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Brex and OpenAI Partner to Revolutionize Financial Operations with AI

Plus: Bessemer Venture Partners Investment Strategy & Why Fintech IPOs May Struggle in 2023

Good morning Rain Makers!

I have to start with this: Raúl Vallejo, head of data for Mexican fintech Bankaya, shares how his regular use of psychedelics has helped him manage stress and become a more empathetic manager.

Now, the question is, who is launching a subscription box for this? Asking for a friend 👀.


🍿 Quick Snack

  • 🤨 Silicon Valley Bank's health is under scrutiny and investors are encouraging startups to consider pulling funds, leading to pressure on its balance of fund flows

  • 🤖 Brex partners with OpenAI to launch AI-powered tools for CFOs and their teams

  • 🇮🇳 Bessemer Venture Partners shares key insights on the future of fintech in India, revealing a glimpse of their investment strategy in the region

  • 📈 Fintech startups may struggle to attract investor attention in 2023 IPO market rebound

  • +2 M&A Transactions

  • +6 Funding Rounds

🍔 The Full Meal

Silicon Valley Bank Is Under Fire

  • Silicon Valley Bank's shares fell sharply after announcing that it is raising $2.25 billion additional capital by selling stock, the company intends to use the proceeds from the offering to extend its term-borrowing capacity, optimize its balance sheet, and strengthen its financial position.

  • There are concerns in the market due to recent banking-related incidents in the tech and tech-adjacent industries. This has led to speculation that all is not well at SVB.

  • SVB noted in its investor presentation that venture capital firms were investing less, and startup clients were still burning cash at a historically elevated level, leading to pressure on its balance of fund flows.

  • Some investors are encouraging startups to consider pulling funds from SVB due to concerns about its health, which could exacerbate the mismatch in deposits and withdrawals, potentially extending the pressure on SVB.

  • Startups are advised to decentralize their assets across multiple banks and keep no more than $250K in SVB checking accounts. This is because $250K is the maximum amount insured by the Federal Deposit Insurance Corporation, providing external protection for those funds.

  • What this means is competitors like Mercury, Arc, and Series Financial may see an influx of migration requests over the coming days.

Brex Teams Up with OpenAI to Revolutionize Financial Operations

  • Brex is partnering with OpenAI and Scale to launch AI-powered tools for CFOs and their teams later this year.

  • The tools will provide custom graphs and AI-powered insights on spend patterns, vendor trends, and more.

  • Finance leaders will be able to compare their business activities to others in similar industries, using data from millions of transactions. This will help companies benchmark performance and spend, all while maintaining and preserving strict privacy.

  • The AI-powered tools will provide also provide real-time insights, and a chat interface with natural language AI-features to answer a wide range of questions such as:

    • "What is our Github spend relative to other companies who experienced similar employee growth?"

    • "Which vendors provide overlapping services and what are the savings opportunities?"

  • Brex has been leveraging machine learning and AI-powered features over the past year, including smart policy controls to restrict spending and autonomous receipts to meet IRS requirements.

“Our goal with these new features is to empower CFOs and their teams to make more informed decisions and ultimately drive growth for their companies.”

-Henrique Dubugras, CEO @ Brex

Insights from Bessemer Venture Partners on Fintech in India

Bessemer Venture Partners (BVP) dropped some serious knowledge bombs this week on their experience in India. Here's a quick rundown of what they had to say concerning their investment strategy:

    • The Future Winners: fintech companies building data, cloud, and software atop legacy financial institutions are best poised for success.

    • Customer Focus: companies building enterprise grid software for large banks, shadow banks, and insurers are preferred over software built for new age fintechs.

    • Pricing Strategy: usage-based pricing is recommended for fintech software investment opportunities, as it allows for revenue scale as customers grow and shows significant net negative churn on revenue.

    BVP follows four tenets to guide its investment decisions in India

    1. Lending is not attractive as a venture-backed business. BVP made money in its early days in India by investing in lending businesses, but later realized this was because Banks and NBFCs (noon-banking financial companies) have an unfair advantage in terms of cost of capital, brand, and distribution, compared to new tech-enabled providers.

    2. Payments have low monetization potential. Due to government-led UPI (unified payment interface) and regulation, interchange rates are nonexistent. To generate revenue from payments, software must provide additional value. One example of this would be a "buy now, pay later" (BNPL) product, which monetizes payments.

    3. Infrastructure-focused ‘pick and shovel’ businesses will be the best bet in the long run. Because large banks, NBFCs, and insurers have an advantage due to the cost of capital and regulations, technology build on top of India’s Financial Stack is what will drive the next stage of growth by enabling a more powerful infrastructure.

    4. Usage-based pricing will be the winner. Fintech products that implement usage-based pricing models will have an advantage in the market. These models allow for more granular and metered units of measure, giving companies more pricing power. Firms that can implement inherent upsell triggers within their products will be best equipped to succeed.

    ⚡️ Related News: Indian fintech unicorn Slice has acquired a 5% stake in The North East Small Finance Bank, a legacy bank in the North-East region of the country, in a move to expand its services and reach. The deal is expected to help Slice establish a strong presence in the banking sector and leverage the bank's existing infrastructure and customer base. (Read More)

    Fintech Startups May Struggle to Attract Investors in U.S. IPO Market Rebound

    • Despite the recent pick up in new listings, fintech startups looking to go public will face challenges attracting investor attention in 2023.

    • Fintech firms may opt out of the race due to concerns about their cash-burn rate, mounting losses, and poor share performance of some of their listed peers.

    • Digital banking pioneers Chime and Stripe are currently seen as the industry's top IPO candidates along with investing app Acorns and buy-now-pay-later firm, Klarna.

    • Fintech apps soared in popularity during the COVID-19 pandemic, as a near-zero interest rate environment helped them offer easy credit to lure consumers who were stuck at home.

    • Companies looking to list will need to shore up investor confidence in their cost-cutting plans and be transparent with their attempts to lower cash burn.

    • Listed fintech companies have failed to largely live up to their shareholders' expectations as they have steadily booked losses. Since they’ve gone public:

      • Affirm has dropped 90% in value (IPO in January 2021)

      • Coinbase has dropped 83% in value (Direct Listing in April 2021)

      • Robinhood has dropped 73% in value (IPO in July 2021) 

    🍟 Extra Fries

    • Carpe Diem. Insurtech Betterview has partnered with Carpe Data to speed up the process of making policy decisions for insurance companies. The collaboration will allow Betterview to use Carpe Data's real-time and predictive data analytics to provide underwriters with more accurate risk assessments. (Read More)

    • Rough times? Stripe is seeking approximately $4 billion from investors, including Thrive Capital, to cover the tax bill triggered by changing the terms of stock awards. The company is facing squeezed profit margins and competition with rivals such as Adyen and Checkout.com. Additionally, card networks such as Visa and Mastercard are raising prices, which is increasing the charges Stripe imposes on its customers. (Read More)

    🖤 M&A Transactions

    • Fifth Third Bancorp has announced its acquisition of Big Data Healthcare, a technology solutions provider for healthcare payments and remittance. The acquisition will add national healthcare revenue cycle capabilities to Fifth Third's digital innovation and focus on the healthcare sector. (Read More)

    • Inflexion has acquired a majority stake in Finnish cash and treasury management software provider Nomentia for an undisclosed sum, with PSG Equity and Verdane exiting. The deal is rumored to be worth €300 million. Nomentia services approximately 1,400 blue-chip customers across 80+ countries and processes over €1.2 trillion of payments annually. (Read more)

    💸 Funding Rounds

    • Mintifi | $110 Series D: supply chain financing platform (link)

    • Fynn | $36m Seed & Debt: safe, fair, and affordable loans for students (link)

    • Candidly | $20.5m Series B: financial wellness platform that addresses student debt, retirement savings, and beyond (link)

    • Monnai | $6.5m Series A: global consumer insight infrastructure for fintech (link)

    • Elyn | $2.7m Pre-Seed: try before you buy & smart returns for e-commerce (link)

    • Ramp | $5m Seed: analytics firm using data science and forecasting to enable finance teams to make strategic business decisions (link)

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