Silicon Valley Bank’s crash is providing valuable lessons all over the world

Welcome to The Interchange! If you acquired this in your inbox, thanks for signing up and your vote of confidence. If you’re studying this as a submit on our website, join right here so you’ll be able to obtain it straight in the future. Mary Ann is on a a lot deserved break this week, so I’m filling in for her, bringing you the hottest fintech information of the earlier week. Now let’s dive into the fintech information since you are most likely questioning what’s up along with your favourite financial institution, and I promise to get to that first. Let’s go! — Christine

We’ve realized much more about the Silicon Valley Bank collapse since the final time you learn this text (heaps and plenty).

The newest being that SVB Financial filed for Chapter 11. And First Republic Bank, which was ensnared in all this mess earlier this week, discovered some saviors in the means of a few of the nation’s largest banks that reportedly got here collectively to bolster the financial institution with round $30 billion in rescue deposits.

This week, a few of my colleagues took a deep dive into the results on customers, companies, banks, buyers, and so forth — all over the world — who had made deposits with SVB. If something, it exhibits simply how related the startup ecosystem actually is.

Annie Njanja and Tage Kene-Okafor acquired the scoop on African corporations affected by the SVB collapse. For instance, they spoke to Nala, a cellular cash switch startup, which was in a position to pull its funds out of SVB earlier than it collapsed. In distinction, Chipper Cash was amongst a number of startups that might not entry a portion of their funds at the time.

They famous how prolific SVB was in the startup ecosystem when it got here to corporations opening SVB financial institution accounts, particularly those that have been a part of a U.S. accelerator program, even explaining how troublesome that course of was when potential account holders didn’t have a Social Security quantity or established U.S. deal with. They additionally wrote that this sort of incident, together with current high-risk banking choices, “have reinforced the need to build homegrown solutions” in Africa.

“If you want U.S.-based banking, which does instill credibility (still) with investors, those are your options,” mentioned Stephen Deng, co-founder and common associate at Africa-focused early-stage VC agency DFS Lab. “I think what changes is that founders must know how they manage counterparty risk. Sweep networks, and treasury management, are all top of mind.”

Meanwhile, Brian Heater reached out to founders and buyers in the robotics sector, sometimes a capital-intensive trade, about what the fallout might imply for them when it comes to entry to future capital and persevering with to diversify sources of funding.

An fascinating remark got here from Peter Barrett at Playground Global, who mentioned, “If SVB rises from the ashes — and we act to mitigate the weaponization of concentrated digital media — money may not become impossibly expensive for capital intensive technologies like robotics. On the other hand, now that we have motor memory for bank runs, things could get messy. How best would an adversary attack innovation in robotics? We saw how destructive a handful of influential tweets and emails could be in unwinding a valued and respected 40-year-old institution. Why bother with a cyberattack when a few well-placed uppercased words from apparently reputable sources can wound thousands of our most innovative companies?”

Indeed. As you’ll be able to think about, all of this is persevering with to develop, so keep tuned for extra.

Moving on, we’re always advised to diversify our holdings in the monetary world — have cash in a variety of totally different mutual funds or have some cash in checking and different cash in financial savings. Over in TechCrunch+, all of this SVB enterprise acquired Natasha Mascarenhas fascinated by how to do that.

She spoke with some founders and buyers about the idea of “single points of failure.” Specifically, the place else a enterprise can diversify — for instance, founding group and succession plans — to ensure it doesn’t have its eggs all in a single basket.

Before I get into extra information, I needed to say that whereas individuals have been pulling cash out of SVB, there are some nonetheless supporting the financial institution. For instance, Brex introduced that it was depositing $200 million of its cash into SVB — pulling it from different large banks to take action. CNN additionally reported on others.

Weekly News

Some corporations that present banking providers to startups stepped up following the Silicon Valley Bank collapse to supply their providers and assist corporations preserve money move. Mary Ann reported on a couple of corporations, like Rho, that noticed a surge in new prospects, together with Mercury, which moved rapidly over the weekend to launch a brand new product referred to as Mercury Vault. This product “offers customers expanded FDIC insurance of up to $3 million via a new product in the wake of Silicon Valley Bank’s collapse. That’s 12x the industry standard for institutions of $250,000 in FDIC insurance that other institutions offer.” Then Friday, the firm upped that, saying on Twitter that “by Monday, Mercury customers will have access to up to $5M in FDIC Insurance — 20x the per bank limit.”

Stripe was fairly energetic this week. I up to date an earlier story Mary Ann labored on about Stripe going after extra funding. At the time, it was anticipated it might herald about $2 billion, however as an alternative, Stripe ended up with $6.5 billion however at a lowered valuation of $50 billion. The Series I proceeds will go to “provide liquidity to current and former employees and address employee withholding tax obligations related to equity awards, resulting in the retirement of Stripe shares that will offset the issuance of new shares to Series I investors.” Also, Stripe was chosen to work with OpenAI to monetize ChatGPT and DALL-E.

Reports Manish Singh: “PhonePe has raised another $200 million as part of an ongoing round, a move that has now helped it pull $650 million in recent weeks despite the market slump as the Indian fintech giant bulks up its war chest following its recent separation from parent firm Flipkart. Walmart, which owns the majority of PhonePe, has invested $200 million into the startup. The ongoing round values the Bengaluru-headquartered company at $12 billion pre-money. The startup has said that it plans to raise up to $1 billion as part of the ongoing round.”

Reports Natasha Mascarenhas: “Founders are still shaking off the dust a week after Silicon Valley Bank’s collapse. Rumors are swirling about who might be looking to buy the beleaguered bank’s assets. Some of the top firms urged their portfolio managers to diversify their assets as the bank was collapsing, and are continuing to do so, even though regulators have stepped in to guarantee that all depositors would get access to their stored cash. While diversifying assets feels obvious in retrospect, actually following that bit of advice is harder than it seems.”

According to Sift’s Q1 2023 Digital Trust & Safety Index, purchase now, pay later (BNPL) corporations noticed cost fraud improve by a whopping 211% in 2022 over 2021. The report checked out over 34,000 websites and apps and highlighted some particular scams that fraudsters are utilizing to steal from BPNL corporations and retailers. For instance, Telegram is one platform the place Sift mentioned “rapid proliferation of scammers advertise the services they could provide with stolen information,” together with faux bank cards and sale of compromised e-mail credentials. In one scheme, Sift noticed a fraudster posting “unlimited access” to an account on three of the high BNPL suppliers for simply $35.

Adyen, providing end-to-end cost capabilities, mentioned it additional superior its digital authentication answer, combining safety and seamless checkout experiences for it prospects. In testing, Adyen was in a position to authenticate the client on behalf of the issuer, whereas they remained on the service provider checkout web page, serving to retailers get a conversion uplift of as much as 7%.

Funding and M&A

Seen on TechCrunch

Wingspan raises $14M for its all-in-one payroll platform for contractors

Here’s a brand new company card startup, backed by $157M in fairness, debt, going after Brex, Ramp

Metaverse cost platform Tilia will get strategic funding from J.P. Morgan

Indonesia’s Broom builds out automated asset-backed lending for used automotive sellers

Nigerian credit-led fintech FairMoney acquires PayForce in retail-merchant banking play

And elsewhere

Masttro secures $43 million development fairness funding led by FTV Capital

Cover Genius, an insurtech for embedded safety, acquires Clyde

Greek fintech Natech grabs €10M in convertible bond to develop

Payments infrastructure startup Payabli closes $12M

Apexx Global, a funds orchestration startup, raised $25M

Chile-based recurring funds firm Toku raises $7.15M

That’s it for now. I hope you loved my takeover of Mary Ann’s column. Don’t fear, she can be again for the March 26 version! Have a terrific week, Christine