Even decacorns have their challenges • Fintech

Brex, a corporate spend management startup, announced last week that it was cutting 11% of its workforce. That’s a total of 136 people. Adam Swiecicki, the startup’s chief financial officer, has resigned to become Rippling’s CFO. Rippling, a workforce platform unicorn, recently entered the corporate management sector, making it a direct rival to Brex.

First, it is rare and refreshing for companies to actually share information about layoffs. It’s also unusual and refreshing. So it was interesting that Brex let me firsthand know what its plans were. Alex Wilhelm, a Friday Equity podcast host, pointed out that the reason for the layoffs appears to be due to Brex’s decision earlier in the year to stop working with SMBs or nonprofessionally-funded startups. The company stated that it only let go people who were primarily focused on this group. It must be a pain for these employees, especially since those who it doesn’t work with are the ones that Brex used to serve as its bread and butter.

Brex’s layoffs are a bigger picture. It shows that even decacorns are not immune to the downturn. This year, the company confirmed a $300 million Series D extension with a staggering valuation of $12.3 billion. The company claims it is “in a strong financial situation with many years’ runway,” but the company also says that the shift from SMBs to more enterprise customers (and, by default any associated layoffs) will place the company on a “path to sustainable profitability over these next few years.”

Side note: Leaving aside Brex, it is still amazing to me as a journalist that companies can raise hundreds of million of dollars in funding but not be profitable. I doubt that I would ever become a founder of a venture-backed startup. I would be unable to sleep well at night due to the pressure to make returns to investors who invested that much money in my company. That’s why I am a journalist, not a founder of a startup!

Speaking of Disrupt and Brex…you can find the interview of co-founder and coCEO Henrique dubugras, and Anu Hariharan (managing director of YC Continuity’s growth fund), live in a Fireside Chat, October 19. In a session entitled “How to Compete Without Losing Your Mind or Runway When Money Is Expensive”, Eric Glyman, Ramp CEO and cofounder, and Thejo Kote founder and CEO of Airbase, Ruth Foxe Blader, Anthemis partner, will also be speaking to me. Last but not least, Parker Conrad, Rippling CEO and cofounder will be talking to me about his company’s plans for “going global.” The event is organized by TechCrunch, you can find it easily on their mainpage.

Oh, and if I talk about anything from “The Good and Ugly Sides of Fintech”, What Great Journalism Really Means, & why Startups Represent Hope,” you can listen to this episode of Fintech Leaders podcast that I recorded with VC Miguel Armaza.

Real estate investing startups are a hot topic for VC funding

Image Credits: Daryl John De Guzman / Pexels

Recently, we’ve seen a lot more interest in proptech and real estate. There have been many startups that raised rounds to fund real estate investing apps. These apps aim to broaden investor access by giving investors tools that can bypass costly upfront capital requirements.

Fintor is an example. A $6.2 million round of funding was closed by startup at an $80million valuation. The platform offers fractionalized shares to investors in residential properties for as low as $5. Similar platforms have been covered by us, including Landa and Nada. All of these platforms raised new funding in 2022.

Retail investors are showing increasing interest in real estate, despite the fact that real estate is less appealing than ever because of rising interest rates. These startups may be more concerned with long-term secular demand growth for real property as part of a diversified portfolio than worrying about short-term volatility.

Below is what Farshad Yousefi, Fintor’s founder and CEO, had to say about the current market conditions in an email.

Although recent media attention has mainly focused on market volatility, there are still opportunities for investors to invest in real estate with the right strategic approach. Atlanta, for example, has experienced a remarkable 12% increase in rental rates year-over-year, which directly boosts investors’ cash flow. Major institutional investors have also seen an almost 50% increase in renewal rent growth when they look at all the MSAs. This dramatic upward trend in tenant retention is a clear indication of where rental demand goes.

For a deeper dive into real estate tech and how it’s changing the investing landscape, check out my article in TC+ this week:

Weekly News

Plaid last week announced that it has added two new features in its identity verification software. Alain Meier, Plaid’s head for identity and fraud, and former CEO of Cognito, told me via email: “With our autofill feature, users are verified in as little 10 seconds. To stay ahead of fraudsters, we are adding more intelligence to our fraud and risk models.

This is the behavioral analytics part that I find particularly fascinating. If you know your SSN/phone number well, your typing behavior will be quite different from if you had to copy it from a document. Plaid admits that this technology isn’t new, but says it’s not often combined with other fraud detection tools.

Going after Square? TechRadar from TechCrunch reports “After its acquisition of now Zettle, PayPal announced a new POS device. It’s specifically designed to meet the needs of small and medium-sized businesses. Zettle Terminal is a Wi-Fi-enabled terminal that connects to the internet using a preloaded SIM card (on both 3G and 4G networks) to allow business owners to work from anywhere. Multi-location vendors will love this “completely mobile” approach, which doesn’t require any additional setup or manual connection at each new location.

Christine Hall reported that Greenlight Financial Technology is a venture-backed fintech firm focused on providing a bank app, debit card and financial education for children. It added safety features to its subscription plan. Greenlight Infinity is $14.98 per month and includes location sharing so that everyone can see where they are and do check ins. It also provides SOS alerts to 911 and emergency contacts with one tap.

Alex Wilhelm , TC+ editor, dug into some Q3 funding numbers and discovered that the fintech sector was not as well-known. He wrote: “Looking at the Q3 2022 data of CB Insights it’s evident that the fintech financing boom is over. Even more, global fintech fundraising activity is now back where it was before 2020, which indicates that last year was more anomaly than new normal for startups.”

Sarah Perez reports that Apple is making a significant step towards offering more banking services to customers. On Oct. 13, Apple announced that it was partnering with Goldman Sachs in order to launch a Savings account feature which will allow cardholders of its Apple Card credit cards to grow and save their Daily cash, the cashback rewards earned through Apple Card purchases. Apple claims that cardholders will soon be able to save the cash in a high-yield Savings account, which partner Goldman Sachs makes available with Apple Wallet. Customers will also be able transfer their money to this account.

According to the Los Angeles Times, “credit cards and digital payments apps like PayPal have some distinct advantages over cash. These include the ability to recover money that was paid to fraudsters.” Zelle is a digital payment network that seven banks own. However, it doesn’t protect its users as well. You have a very slim chance of getting your money back from Zelle if you pay someone using Zelle. You can also send money to the wrong person. You can send money to the wrong person by hitting Send. Hmm.