Weekly Briefing No. 140 | Back That Fintech Financing Truck Up

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We invite you to drink in our final edition before our hiatus. Here’s what’s basking on our summer beach chair this week:

  • Fintech start-ups are loading up on cash
  • Our one-on-one with Groundfloor’s Brian Dally
  • Exobot, LevelUp; Edmit; FFiT; Earnings
  • Amazon and asset management; Coinbase’s new PAC
  • Picasso’s lawn mowing; Jamie Dimon
  • Coindesk’s blockchain report; Paul McCartney vs. AI

FINANCINGS

Back that fintech financing truck up.

We’re paraphrasing a song title from Kentucky’s Borrowed Blue to describe the overall level of fintech financing news that was revealed this week. To that point, Credit Suisse’s fintech investment arm, Next Investors, backed up the truck and took in $261 million. Also, Tally, a debt consolidator that offers tools to help people pay their credit card bills on time, collected $25 million, and OpenVest, a digital investment advisor we like, announced a $10.4-million Series A. There’s more: Global payments provider Flywire announced that it raised a fresh $100 million, and Atlanta-based Patientco, which helps hospital administrators deal with the madness of health care payments, closed on $28 million. Finally, Equidate is now in high cotton to the tune of $50 million thanks to a Series B that was just announced. With the cash, the company plans to bolster its accredited investor platform for late-stage start-up secondary shares.

INTERVIEW

Groundfloor’s Brian Dally.

Institutional money found its way to real estate a long time ago, but until fairly recently, technology’s power to democratize real estate hadn’t been a big factor. But now, the awakening is in full blossom as start-ups have entered both the commercial and residential sectors, seeking to open up just about every part of the property value chain. We’ve been watching this activity with great interest, which is why we’ve sat down with several real estate technology entrepreneurs in our Conversations series. This week, we’re at it again in a new discussion with Groundfloor’s Brian Dally. In a one-on-one with The FR’s Gregg Schoenberg, Dally talks about Groundfloor’s focus on residential renovators (i.e., flippers) and explains why he’s passionate about providing investment opportunities for non-accredited investors. “Wall Street has told people you can’t have direct access. You aren’t allowed. That's a fundamentally un-American idea.” he said.

Note: Groudfloor is an advertising client of The FR.

NEWS ROUNDUP

In a weird story, the source code of an Android banking trojan that was put up for sale in January on the dark web is now spreading within the malware community.  In tastier news, Grubhub announced that it was acquiring payments and loyalty platform LevelUp for $390 million (LevelUp has raised $108 million to date). On the earnings front, Equifax reported Q2 results that were below estimates. PayPal, meanwhile, didn’t report the kind of existentially vexing results that were posted by Facebook and Twitter, but when you’ve conditioned investors to expect stellar, good isn’t so good. Finally, Starbucks, which is increasingly looking to us like a compelling fintech story à la Domino’s Pizza, posted strong numbers that were fueled by its loyalty program (up 14% YOY) and mobile payments.

COMPANY & COMPETITION OF NOTE

Edmit.

In biblical times, declarations of jubilees every 50 years were used to liberate people from accumulating debt. Rather than being motivated purely by altruism, though, jubilees were sometimes employed to restore military and economic stability. But when it comes to forgiving US student loan debt, which at $1.5 trillion is roughly equivalent to Russia’s 2017 GDP (nyet good), the current administration is drawing a red line in the sand. Given this backdrop, we’re taking note of companies like Edmit, which is doing its part to offer rational economic analysis, insights and transparency to the millions of American families confronting soaring college costs. In speaking with The FR’s Gregg Schoenberg, Edmit’s CEO and co-founder Nick Ducoff articulated a clear vision for his Boston-based start-up: “Information asymmetry works for colleges and against consumers,” Ducoff explained. “We want to give consumers buyer power in a category where they've historically had none." Now that’s a mission we’re behind 1.5 trillion percent.

Female Founders in Tech takes on insurance.

According to Quesnay’s Jenn Byrne, the percentage of venture-funded companies with female founders plateaued in the five years leading up to 2017. Getting that percentage moving north again is the objective behind the Female Founders in Tech program. The initiative’s upcoming insurance competition will be powered by Quesnay and hosted by InsureTech Connect at its 2018 event. The deadline to apply is approaching quickly, so if you’re interested in competing, act now.

OPINION

Amazon’s path to disrupting asset management is murky.

Inigo Fraser-Jenkins isn’t a standard sell-side analyst. The AllianceBernstein provocateur, who once warned that passive investing is worse than Marxism, has our respect (although nothing is worse than Marxism). But we’re not down with his view that Amazon is primed to disrupt retail asset management. Yes, Amazon has lots of customers and leverageable data, and an ability to use its scale to compress margins and foster distribution. We also understand Alibaba’s Ant Financial has scored a hit with its Yu’e Bao money market fund. But when it comes to its consumer-facing businesses, Amazon is relentlessly good at delighting customers by bringing much-needed efficiency and simplicity to the table (which is why Amazon’s pharmaceuticals and grocery forays make sense to us). The vagaries of the financial markets, though, are not controllable — even for Amazon. Moreover, there are several big asset managers who are already pummeling legacy players calcified in 1985. Indeed, ETF leaders like Vanguard, Blackrock and State Street are hoovering up retail flows thanks to their margin-eating passive and smart beta products. Plus, Amazon would also have to face brokerage behemoths like Fidelity and Schwab, roboadvisors like Betterment and Wealthfront, and zero-commission Millennial darlings like Robinhood. Could Amazon carve out a niche via Prime or another channel? Of course. But would it be able to run the table against that peer group? We’re not so sure.

Coinbase opens a PAC.

Last Friday night (after we put our 139th issue to bed), news hit that Coinbase established a political action committee. The actual filing is full of 0s, but its significance is clear: the biggest brand in crypto isn’t going to remain outside of the mainstream political system while US influencers give crypto the full piñata and the SEC takes a hard line. For a long time, we’ve been wondering when the crypto world would engage with politicians in the only language they understand: money. And while we expect that Coinbase’s PAC will transact in USD, we’re looking forward to seeing how crypto interacts with the swampiest part of the Potomac swamp (i.e., our campaign finance system). Dark-moneyed 501(c)(4)s funded in crypto? Token-based blockchain voting to bring accountability to our political process? Good or bad, we think it’s all coming down the pike, and we’re glad that Coinbase is dealing in.

TROVE

The Spanish Gardener should be you: We know several financial pros who will be spending their August vacations contemplating their futures. Some are almost ready to join or build a start-up, but are looking for that final push or insight. Here’s our suggestion to them: head to the corner of Degraw and Columbia Streets in Red Hook. Once there, you'll be greeted by Elliott Arkin’s huge sculpture of Pablo Picasso mowing his lawn. If Picasso were around today, says Arkin, he’d have to mow lawns for a living given the changes in the art market. Similarly, in today’s changing financial services market, no matter how accomplished you were at your bank, fund or insurer, you need to be ready to start over in entrepreneurial finance. That means checking your ego at the lawn, rolling up your sleeves and getting dirty.

Is Jamie Dimon doing a cameo in Fight Club 2?: We liked a recent CNN exclusive with Jamie Dimon, in which America’s greatest banker opined on everything from a negative income tax to a pro-immigration agenda. Dimon also discussed how he responded to his daughter, who protested his ongoing dialogue with President Trump. But what’s up with the abandoned factory floor setting for the interview?

Bringing old homes back to life is a good thing.

Sponsored by Groundfloor

It may sound like a cliché, but housing represents a huge part of our nation’s economy. It’s also one the biggest, if not the biggest driver of U.S. wealth creation. But unfortunately, building a new home from scratch isn’t cheap. In fact, over the last several years, the cost of construction materials and labor has risen far faster than inflation and, in many cases, home prices. That’s why Groundfloor is proud to be working with entrepreneurs who are reviving our country’s existing housing stock and the investors backing them. In many US markets, bringing old homes back to life takes less capital and less time than breaking ground on a new home. Is renovation hard? Of course. But the folks at Groundfloor are doing their part to simplify the real estate financing process and make it more accessible to regular Americans. But don’t take our word for it. Check out Groundfloor’s website and discover how it’s helping turn the old into the new.

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Coindesk’s state of blockchain: Need to fatten up your cerebrum this summer with crypto-related information? If so, we’d recommend that you check out Coindesk’s mega slide deck that covers just about every pertinent trend you can imagine.

Paul McCartney is in no danger from AI: AI may be poised to surpass human capabilities across many financially-related applications. However, it’s not yet ready to carry the weight of writing a catchy tune that can also make you think. That’s our conclusion upon hearing DeepMind’s latest attempt, which is no Abbey Road.

QUOTE OF THE WEEK

“There's nothing more dangerous than a resourceful idiot.”

~ Scott Adams