March 2020 in numbers: DeFi & Fintech
We have looked at the March funding numbers in Web3 Funding: March in numbers. Now it's time for a breakdown. Fintech & DeFi are still accounting for over a third of the deals in web3 in March 2020. Although they have been out-funded by Identity by $2m, the category still attracted $41m in total funding. Who was funded?
The most active Fintech/DeFi category is exchanges.
CoinDCX, FTX exchange, Bakkt, Grainchain all raised growth capital with Bakkt attracting a $300m round.
Product: cryptocurrency exchange pooling liquidity from Binance, Huobi and HitBTC
Investors: Polychain, Bain Capital Ventures, BitMEX Ventures
Stage: series A
Total Raised: $3m
Business Model: Exchange offering margin accounts and pooled liquidity
Comparables: WazirX, Coinswitch, Zebpay
Indian Supreme Court has recently lifted the ban on cryptocurrencies
Locals need access to trading in INR
Exchanges like Binance and Huobi get indirect access to the Indian market
Peer to peer transactions in India are available for BTC and ETH via localbtc and localcryptos. Having an exchange trading in native currency removes friction in the market allowing people to hedge their volatile local currency.
Product: financial company enabling institutional, merchant and consumer access to digital assets in a secure, trusted ecosystem backed by Intercontinental Exchange (owner of NYSE)
Location: Atlanta, US
Investors: BCG, Pantera, PayU, M12, CMT Digital Ventures, Goldfinch Partners, Cityblock capital
Stage: series B
Total Raised: $482.5m
Retail - trading, payments, loyalty redemption fees
Institutional markets - derivatives and custody
Merchants - rewards payments connected to POS
Comparables: Boson protocol, Wirex, Xapo, Coinbase
Retail investors need secure way to redeem their in-game assets and loyalty points on-demand
Institutional investors need a liquid derivative market where they can get exposure to the new asset class as well as secure storage and handling without complications of doing it all in house
Merchants need to remove friction in their loyalty programs
Bakkt keeps diversifying their exposure speaking to the difficulties of growing a company in a $200b market. They started off with institutional investors and recently expanded into loyalty and rewards. On-demand liquidity for collectibles and vouchers is a huge opportunity, especially in a distressed world where access to cash is of essence.
Followed by payments, liquidity and banking. Lending, derivatives, wallets, consumer Fintech are trailing with 1 deal each
Product: unifying transactions and regulated data and identity management through their own DLT and secure APIs
Location: London, UK
Investors: Mencey Capital, VCF III, FIS
Stage: series A
Total Raised: 13.9M EUR (including grants)
Business Model: enterprise B2B offering integration for 2 products
1. Document management - secure signing, storage, access control for documents with minimal admin, every action is recorded on chain and linked to digital identity
2. Payments - regulated to encode fiat in the UK and Poland with no single point of failure
Workflows in most large enterprises are complicated, outdated and reliant on bloated teams. Companies need to be quicker with decision making, pivots and new business development. DLT provides the infrastructure for access control and tracing logs without relying on manual admin.
Product: cryptocurrency payment gateway
Location: London, UK
Business Model: charging percentage per successful transaction and no recurring fees
Comparables: Coinbase Commerce, Bitpay, B2Binpay
No chargebacks, POS app, crypto payments are automatically converted into the local currency.
Thoughts: integrating blockchain payments is complex and expensive to build in-house and there is a growing pool of people looking to pay directly instead of overcollateralising digital assets for loans or selling digital assets
ITM closed their seed from MediaTek in mid-March. It is a strategic investment as ITM’s blockchain software development kit (SDK) can be ported on low-level IoT chips and is secured with a fingerprint on blockchain.
Product: technology provider offering software enabling liquidity provision
Location: New York
Investors: Galaxy Digital LP, Social Starts, Blockchain Capital, Robin Hood Ventures
Stage: series A bridge
Total Raised: $23.2m
Business Model: B2B tech provider with OTC access, asset digitization and issuance, full stack exchange software
X factors: exchanges need a reliable and standard plug and play software as in their core they are not tech companies and building in-house will slow their product to market significantly
Thoughts: The exchange business is economically and financially complex, startups should not be spending time, effort and valuable capital to build their own in-house solutions to manage their operations.They should be focused on onboarding new users, liquidity providers and make markets.
Folkvang is a quant trading firm and digital assets liquidity provider with a 24/7 presence on the markets. They received a seed from Alameda research that is one of the most active companies incubating and spinning off liquidity-related companies.
Banking & Lending
ZeFi is part of the W20 cohort in Y combinator. They’re building a banking product offering high yield US-denominated savings accounts by leveraging Compound’s product for lending to low risk borrowers.
Product: automated peer to peer lending with digital assets as collateral
Location: Minneapolis, US
Investors: Nex Cubed, Techstars, Microsoft
Total Raised: $470k
Business Model: peer to peer lending
Comparables: Nexo, Compound
X factors: introducing a savings product that is less complex than staking via staking providers with the opportunity to grow into a full bank linking deposits and loans leading to reduced collateral needs.
Elyps is building a neobank with no deposit requirements, clear pricing and no commissions. They also have a loyalty system with green rewards when buying eco-friendly products. The users are also becoming shareholders when they join. The Belgian challenger raised 1.7m EUR.
DeFi Money Market raised a seed from Draper Goren Holm for a product providing 6.25% yield on digital assets in a world of decreasing yields. The deposited digital assets are used to acquire income producing assets (viewable on-chain) and repay interest.
Product: simple smart wallet for digital assets allowing borrowing, storage, earning interest, in-app investment.
Location: London, UK
Investors: Paradigm, Index Ventures, Firstminute Capital, Creandum, Proxy Ventures, Hummingbird Ventures, KR1
Stage: series A
Total Raised: $16m
X factors: most digital asset-related products are too complicated and non-intuitive to use. Argent features wallet social recovery, connected to Maker, Compound and Apple Pay
Thoughts: the industry has long been battling with user experience and simple bundling applications are a great way to help users navigate the complex world of decentralised finance.
Jassby is a mobile payment app for families, kids and teens. It allows the parents to pay for chores and gifts, automatically transfer allowances. Parents can manage parent-children’s finances without cash, credit, debit cards or checks that are not suited for small frequent payments. Jassby has raised $5m from Plug and Play Mexico, Blumberg Capital, Needham Bank, Moneta VC, Correlation Ventures.
The investors in DeFi & Fintech this month were quite diverse including some prominent Fintech players like Index Ventures and Firstminute Capital alongside trusted Blockchain VCs like Pantera, Polychain and Galaxy.
If you’re building a pre-seed web3 company, I want to hear from you! We, at Outlier Ventures, are on a mission to fund the best founders. With that in mind, we are running the applications for our Base Camp accelerator until 17 April. It is a virtual-first bespoke program with residency in London and Berlin. Find out more here.
I will be releasing a list of startups for the top 3 market categories with some analysis for the deals. Coming up next- Identity.
For data requests, use of graphics or quotes, reach out to ana [at] ana [dot] vc. Allow for slow response as navigating the current messy world takes up most of my time.
Thanks Joel John for the data!