he said. The remaining 80% are companies that are not but rather want to embed banking as a service into their offering.

Unit, Damti claims, takes what was once “a very expensive and complex process of 18 months” that includes finding and managing a bank relationship, building a compliance team and building a tech stack “that gets you to a competitive banking offering, and turns it into one API and one dashboard that helps companies launch accounts cards, payments and lending within five weeks.”

In conjunction with the funding, Unit is also announcing today a new offering, Unit Go, which it says allows companies to create live bank accounts and issue physical and virtual cards in minutes. Founders and developers can try it out by creating a free account, building in Unit’s live environment and testing their products using real funds. Unit Go is currently in beta and will be available to the public in the fall of 2021. 

The company plans to use its new capital to grow its headcount of 26 and fast-track its Unit Go offering. It also wants to expand its platform into additional financial products, software development kits (SDKs) and integrations. (It’s already integrated with Plaid, for example).

Of course, Unit is not the only startup in the burgeoning banking-as-a-service (BaaS) space. It competes with the likes of Railbank, Treasury Prime and Stripe. Damti believes there are a few things that help differentiate Unit in the increasingly crowded space.

For one, according to Damti, Unit intentionally “put compliance at the front and center of what we do.” As evidence of that, earlier this year, it tapped Amanda Swoverland to serve as its chief compliance officer. 

Secondly, Damti emphasizes that Unit is not a matchmaker or marketplace along the lines of Synctera.

“We are acting as a company that connects banks to the tech ecosystem and banks are critical vendors and partners to us, but we see them as a built-in element within Unit, because we believe that the most excellent experience in this ecosystem can only come from software companies,” Damti told TechCrunch. 

And finally, he notes, Unit is technically distinct in that it is actually building a ledger, which Damti describes as “the most critical and sensitive part of the ecosystem.”

By owning the ledger and not delegating, he said, Unit is “able to offer a radically better experience.”

“As far as the transaction environment, the cleanliness of the data that we provide and the fees that our customers are able to control and tweak, owning that ledger piece is super critical for the experience,” Damti said.  

Accel partner Amit Kumar notes that in recent years, the landscape has shifted from hundreds of fintech startups “trying to beat incumbents with slightly better products” to thousands of tech companies trying to launch fintech businesses in their verticals.

“Unit’s strong emphasis on managing compliance addresses the risk typically associated with offering banking services and allows customers to bring these products to market much faster than previously possible,” he told TechCrunch. “Unit is building the platform to power the next generation of fintech.”

10x, a UK fintech, raises $187M to build new services for old banks

As so-called neobanks continue to gain more traction in the market with their more modern takes on banking and other financial services, a startup that’s building technology to help incumbent players better compete is announcing a big round of funding.

10x Future Technologies, a London-based fintech that helps larger, established banks build both next-generation services as well as tools to help their older services work more efficiently, has raised $187 million. We understand from sources close to the company that 10x’s valuation with this round is in the range of $700 million.

(The amount raised and valuation also roughly line up with the figures from Sky News, which reported earlier this month that 10x was raising new funding.)

10x will be using the funds both to expand into new geographies like North America, as well as to continue building more technology for its flagship platform. SuperCore, as that platform is called, is an all-in-one system built from scratch to run a wide range of banking services such as payments, core banking, mortgages, analytics, security and marketing, which 10x’s bank customers can integrate into their existing tech by way of APIs, or 10x can use to build those clients new services from the ground up.

This Series C round is full of heavy hitters that speak to the credibility 10x has picked up in its five years in the market.

Co-led by BlackRock and Canada Pension Plan Investment Board (CPP Investments), it also includes existing investors JPMorgan Chase, Nationwide, Ping An and Australia’s Westpac.

The latter four include strategic backers: Antony Jenkins, the founder and CEO of 10x who himself used to work at big banks (his last role was CEO of Barclays, and although he left under a cloud, his prominence and track record are likely reasons for the company’s clout), tells us that 10x is currently building services for Westpac and Nationwide.

10x has two other banks as customers that it is not disclosing yet, which will be leading to more soon, Jenkins added, since the industry is “at a transitional moment” right now. Some of 10x’s engagements are already live, with “volume going over the platform,” he said. Others have yet to launch.

The opportunity that 10x is targeting is big, but also elusive.

Neobanks and other new-generation fintech providers are slowly chipping away at incumbent banks’ stronghold on consumer and business banking. They are typically doing this not by becoming fully-fledged banks themselves, but by stitching together suites of traditional and more modern banking services by way of APIs from other fintechs; machine learning algorithms to personalise services to customers; and modern interfaces to make the whole experience more user-friendly than what you might get from a traditional bank.

Incumbent banks want to compete against these new upstarts with rival products of their own, but in many cases they can’t: their infrastructure is too old, and oftentimes the company culture is even older.

This is where 10x comes in, providing the tools and advice to help them get new services up and running.

Jenkins notes that currently, a lot of the engagements 10x is seeing involve banks bolting on completely new services rather than building services to replace those they already offer. One fitting analogy here is that it’s a little like putting a modern extension on a very old house, rather than remodelling and modernizing the whole of the old house from the ground up.

But, it seems that we are now, five years into 10x’s life as a business, starting to see the first signs of banks willing to explore how to migrate their core data to more modern systems to make it more extensible and usable in a wider range of new services, and 10x believes it can be a partner in that back-end transformation, too.

“The legacy systems are where banks’ issues sit, because they are all architected around product, not customers,” he said. “But we believe that the industry is ready to contemplate the process of migration now.” The company is not yet working on any projects of this kind, he added, but it expects to in the next 12 months.

And even with other fintech startups, like FintechOS, also building services aimed at helping incumbent banks be more modern, that expectation spells opportunity for investors.

“We have been impressed with 10x’s strategy and ambition to play a key role at the heart transformations taking place in financial services, driven by technology innovation, consumer expectations and regulatory reform,” saiid William Abecassis, BlackRock’s Head of Innovation Capital, in a statement. “We are excited to be investing in the business as it scales into new markets.”

Leon Pedersen,  MD and Head of Thematic Investing, CPP Investments added: “10x is very well placed to change how big banks are built and deliver for their customers. 10x presents an attractive opportunity for a long-term investor like CPP Investments as we believe they will benefit from their exposure to the structural growth trend of financial institutions investing in digital initiatives and renewing core technology infrastructure, allowing banks to introduce new offerings and products much faster than using legacy platforms.”

FamPay, a fintech aimed at teens in India, raises $38 million

How big is the market in India for a neobank aimed at teenagers? Scores of high-profile investors are backing a startup to find out.

Bangalore-based FamPay said on Wednesday it has raised $38 million in its Series A round led by Elevation Capital. General Catalyst, Rocketship VC, Greenoaks Capital and existing investors Sequoia Capital India, Y Combinator, Global Founders Capital and Venture Highway also participated in the new round, which brings FamPay’s to-date raise to $42.7 million.

TechCrunch reported early this month that FamPay was in talks with Elevation Capital to raise a new round.

Founded by Sambhav Jain and Kush Taneja (pictured above) — both of whom graduated from Indian Institute of Technology, Roorkee in 2019 — FamPay enables teenagers to make online and offline payments.

The thesis behind the startup, said Jain in an interview with TechCrunch, is to provide financial literacy to teenagers, who additionally have limited options to open a bank account in India at a young age. Through gamification, the startup said it’s making lessons about money fun for youngsters.

Unlike in the U.S., where it’s common for teenagers to get jobs at restaurants and other places and understand how to handle money at a young age, a similar tradition doesn’t exist in India.

After gathering the consent from parents, FamPay provides teenagers with an app to make online purchases, as well as plastic cards — the only numberless card of its kind in the country — for offline transactions. Parents credit money to their children’s FamPay accounts and get to keep track of high-ticket spendings.

In other markets, including the U.S., a number of startups including Greenlight, Step and Till Financial are chasing to serve the teenagers, but in India, there currently is no startup looking to solve the financial access problem for teenagers, said Mridul Arora, a partner at Elevation Capital, in an interview with TechCrunch.

It could prove to be a good issue to solve — India has the largest adolescent population in the world.

“If you’re able to serve them at a young age, over a course of time, you stand to become their go-to product for a lot of things,” Arora said. “FamPay is serving a population that is very attractive and at the same time underserved.”

The current offerings of FamPay are just the beginning, said Jain. Eventually the startup wishes to provide a range of services and serve as a neobank for youngsters to retain them with the platform forever, he said, though he didn’t wish to share currently what those services might be.

Image Credits: FamPay

Teens represent the “most tech-savvy generation, as they haven’t seen a world without the internet,” he said. “They adapt to technology faster than any other target audience and their first exposure with the internet comes from the likes of Instagram and Netflix. This leads to higher expectations from the products that they prefer to use. We are unique in approaching banking from a whole new lens with our recipe of community and gamification to match the Gen Z vibe.”

“I don’t look at FamPay just as a payments service. If the team is able to execute this, FamPay can become a very powerful gateway product to teenagers in India and their financial life. It can become a neobank, and it also has the opportunity to do something around social, community and commerce,” said Arora.

During their college life, Jain and Taneja collaborated and built an app and worked at a number of startups, including social network ShareChat, logistics firm Rivigo and video streaming service Hotstar. Jain said their work with startups in the early days paved the idea to explore a future in this ecosystem.

Prior to arriving at FamPay, Jain said the duo had thought about several more ideas for a startup. The early days of FamPay were uniquely challenging to the founders, who had to convince their parents about their decision to do a startup rather than joining firms or startups as had most of their peers from college. Until being selected by Y Combinator, Jain said he didn’t even fully understand a cap table and dilutions.

He credited entrepreneurs such as Kunal Shah (founder of CRED) and Amrish Rau (CEO of Pine Labs) for being generous with their time and guidance. They also wrote some of the earliest checks to the startup.

The startup, which has amassed over 2 million registered users, plans to deploy the fresh capital to expand its user base and product offerings, and hire engineers. It is also looking for people to join its leadership team, said Jain.

Extra Crunch roundup: TC Mobility recaps, Nubank EC-1, farewell to browser cookies

What, exactly, are investors looking for?

Early-stage founders, usually first-timers, often tie themselves in knots as they try to project the qualities they hope investors are seeking. In reality, few entrepreneurs have the acting skills required to convince someone that they’re patient, dedicated or hard-working.

Johan Brenner, general partner at Creandum, was an early backer of Klarna, Spotify and several other European startups. Over the last two decades, he’s identified five key traits shared by people who create billion-dollar companies.


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“A true unicorn founder doesn’t need to have all of those capabilities on Day One,” says Brenner, “but they should already be thinking big while executing small and demonstrating that they understand how to scale a company.”

Drawing from observations gleaned from working with founders like Spotify’s Daniel Ek, Sebastian Siemiatkowski from Klarna, and iZettle’s Jacob de Geer and Magnus Nilsson, Brenner explains where “VC FOMO” comes from and how it drives dealmaking.

We’re running a series of posts that recap conversations from last week’s virtual TC Mobility conference, including an interview with Refraction AI’s Matthew Johnson, a look at how autonomous delivery startups are navigating the regulatory and competitive landscape, and much more. There are many more recaps to come; click here to find them all.

Thanks very much for reading Extra Crunch!

Walter Thompson
Senior Editor, TechCrunch
@yourprotagonist

How contrarian hires and a pitch deck started Nubank’s $30 billion fintech empire

Image Credits: Nigel Sussman

Founded in 2013 and based in São Paulo, Brazil, Nubank serves more than 34 million customers, making it Latin America’s largest neobank.

Reporter Marcella McCarthy spoke to CEO David Velez to learn about his efforts to connect with consumers and overcome entrenched opposition from established players who were friendly with regulators.

In the first of a series of stories for Nubank’s EC-1, she interviewed Velez about his early fundraising efforts. For a balanced perspective, she also spoke to early Nubank investors at Sequoia and Kaszek Ventures, Latin America’s largest venture fund, to find out why they funded the startup while it was still pre-product.

“There are people you come across in life that within the first hour of meeting with them, you know you want to work with them,” said Doug Leone, a global managing partner at Sequoia who’d recruited Velez after he graduated from grad school at Stanford.

Marcella also interviewed members of Nubank’s founding team to better understand why they decided to take a chance on a startup that faced such long odds of success.

“I left banking to make a fifth of my salary, and back then, about $5,000 in equity,” said Vitor Olivier, Nubank’s VP of operations and platforms.

“Financially, it didn’t really make sense, so I really had to believe that it was really going to work, and that it would be big.”

Despite flat growth, ride-hailing colossus Didi’s US IPO could reach $70B

Image Credits: Didi

In his last dispatch before a week’s vacation, Alex Wilhelm waded through the numbers in Didi’s SEC filing. The big takeaways?

“While Didi managed an impressive GTV recovery in China, its aggregate numbers are flatter, and recent quarterly trends are not incredibly attractive,” he writes.

However, “Didi is not as unprofitable as we might have anticipated. That’s a nice surprise. But the company’s regular business has never made money, and it’s losing more lately than historically, which is also pretty rough.”

What’s driving the rise of robotaxis in China with AutoX, Momenta and WeRide

AutoX, Momenta and WeRide took the stage at TC Sessions: Mobility 2021 to discuss the state of robotaxi startups in China and their relationships with local governments in the country.

They also talked about overseas expansion — a common trajectory for China’s top autonomous vehicle startups — and shed light on the challenges and opportunities for foreign AV companies eyeing the massive Chinese market.

The air taxi market prepares to take flight

Image Credits: Bryce Durbin

“As in any disruptive industry, the forecast may be cloudier than the rosy picture painted by passionate founders and investors,” Aria Alamalhodaei writes. “A quick peek at comments and posts on LinkedIn reveals squabbles among industry insiders and analysts about when this emerging technology will truly take off and which companies will come out ahead.”

But while some electric vertical take-off and landing (eVTOL) companies have no revenue yet to speak of — and may not for the foreseeable future — valuations are skyrocketing.

“Electric air mobility is gaining elevation,” she writes. “But there’s going to be some turbulence ahead.”

The demise of browser cookies could create a Golden Age of digital marketing

Though some may say the doomsday clock is ticking toward catastrophe for digital marketing, Apple’s iOS 14.5 update, which does away with automatic opt-ins for data collection, and Google’s plan to phase out third-party cookies do not signal a death knell for digital advertisers.

“With a few changes to short-term strategy — and a longer-term plan that takes into account the fact that people are awakening to the value of their online data — advertisers can form a new type of relationship with consumers,” Permission.io CTO Hunter Jensen writes in a guest column. “It can be built upon trust and open exchange of value.”

If offered the right incentives, Jensen predicts, “consumers will happily consent to data collection because advertisers will be offering them something they value in return.”

How autonomous delivery startups are navigating policy, partnerships and post-pandemic operations

Nuro second gen R2 delivery vehicle

Image Credits: Nuro

We kicked off this year’s TC Sessions: Mobility with a talk featuring three leading players in the field of autonomous delivery. Gatik co-founder and chief engineer Apeksha Kumavat, Nuro head of operations Amy Jones Satrom, and Starship Technologies co-founder and CTO Ahti Heinla joined us to discuss their companies’ unique approaches to the category.

The trio discussed government regulation on autonomous driving, partnerships with big corporations like Walmart and Domino’s, and the ongoing impact the pandemic has had on interest in the space.

Waabi’s Raquel Urtasun explains why it was the right time to launch an AV technology startup

Image Credits: Waabi via Natalia Dola

Raquel Urtasun, the former chief scientist at Uber ATG, is the founder and CEO of Waabi, an autonomous vehicle startup that came out of stealth mode last week. The Toronto-based company, which will focus on trucking, raised an impressive $83.5 million in a Series A round led by Khosla Ventures.

Urtasun joined Mobility 2021 to talk about her new venture, the challenges facing the self-driving vehicle industry and how her approach to AI can be used to advance the commercialization of AVs.

The Nubank EC-1

Brazil is a country riven with economic contradictions. It has one of the largest and most profitable banking industries in Latin America, and is among the world’s most developed financial markets. Financial transactions that would take days to process in the United States through ACH happen instantaneously in Brazil. This sophistication, however, masks a backward state of affairs plagued by appalling customer service, exorbitant fees and lack of banking access for many.

The country’s financial system is volatile and often leaves its citizens with few or no alternatives. According to an HBS case study, “in December 2018 the interest rate in Brazil for corporate loans was 52.3%, for consumer loans it was 120.0% and for credit card indebtedness it was 272.42%.” Those rates are many multiples higher compared to figures in neighboring countries.

Brazil’s banking system is a massive market, and one ill-served by incumbents. If someone could thread the needle of product development, strategy and political horse trading required to build a bank in a country where it is nearly impossible for foreigners to own or invest in a bank, it would be one of the great startup and economic success stories of this century.

Nubank is on its way to realizing that objective. Its story is one of unmitigated success, even by the standards of our EC-1 series on high-flying companies and their hard-learned lessons. Just last week, this Brazilian credit card and banking fintech raised a $750 million round led by Berkshire Hathaway at a $30 billion valuation, becoming one of the most valuable startups in the world. It has 40 million users across Brazil, as well as Mexico and Colombia.

Yet, it’s a startup with a CEO and co-founder who isn’t Brazilian, didn’t speak the local language of Portuguese, hadn’t started a company before, and didn’t really know a lot about banking to begin with. This is a story of how raw execution, a “faster, faster” mentality and a fanaticism for making customer experience as enjoyable as a trip to Disney World can completely change the history of an industry — and country — forever.

Our lead writer for this EC-1 is Marcella McCarthy. McCarthy, who spent significant time in Brazil growing up and is trilingual in English, Spanish and Portuguese, has been covering the LatAm and Miami ecosystems for TechCrunch with an eye to the disruption underway in these interconnected regions. The lead editor for this package was Danny Crichton, the assistant editor was Ram Iyer, the copy editor was Richard Dal Porto, and illustrations were drawn by Nigel Sussman.

Nubank had no say in the content of this analysis and did not get advance access to it. McCarthy has no financial ties to Nubank or other conflicts of interest to disclose.

The Nubank EC-1 comprises four main articles numbering 9,200 words and a reading time of 37 minutes. Here’s what’s in the bank:

We’re always iterating on the EC-1 format. If you have questions, comments or ideas, please send an email to TechCrunch Managing Editor Danny Crichton at [email protected].