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.

The huge TAM of fake breaded chicken bits

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

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Does what happens at YC stay at YC?

Community has never felt louder in startupland. Bringing people together over a shared interest is innate to human nature. And, coming out of a lonely, draining pandemic, every startup wants to find a way to cultivate community, conversation and camaraderie as part of its value proposition.

Last week, though, the outside world got a look at how Y Combinator, one of Silicon Valley’s most famed and feared accelerators, deals with the intricacy and nuance of a scaled, yet still ultra-exclusive, community after the accelerator kicked out two founders from its internal messaging board, Bookface.

The two founders, Dark CEO Paul Biggar and Prolific CEO and co-founder Katia Damer, say they were removed from YC after publicly critiquing YC — for very different reasons. Biggar had noted on social media back in March that another YC founder was tipping off people on how to cut the vaccine lines to get an early jab, while Damer expressed worry and frustration more recently about the alumni community’s support of a now-controversial alum, Antonio García Martínez.

Y Combinator says that the two founders were removed from Bookface because they broke community guidelines, namely the rule to never externally post any internal information from Bookface.

The now-public ousting of Biggar and Damer, who turned to Twitter to first explain their experiences, is a nuanced situation. Y Combinator says that it has only removed a “dozen or so” founders in its 16 year history for violating YC ethics and Bookface forum guidelines.

Still, YC’s decision to remove these founders, especially in light of a broader reckoning around free speech and dissent within startups, has triggered a series of questions — some by YC founders themselves — around how the accelerator moderates its community, handles negative publicity and draws its own line around what can be openly said by its alumni base without consequence.

Privacy first

The best curated communities allow participants to safely, and freely, share personal experiences, debate, and even disagree. Part of that safety comes from what some see as a common rule within communities: don’t share private information publicly.

Per YC, respecting privacy is a key rule for anyone who joins Bookface, an internal messaging forum that includes some 6,000 founders of the YC commnunity, from alumni to management to current batch companies. Founders log in daily, asking for introductions to a crypto accountant or bringing up a recent job posting for crowdsourced suggestions, among other topics.

“We ask that founders don’t share anything from the forum with anyone outside of YC, as this is a community built on trust and privacy,” Lindsay Wiese-Amos, Y Combinator head of communications, told TechCrunch.

It’s more than a polite request. Amos said that when a company is accepted into YC, the founders must sign investment documents, one of which is its founder ethics policy. Within the policy, there are guidelines around the Bookface forum, including the language: “Don’t share anything in the Forum, or any links to the content posted to it, with anyone outside of YC.”

YC claims that when a founder breaks the rules, it reaches out to them with a warning, and if the rule is broken multiple times, they are removed from the community.

When a startup is removed from the YC community, YC “generally” returns the shares to the company, though it says there are exceptions. In Damer’s case, says Amos, her “co-founder is still actively working on Prolific, and both he and Prolific remain part of the YC community.”

Meanwhile, Biggar’s YC startup closed eight months after graduating from the accelerator, so YC didn’t have to sever financial ties.

Garry Tan, co-founder of Initialized Capital, and a former YC partner who has stakes in alumni companies including Coinbase, thinks there is a difference between a critical discussion and breaking community rules. Tan told TechCrunch that discussions are fine, but that these “founders violated privacy expectations of other people within the community.”

“I think YC has become an institution, and institutions are viewed with high scrutiny,” he said. “That’s not a bad thing, it’s probably how it should be.”

The ‘too far’ moment is when people try to ascribe specific political viewpoints to an institution when that institution is A) a lot of people not just a few and B) probably innocent of specifically pushing one viewpoint or another,” Tan continues.

YC’s Bookface rules are seemingly cut and dry However, in light of the actions it took against Biggar and Damer, it’s fair to wonder what happens if someone in the community disparages YC publicly, but not having to do with Bookface. Is that also an offense that would get them kicked out of the organization? And would the organization make an exception for especially promising founders?

Amos suggests that all founders are treated equally and that dissent is welcome. “We believe strongly in free speech and are open to criticism. People are allowed to criticize YC and would not get kicked out of the community for doing so,” she said.

‘I had no faith in Y Combinator doing the right thing’

Biggar went through Y Combinator in 2010. “I was like a Paul Graham acolyte,” he says. “I have a signed copy of Hackers and Painters, read every essay that he put out, and as soon as I finished my PhD, I applied to Y Combinator.”

For over a decade, Biggar says, he has been an active participant in Bookface, recently helping multiple companies with financial and relationship advice on co-founder break-ups.

When the Black Lives Matter movement was growing last summer, Biggar noticed that Bookface was relatively quiet and, as he describes it, “apolitical, but in a derogatory way” around issues such as diversity and police brutality. He compared the tone of Bookface to that of Coinbase, after Armstrong published a memo that banned political discussions at work.

Biggar’s frustration grew, hitting a tipping point in March when he spotted a founder bragging on the forum that he had skipped a vaccine queue and offering tips to help other founders do the same.

Soon after, Biggar tweeted: “For the second time, a @ycombinator founder has posted to the internal YC forum about how they lied to skip the vaccine queue in Oakland, with instructions for other founders to do the same. Absolutely fucking disgusted.”

Biggar left out screenshots of the founder’s post or any identifying material to protect the individual’s anonymity. But within hours of publishing the tweet, Biggar received a direct message on Twitter from Y Combinator co-founder Jessica Livingston, asking him to alert a partner at YC about inappropriate content on Bookface. She added: “You may get a faster and more thorough response than posting to all of Twitter.”

His response to her: “Hey Jessica! Truth be told, I’m so disillusioned with YC that it never even occurred to me.”

Biggar decided to leave up the tweet. Meanwhile, because Biggar was apparently not alone in his view of the content on Bookface — Amos says that “the community made its perspective quite clear in the comments: they were not in agreement with this founder” offering vaccination hacks  — YC says it deleted the post less than 24 hours after it appeared on Bookface.

The episode wasn’t even on his mind, Biggar says, when he received an email from Jon Levy, the managing director of partnerships at YC, asking to chat last week. To Biggar’s surprise, Levy told him that he was being removed from the YC community. That meant he was being removed not just from Bookface, says Biggar, but he is no longer invited to Demo Day or allowed on YC Slack.

Notably, Biggar says that YC didn’t give him a warning or the option to take down any posts before ushering him out of the broader YC community, though he suspected it was becoming stricter about its community rules. A week before he was booted, Biggar says that Y Combinator reminded founders about a “no leak” policy within Bookface.

YC offers a different recounting of the events, saying it was only “recently” notified of Biggar’s tweet through someone in the YC community and that all founders are given a warning. YC also states that a founder is removed only after violating the terms “multiple” times, while Biggar maintains that he only once tweeted about Bookface. Asked about other examples of Biggar violating its terms, YC declined to comment further.

Says Biggar now of these recent events: “I got criticized for not posting it internally, which I think is kind of bullshit. But, you know, the reason I didn’t post it internally is just that I had no faith in Y Combinator doing the right thing. I didn’t think that going public would do anything, either. I mean, I’m not someone who actually matters here.”

“This is the smallest way that one could possibly call out YC,” Biggar continues. “A couple of community members did a shitty thing, which I think is reflective of the community. That for them is, like, too much dissent — shut it all down.”

If you are not “the people who have been elevated to part-time partners [or are] tight with the people that matter,” no one “cares what you think. No one ever asks what you think . . .You can’t have dissent internally. There are just too many disciples.”

‘YC is not soul-searching’

Damer’s own removal from Bookface might not have been publicized if not for Biggar sharing on Twitter last week that he’d just been “kicked out.” Soon after, she came forward, tweeting to him that “2 weeks ago, YC kicked me out as well” for her public critique. Specifically, says Damer, she was thrown off Bookface because she called out misogyny and the lack of diversity within the accelerator community.

It began with a memo on Bookface with the title: “Is YC an inclusive organization? If we continue like this, YC will lose its great reputation.” In her post, Damer explained that she noticed many people defending Antonio García Martínez, the author of Chaos Monkeys who recently was invited to join Apple, then asked to leave Apple, after a petition to investigate his hiring was signed by more than 2,000 Apple employees. They were concerned about specific book passages, including one that reads: “[M]ost women in the Bay Area are soft and weak, cosseted and naive despite their claims of worldliness, and generally full of shit.”

Like the Apple employees who circulated the petition, Damer believes the book is proof that García Martínez is a “misogynist,” writing on Bookface about how “disconcerting” an outpouring of support for him on the internal platform.

“I care about YC and that’s why I am writing this,” Damer said. “What is happening right now is not normal, and it looks like YC is soul searching. If this doesn’t get under control, YC will start missing out on some of the best deal flow, especially from women and underrepresented founders.”

Livingston soon responded.

“YC is not ‘soul-searching’,” Livingston wrote. “Antonio participated in YC a decade ago, and I remember him as a decent person…I think if anything the YC community should be the ones defending Antonio, because many of us have first-hand knowledge of him, instead of just cherry picked quotes from a book. And we know from being in the startup world how often people are criticized unfairly by the press and in social media.”

Livingston’s post received hundreds of upvotes, while Damer’s post received a handful. Aggravated, Damer soon went to LinkedIn and Twitter to post screenshots of the interaction, “retracting” any previous praise she’d given to YC’s founders, and advising founders not to give up equity before VCs earn their trust.

Soon, a YC partner e-mailed Damer with an invitation to reach out to group partners or them directly about any YC concerns, according to a document shared with TechCrunch by the accelerator. The partner also explained that one of the community rules at Bookface was not to share anything from the forum with anyone outside of YC. The partner asked Damer to take down the Bookface screenshots. Damer did not respond to the email and did not take down the screenshots. 

Less than two weeks later, Damer received a second email from the partner, this time with a clear message: Because she did not delete her posts, she had been removed from Bookface and could reach out if she wished to re-engage.

The communication was extensive compared with the organization’s handling of Biggar’s tweet, and suggests that YC did a far better job in following its own protocols in Damer’s case.

Either way, Damer thinks that YC’s guidelines encourage complacency, especially around issues of diversity, and suggests her waning enthusiasm for the organization ties directly to its not “stepping up” for “women when given the chance.” Adds Damer, “I don’t think any one of [the partners] is malicious, I actually think they are good people. It’s more about the complacency — that is what bothers me so much,” she said.

As for whether she regrets airing her exasperation publicly, she suggests she didn’t have a choice. “People use rules when they don’t know what else to do. This is about courage, this is about actually standing up for what is right.”

Community rules can be clear, but enforcement muddy

There is plainly an argument for and against Y Combinator’s deciding to remove founders from its forum. It’s typical of investors to ask portfolio companies to agree to certain terms and conditions. In this case, YC specifically alerts those who join its organization that the privilege of using Bookface comes with its own, additional, terms and conditions.

Still, whether the terms and conditions around its community are fair or reasonable could become a question mark in the minds of founders who haven’t yet applied to the program — as could YC’s different handling of two founders who broke the rules.

Broadly speaking, people within communities who feel like they are not being heard internally — yet who are also being asked not to express their disdain publicly — are pushing back on such limits. Coinbase saw at least 60 employees leave last fall after being told that the company would no longer tolerate internal political dissent or debate. In late May, the company Basecamp reportedly lost a third of its staff following disagreements over the company’s attitude toward internal political debates. Most recently, Medium lost half its staff in July after a strategy shift and an internally criticized culture memo.

Because of its successful track record, YC may be more powerful as an institution than any one company, but rivals are always looking for weaknesses, and asking members not to air their grievances outside of YC could ultimately impair the outfit. A generation of founders and operators is showing it is less and less willing to suppress a viewpoint in the service of others, and the most talented of these individuals have no shortage of options when it comes to both mentorship and capital.

YC, with its extensive network — perhaps even because of it —  may increasingly find it isn’t immune to the trend.

Float wants to provide liquidity to African SMBs in a way never done before

According to research, 85% of African SMBs have zero access to financing, and each day, African SMBs have billions locked up in receivables due to long payment cycles. This leads to cash flow problems that cause businesses to be late on important expenses and fulfilment of new orders.

Jesse Ghansah and his co-founder Barima Effah want to answer these problems with their newly launched startup Float.

Ghansah is a serial entrepreneur. Since leaving the university in 2014, he has co-founded several tech startups but made his mark globally with OMG Digital, a startup with offices in Ghana and Nigeria that wanted to become the “BuzzFeed of Africa.” In 2016, OMG Digital was one of the first African companies accepted into Y Combinator.

Ghansah had a good run with the company and left two years ago. For his newest venture, he turned his focus outside media to fintech. Formerly Swipe, Float is an 18-month-old Lagos and San Francisco-based company aiming to close the $300 billion liquidity gap for Africa’s small and medium businesses. The company took part in YC’s Winter batch 2020, making Ghansah one of the few two-time YC founders in Africa.

Float has evolved from the last time we partly covered them during their Demo Day as “Brex for Africa.” According to CEO Ghansah, Float is “rethinking the way African businesses manage their financial operations, from managing cash and making payments to accessing credit.”

After 18 months in stealth, Float is finally going live, and we spoke with the CEO to get a glimpse into its progress and what makes it different from similar platforms on the continent.

TC: What problem would you say Float is solving?

JG: If you ask any small business, cash flow will most likely be the number one problem that they face. And this stems from the whole payment cycle, which is after you provide a service or deliver a product. Businesses that serve other businesses have to wait typically for 30-90 days for their payments to come in. This is like a traditional payment cycle where you have to offer credit sales to your customers to stay competitive; that’s why you send an invoice, and the customer will pay you back within that time frame. 

That creates a lot of problems in terms of constant cash crunches. Because you’re waiting for your revenue to come in, they sometimes fall behind in meeting certain expense payments like payroll, inventory, utilities. That’s what really causes a lot of these cash flow issues, and because of that, businesses can’t grow. For existing businesses, these are the issues they face and getting credit in terms of working capital is extremely difficult if you’re dealing with banks. 

TC: Did you have a personal experience with this problem seeing as your past venture was in media?

JG: As you know, I was a co-founder at OMG Digital, and as a media company, we had to wait for months to get paid by our partners. We needed credit this time and proceeded to get an overdraft from a long-term partner bank where we had transacted more than $100,000. But the bank wanted us to deposit 100% collateral in cash before they could give the overdraft. 

I also remember taking money from loan sharks with ridiculous interest rates, sometimes as high as 20% a month, just to meet payroll. That sort of threw me into solving those problems with Float.

TC: There are a plethora of lenders giving loans to businesses. How is Float solving the credit issue differently?

JG: So our credit product is quite different regarding how we present it to the customer. It is less complex than a loan; it is more flexible than a business overdraft. Also, there’s a difference in the tools that we provide. So we don’t just give money; what we’ve provided is a software solution with credit embedded. 

Float

Right now, we’ve built what we call the cash management tool for businesses where they get credit at the critical set of moments in time. For instance, if you want to pay a lender and need credit, you can withdraw the credit and make payment immediately. We provide a credit line that businesses can tap into any time they want as soon as they onboard to our platform, and it increases and decreases based on the transactions performed on our platform. 

So that’s just on the credit side. We’ve also built tools to help businesses stay on top of their cash flow. We give them invoicing, budgeting tools and spend management tools and a way for them to manage all their bank accounts because we know that existing businesses usually have more than one bank account. On Float, they can see all their balances and transactions, and we’re building a way for these businesses to make payments from their accounts on Float. 

You can think of Float as a really well-built cash management platform. You get credit when you need it to make vendor payments or boost your working capital, which has been pivotal to our loss rate of 0%. Then two, tools that give total visibility about your businesses so you know where your money is coming in and going out.

TC: Float’s loss rate is 0%? Does that mean no business has defaulted on your platform?

JG: Yes, we’ve not had any default so far. We’ve advanced $2.8 million to our pilot customers in Nigeria, and we don’t have any losses in the last eight months; it’s because of the type of loans we’re giving. We give businesses money to boost their working capital. So we’re essentially giving you an advance for your future revenue. 

If you look like, in the U.S., Pipe has built this for SaaS companies and are building for other customer segments, which is essentially what we’re doing. So, for us, the way we’re solving the cash flow issue is that we’re sorting your future revenue and as your customers pay you through our platform, then we make deductions. 

You can think of us as a Stripe Capital, Square Capital, Pipe or the new multidimensional lending platforms we have now. When you consider lending, I’d say there are different phases. Lending 1.0 was when you’d fill an application online, and you’d get a loan decision. Lending 2.0 and 3.0 is where credit is embedded in online tools businesses already use. That’s why it has worked really well because the businesses on our platform aren’t exactly looking for a lifeline but are looking to boost their cash flow and basically step on the gas to grow.

TC: But this loss rate will likely change as soon as you onboard more businesses, right?

JG: Yes, definitely it’s going to change. The thing with lending is that with more customers, your credit model gets tested. The more customers you have, the more probability that you’re going to have default losses. But as long as you have, like a solid credit risk criteria and assessment, you must always try to keep it as small as possible. It’s almost impossible to have a 0% default rate when you begin to grow fast.

TC: What strategy does Float put in place to mitigate losses and reduce risk?

JG: The way our credit product works is that we’re constantly connected to your bank; we know who your vendors are, know who your suppliers are, and know who your customers are. We know how much money is flowing in and out of your business at any point in time. So as I mentioned, we can quickly adjust your credit limits as soon as we sense a difference in your activity. If we notice your invoice activity has dropped and we’re not receiving as much money as you were in the previous weeks, we reduce your limit. It’s a very dynamic sort of type of product, and it is really different from what you see out there today.

TC: Aside from lending, how have the other tools been helpful to businesses?

JG: With our pilot phase, we’ve been able to give credit and also processed invoicing and vendor payments for our customers worth about $5 million. 

When you think of business payments, sometimes people always think about Paystack and Flutterwave. They’re tackling a different segment which is basically consumers paying businesses. For us, we’re centred around businesses paying other businesses. Their method, as we know, is a very drawn-out process, and that market is 10 times bigger than the market Paystack and Flutterwave are serving. 

Float

L-R: Barima Effah and Jesse Ghansah

If you look at your big multinational corporations, they have thousands of vendors on their payroll every month. Globally trillions of dollars are flowing from business to business, and that is where we want to play in. We’re launching the new version of our invoicing product and vendor payments, and a product where we can pay for services upfront on behalf of our customers and they pay back in 30 days.

TC: I’m tempted to call Float a digital bank for small businesses. Would you say there are differences?

JG: Of course there are. Almost any business owner will tell you that business banking is mostly broken. Legacy banks typically provide an outdated, underwhelming user experience. Businesses quickly move beyond basic banking needs, and for them, the options are frustratingly limited.

African neo-banks are aiming to compete with traditional banks. Still, in reality, they are actually now competing with each other for a relatively tiny slice of the market due to not solving the core problems facing businesses. A marginally better UX and a quick account opening experience is the value proposition that probably resonates well with a new startup business or a budding freelancer. However, to an already operating retail business owner that struggles to make timely payments to suppliers due to poor cash flow, that’s grossly inadequate.

This, coupled with the trust matters, reconciliation, and auditing headaches involved in moving accounts, is why neobanks haven’t taken off in this market.

There are little to no switching costs using Float because we have designed our platform to run on top of existing business bank accounts and payment processors. The idea is to provide a single platform that provides businesses with the credit they need, a consolidated view of their existing business banking and cashflow activity, coupled with various payment tools to enable them to speed through their financial operations so they can spend more time actually growing their business.

Kafene raises $14M to offer buy now, pay later to the subprime consumer

The buy now, pay later frenzy isn’t going anywhere as more consumers seek alternatives to credit cards to fund purchases.

And those purchases aren’t exclusive to luxuries such as Pelotons (ahem, Affirm) or jewelry someone might be treating themselves to online. A new fintech company is out to help consumers finance big-ticket items that are considered more “must have” than “nice to have.” And it’s just raised $14 million in Series A funding to help it advance on that goal.

Neal Desai (former CFO of Octane Lending) and James Schuler (who participated in Y Combinator’s accelerator program as a high schooler) founded New York City-based Kafene in July 2019. The pair’s goal is to promote financial inclusion by meeting the needs of what it describes as the “consumers that are left behind by traditional lenders.”

More specifically, Kafene is focused on helping consumers with credit scores below 650 purchase retail items such as furniture, appliances and electronics with its buy now, pay later (BNPL) model. Consider it an “Affirm for the subprime,” says Desai.

Global Founders Capital and Third Prime Ventures co-led the round, which also included participation from Valar, Company.co, Hermann Capital, Gaingels, Republic Labs, Uncorrelated Ventures and FJ labs.

“Historically, if you could access credit, you could go to the bank or use a credit card,” Third Prime’s Wes Barton told TechCrunch. “But if you had some unexpected expense, and had to miss a payment with the bank, there would be repercussions and you could fall into a debt trap.”

Kafene’s “flexible ownership” model is designed to not let that happen to a consumer. If for some reason, someone has to forfeit on a payment, Kafene comes to pick up the item and the customer is no longer under obligation to pay for it moving forward.

The way it works is that Kafene buys the product from a merchant on a consumers’ behalf and rents it back to them over 12 months. If they make all payments, they own the item. If they make them earlier, they get a “significant” discount, and if they can’t, Kafene reclaims the item and takes the loan loss.

Image Credits: Kafene

It’s a modern take on Rent-A-Center, which charges more money for inferior products, Desai believes.

“This is also a superior product to credit cards, and the size of that market is massive,” Barton said. “We want to take a huge chunk of credit card business in time, and give consumers the flexibility to quit at any point in time, and fly free, if you will.”

Such flexibility, Kafene claims, helps promote financial inclusion by giving a wider range of consumers options to alternative forms of credit at the point of sale.

It also helps people boost their credit scores, according to Desai, because if they buy out of the loan earlier than the 12-month term, their credit score goes up because Kafene reports them as a positive payer.

“In any situation where they don’t steal the item, their credit score improves,” he said. “Even if they end up returning it because they can’t afford it. In the long run, they can have a better credit score to qualify for a traditional loan product.”

Kafene rolled out a beta of its financing product in December of 2019 and then had to pause in March due to the COVID-19 pandemic. The company essentially “hibernated” from March to June 2020 and re-launched out of beta last July.

By October, Kafene stopped all enrollment with merchants because it had more demand that it could handle — largely fueled by more people being financially strained due to the COVID-19 pandemic. In March 2021, the company was handling about $2 million a month in merchandise volume.

With its new capital, Kafene plans to significantly scale its existing lease-to-own financing business nationally, as well as to launch a direct-to-consumer virtual lease card.

Ditto raises $1.5 million to help teams collaborate on copy

Even as remote software uptake has boomed during the pandemic, certain workflows have gotten prioritized for specialized toolsets while other team members have been left piecemealing their productivity. Employees designing the copy that directs users and encapsulates company messaging have been particularly forgotten at times, say the founders of Ditto, a young startup building software focused on finding a “single source of truth” for copy.

The startup was in Y Combinator’s winter 2020 batch (we selected it as one of our favorites from the class), now Ditto’s founders tell TechCrunch the team has raised a $1.5 million seed round from investors including Greycroft, Y Combinator, Soma Capital, Decent Capital, Twenty Two VC, Holly Liu and Scott Tong, among others.

While copy workflows are often very messy when it comes to design and implementation, even the most-organized teams are often left scouring through meandering email threads, screenshot dumps and slack DMs with disparate teams. The founders behind Ditto hope that their software can give copy teams the home they deserve to keep everything organized and synced across projects and applications, ensuring that language is actually finalized and ready to ship when the time comes.

The company’s founders Jessica Ouyang and Jolena Ma were Stanford roommates who saw a lingering opportunity to build a toolset that prioritized copy as its own vertical.

“It’s so easy to couple text with where it lives, like you may think of it as part of the design so a lot of writers have to manage it inside toolsets for design or you may already think of it as part of development so writers end up having to go into the codebase and figure out how to code or manage JSON even though they’re content designers,” Ouyang tells TechCrunch.

Out of the gate, Ditto has been built for Figma, meaning users can easily export text blocks from designs in the app and rework them inside the Ditto web app, pushing updates without having to dig through the designs themselves. The founders say they are currently working on building out integrations for Sketch and Adobe XD as well. Inside the Ditto web app users can access change logs and update the status of particular pieces of text inside a project so that approvals are always certain.

“We find there’s a lot more opportunity to integrate into all of the places where copy is being worked on,” Ma tells us. “We have a lot more we’re hoping to do with our developer integrations and just integrating to all of those places where copy lives, places like A/B testing, internationalization, localization and other workflows.”

Copy development has plenty of stakeholders and the team is looking to experiment with pricing tiers that address that. For now they split up users into editors and commenters paying $15 and $10 monthly (priced annually) respectively on the startup’s Teams plan. Ditto has a free tier for teams of two as well and pricing designed for larger enterprise clients.

 

Belvo, LatAm’s answer to Plaid, raises $43M to scale its API for financial services

Belvo, a Latin American startup which has built an open finance API platform, announced today it has raised $43 million in a Series A round of funding.

A mix of Silicon Valley and Latin American-based VC firms and angels participated in the financing, including Future Positive, Kibo Ventures, FJ Labs, Kaszek, MAYA Capital, Venture Friends, Rappi co-founder and president Sebastián Mejía, Harsh Sinha, CTO of Wise (formerly Transferwise) and Nubank CEO and founder David Vélez.

Citing Crunchbase data, Belvo believes the round represents the largest Series A ever raised by a Latin American fintech. In May 2020, Belvo raised a $10 million seed round co-led by Silicon Valley’s Founders Fund and Argentina’s Kaszek.

Belvo aims to work with leading fintechs in Latin America, spanning verticals like the neobanks, credit providers and personal finance products Latin Americans use every day.

The startup’s goal with its developer-first API platform that can be used to access and interpret end-user financial data is to build better, more efficient and more inclusive financial products in Latin America. Developers of popular neobank apps, credit providers and personal finance tools use Belvo’s API to connect bank accounts to their apps to unlock the power of open banking.

As TechCrunch Senior Editor Alex Wilhelm explained in this piece last year, Belvo might be considered similar to U.S.-based Plaid, but more attuned to the Latin American market so it can take in a more diverse set of data to better meet the needs of the various markets it serves. 

So while Belvo’s goals are “similar to the overarching goal[s] of Plaid,” co-founder and co-CEO Pablo Viguera told TechCrunch that Belvo is not merely building a banking API business hoping to connect apps to financial accounts. Instead, Belvo wants to build a finance API, which takes in more information than is normally collected by such systems. Latin America is massively underbanked and unbanked so the more data from more sources, the better.

“In essence, we’re pushing for similar outcomes [as Plaid] in terms of when you think about open banking or open finance,” Viguera said. “We’re working to democratize access to financial data and empower end users to port that data, and share that data with whoever they want.”

The company operates under the premise that just because a significant number of the region’s population is underbanked doesn’t mean that they aren’t still financially active. Belvo’s goal is to link all sorts of accounts. For example, Viguera told TechCrunch that some gig economy companies in Latin America are issuing their own cards that allow workers to cash out at small local shops. In time, all those transactions are data that could be linked up using Belvo, casting a far wider net than what we’re used to domestically.

The company’s work to connect banks and non-banks together is key to the company’s goal of allowing “any fintech or any developer to access and interpret user financial data,” according to Viguera.

Viguera and co-CEO Oriol Tintoré founded Belvo in May of 2019, and it was part of Y Combinator’s Winter 2020 batch. Since launching its platform last year, the company says it has built a customer base of more than 60 companies across Mexico, Brazil and Colombia, handling millions of monthly API calls. 

This is important because as Alex noted last year, similar to other players in the API-space, Belvo charges for each API call that its customers use (in this sense, it has a model similar to Twilio’s). 

Image Credits: Co-founders and co-CEOs Oriol Tintore and Pablo Viguera / Belvo

Also, over the past year, Belvo says it expanded its API coverage to over 40 financial institutions, which gives companies the ability to connect to more than 90% of personal and business bank accounts in LatAm, as well as to tax authorities (such as the SAT in Mexico) and gig economy platforms.

“Essentially we take unstructured financial data, which an individual might have outside of a bank such as integrations we have with gig economy platforms such as Uber and Rappi. We can take a driver’s information from their Uber app, which is kind of built like a bank app, and turn it into meaningful bank-like info which third parties can leverage to make assessments as if it’s data coming from a bank,” Viguera explained.

The startup plans to use its new capital to scale its product offering, continue expanding its geographic footprint and double its current headcount of 70. Specifically, Belvo plans to hire more than 50 engineers in Mexico and Brazil by year’s end. It currently has offices in Mexico City, São Paulo and Barcelona. The company also aims to launch its bank-to-bank payment initiation offering in Mexico and Brazil.

Belvo currently operates in Mexico, Colombia and Brazil. 

But it’s seeing “a lot of opportunity” in other markets in Latin America, especially in Chile, Peru and Argentina, Viguera told TechCrunch. “In due course, we will look to pursue expansion there.” 

Fred Blackford, founding partner of Future Positive, believes Belvo represents a “truly transformational opportunity for the region’s financial sector.”

Nicolás Szekasy, co-founder and managing partner of Kaszek, noted that demand for financial services in Latin America is growing at an exponential rate .

“Belvo is developing the infrastructure that will enable both the larger institutions and the emerging generation of younger players to successfully deploy their solutions,” he said. “Oriol, Pablo and the Belvo team have been leading the development of a sophisticated platform that resolves very complex technical challenges, and the company’s exponential growth reflects how it is delivering a product that fits perfectly with the requirements of the market.” 

OpenUnit raises a $1M seed round to be the online face of self-storage

How are mom-and-pop self-storage facilities meant to keep up with the tech offered by the massive, ever-growing chains?

That’s a key part of the idea behind OpenUnit, a team I first wrote about in August of last year. You bring the storage units, they bring the website, payment processing, and backend tools you need to manage them. They don’t charge facility owners a monthly subscription fee, instead taking a cut of each payment as the payments processor.

OpenUnit has now raised a $1M seed round, and acquired the IP of a fellow YC company along the way.

Since we last heard from OpenUnit, they’ve been expanding to locations around the US and Canada and now have a waitlist over 800 facilities deep, the team tells me.

Image Credits: OpenUnit

OpenUnit co-founder Taylor Cooney was quick to point out that this seed round is as much about strategic partnerships as it is about the money. Neither Taylor nor co-founder Lucas Playford had much to do with the storage industry until a knock at the door led them down a rabbit hole. As I wrote back in August:

“…Taylor’s landlords came to him with an offer: they wanted to sell the place he was renting, and they’d give him a stack of cash if he could be out within just a few days. Pulling that off meant finding a place to keep all of his stuff while he looked for a new home, which is when he realized how antiquated the self-storage process could be.”

Of the 20+ investors participating in the round, 6 are from the self-storage industry, from prior/current facility owners to the Director of the Canadian Self Storage Association. For some of them, it’s their first time investing in a tech or software company — but all potentially bring something to the table beyond money.

Of course, that’s not to say they’re just letting that money sit around. They’ve grown the team from just Taylor and Lucas up to five, and are still looking to grow. Meanwhile, Taylor tells me that the company has acquired the IP of fellow Y Combinator W20 batchmate Affiga, a product that aimed to automatically provide insights about a new customer after a transaction is made.

Writes Taylor: “As self-storage companies move services like rentals, leases, and payments online, it’s becoming increasingly difficult for them to ‘know’ their customers. We see the integration into our product as a way to help self-storage operators bridge the gap between their online and in-store customer experiences, where the personal touch tends to be lost.”

Affiga initially shutdown its operations back in 2020. After OpenUnit realized they wanted something similar in their product, they set out to buy rather than build. “With a decade in e-commerce under their belt,” Taylor tells me, “their founder had a much better approach to this then we would’ve come up with.”

So what’s next? Besides getting more people off the waitlist and onto the platform, they’re exploring other opportunities, including potentially providing loans to facilities looking to expand or renovate. Because OpenUnit is both the management platform and the payments provider, they have deep insights on how a facility is doing; they know how much a location makes, how punctual their customers are with payments, etc. Take that data and mash it up with insights on what improvements can increase revenue, and it seems like a pretty straightforward formula.

This round includes investment from Garage Capital, Advisors Fund, Insite Property Group, SquareFoot co-founder Jonathan Wasserstrum, and a number of angel investors.

Netlify snags YC alum FeaturePeek to add design review capabilities

Netlify, the startup that’s bringing a micro services approach to building websites, announced today that it has acquired YC alum FeaturePeek. The two companies did not share the purchase price.

With FeaturePeek, the company gets a major upgrade in its design review capability. While Netlify has had a previewing capability called Deploy Previews in the platform since 2016, it lacked a good way for reviewers to discuss and comment on the design. The preview alone was useful as far as it goes, but having the ability to collaborate on the design remained a missing piece until today.

With FeaturePeek, the company can expand on Deploy Previews to not only preview the design, but also enable all the stakeholders in the design process to add their opinions, edits and changes as the design moves through the creation process instead of having to wait until the end or gather the comments in a separate document or communications channel.

As FeaturePeek co-founder Eric Silverman told me at the time of their seed funding last year, his product removed a lot of frustration when the web coders would get all their review comments at the last minute:

“Right now, there’s no dedicated place to give feedback on that new work until it hits their staging environment, and so we’ll spin up ad hoc deployment previews, either on commit or on pull requests and those fully running environments can be shared with the team. On top of that, we have our overlay where you can file bugs, you can annotate screenshots, record video or leave comments.”

Matt Biilmann, CEO and co-founder, Netlify says that when his company created Deploy Previews, it was in reaction to customers who were kloodging together their own solutions to the issue. They learned that even with their own preview feature, customers craved a communications capability.

In the classic build versus buy debate, the company began building its own, then it met the FeaturePeek team and decided to switch course. “We had a team working on a prototype when the founders of FeaturePeek, Eric and Jason, gave us a demo of their product. As the demo progressed, our jaws got increasingly closer to hitting the floor and we knew straight away that what we had just seen was miles away from both our internal prototypes and any of the other tools we had seen in the space,” Billmann told TechCrunch.

He added, “It also quickly became apparent that fully building towards this vision as two different companies, without a deep end-to-end experience from initial Pull Request to a new feature release, would never really allow us to build what we were dreaming of, so we decided to join forces.”

The companies’ combined effort actually comes together today in a new release of Deploy Previews that includes the new FeaturePeek collaboration/commenting capabilities.

FeaturePeek was founded in 2019, went through Y Combinator Summer 2019 batch, and raised around $2 million. Netlify was founded in 2014 and has raised over $97 million, according to Crunchbase. Its last raise was a $53 million Series C in March 2020.

Fresh out of YC, Houm raises $8M to improve the home rental and sales market in LatAm

As a longtime real estate developer based in Chile, Benjamin Labra was able to spot gaps in the buying and renting markets in Latin America. To meet demands, he started Houm, an all-in-one platform that helps homeowners rent and sell their properties in the region.

Fresh out of Y Combinator’s W21 cohort, today Houm announced an $8 million seed round. 

If you think the concept sounds like Brazil’s unicorn, QuintoAndar, it’s because Houm is very similar. While QuintoAndar dominates the Brazilian market, Houm operates in Chile, Mexico and Colombia, and aims to capture the rest of Spanish-speaking LatAm.

Think of Houm as a homeowner-run Zillow meets TaskRabbit. The company offers a marketplace run by the property owners themselves and cuts out the realtor by employing 200 freelancers who prepare the property for sale or to manage it.

Houmers, as they are called, go to the owner’s home, take photos and then help possible buyers or renters view the property. For their work, Houmers are compensated each time a home they worked on sells or gets rented.

However, Houm’s selling proposition isn’t just the ease of use it provides; instead, it also serves as a guarantor in my ways, making the buying process more accessible.

“In Colombia and Mexico, for someone to be your guarantor, they have to have a property that’s free of mortgage so it can be used as collateral,” Labra told TechCrunch.

On the flip side, the company also guarantees that renters will get paid every month, and if a tenant falters, Houm covers the cost. “You really have nothing to lose if you use Houm,” Labra said.

You can imagine that a company like Houm now has all sorts of data on the real estate market, especially around sales and rental prices. As a result, Houm uses this data in an algorithm that helps the homeowner determine a fair price for their property, but the listed price remains up to the owner.

The company, which was founded in 2018 and is based in Chile, now has about 200 full-time employees, in addition to their freelance team. While Labra declined to say how many active users it has, he said Houm is now showing a property every eight minutes.

The current funding round had no lead investor but includes Y Combinator, Goodwater Ventures, OneVC, Vast VC, Liquid2 and Myelin. The company plans to use the money to expand within the region, perfect its algorithm and generally speed up growth.