The Silicon Valley Bank Crash Teaches Valuable Lessons Around the World

welcome to The exchanger! If you received it in your inbox, thank you for subscribing and for your vote of confidence. If you read this as a post on our site, subscribe here so that you can receive it directly in the future. Mary Ann is on a well-deserved break this week, so I’m replacing it by bringing you the hottest fintech news from the week before. Now let’s dive into fintech news, because you’re probably wondering what’s going on with your favorite bank, and I promise to get there first. Let’s go! — Christina

We’ve learned a lot more about the Silicon Valley Bank collapse since you last read this newsletter (a lot, a lot).

The latest being that SVB Financial has filed for Chapter 11. And First Republic Bank, which got caught up in the whole mess earlier this week, has found saviors in the way of some of the biggest banks. of the country that would have come together to bolster the bank with about $30 billion in bailout deposits.

This week some of my colleagues have taken a deep dive into the effects on consumers, businesses, banks, investors, etc. – anywhere in the world – who had made deposits with SVB. On the contrary, it shows how connected the startup ecosystem really is.

Annie Njanja and Tage Kene-Okafor got the inside scoop on African businesses affected by the SVB collapse. For example, they spoke to Nala, a mobile money transfer start-up, which was able to withdraw its funds from SVB before it collapsed. In contrast, Chipper Cash was among several startups that couldn’t access some of their funds at the time.

They noted how prolific SVB was in the startup ecosystem when it came to companies opening SVB bank accounts, especially those that were part of a US accelerator program, even explaining how that process was. difficult when potential account holders did not have a social security number. or address established in the United States. They also wrote that this type of incident, along with existing high-risk banking options, “reinforced the need to create local solutions” in Africa.

“If you want a U.S.-based bank that (still) instills credibility with investors, these are your options,” said Stephen Deng, co-founder and general partner of the phased venture capital firm. startup DFS Lab, focused on Africa. “I think what changes is that founders need to know how they manage counterparty risk. Sweep networks and cash management are at the core of our concerns.”

Meanwhile, Brian Heater reached out to founders and investors in the robotics sector, typically a capital-intensive industry, about what the fallout could mean for them in terms of accessing future capital and furthering the diversification of funding sources.

An interesting comment came from Peter Barrett of Playground Global, who said: “If SVB rises from the ashes – and we act to mitigate the militarization of concentrated digital media – the money may not get incredibly expensive for tech capital-intensive like robotics. On the other hand, now that we have motor memory for bank runs, things could get messy. How would an adversary best attack innovation in robotics? We’ve seen how destructive a handful of influential tweets and emails can be in unraveling an esteemed and respected institution for 40 years. Why bother with a cyberattack when a few well-placed capitalized words from seemingly reputable sources can hurt thousands of our most innovative companies? »

In effect. As you can imagine, this all continues to develop, so stay tuned for more.

Then we are constantly told to diversify our holdings in the financial world – have money in a number of different mutual funds or have money in checks and some pennies in savings. In TechCrunch+, all this SVB stuff got Natasha Mascarenhas thinking about how to proceed.

She spoke with some founders and investors about the concept of “single points of failure.” Specifically, where a company can diversify – for example, founding team and succession plans – to ensure it doesn’t have all its eggs in one basket.

Before going into other news, I wanted to mention that even though people have withdrawn money from SVB, some still support the bank. For example, Brex announced that it was depositing $200 million of its money in SVB, pulling it out of other big banks to do so. CNN also reported on others.

Weekly News

Some companies that provide banking services to startups have stepped up after the collapse of Silicon Valley Bank to offer their services and help businesses maintain cash flow. Mary Ann reported on a few companies, like Rhowhich has seen an increase in new customers, including Mercury, which moved quickly over the weekend to launch a new product called Mercury Vault. This product “offers customers expanded FDIC insurance of up to $3 million through a new product in the wake of the Silicon Valley Bank collapse. That’s 12 times the industry standard for institutions of $250,000 in FDIC insurance that other institutions offer. Then on Friday the company increased that, announcement on Twitter that “by Monday, Mercury customers will have access to up to $5 million in FDIC insurance – 20 times the limit per bank.”

Strip has been quite active this week. I updated a previous story that Mary Ann worked on about Stripe seeking additional funding. At the time, it was expected to make around $2 billion, but instead Stripe ended up with $6.5 billion, albeit with a reduced valuation of $50 billion. . Proceeds from Series I will be used to “provide cash to current and former employees and meet employee tax withholding obligations related to share awards, resulting in the withdrawal of Stripe shares which will offset the issuance of new shares. to Series I investors”. Additionally, Stripe was chosen to work with OpenAI to monetize ChatGPT and DALL-E.

Reports Manish Singh: “PhonePe raised another $200m in an ongoing round, a move that has now helped it pull out $650m in recent weeks despite the market crashing as the Indian fintech giant swells its war chest after its recent split from parent company Flipkart. walmart, which owns the majority of PhonePe, has invested $200 million in the startup. The current round values ​​the Bengaluru-based company at $12 billion before silver. The startup said it plans to raise up to $1 billion in the current round.

Reports Natasha Mascarenhas: “The founders are still shaking the dust a week after the collapse of Silicon Valley Bank. Rumors are swirling about who may be looking to buy the beleaguered bank’s assets. Some of the biggest companies urged their money managers to diversify their assets as the bank collapsed, and continue to do so, even as regulators stepped in to ensure all depositors would have access to their stored cash. Although asset diversification seems obvious in retrospect, following this advice is harder than it looks.

According SiftThe First Quarter 2023 Buy Now Pay Later (BNPL) Digital Trust and Security Index saw payment fraud increase by 211% in 2022 compared to 2021. The report looked at more than 34,000 sites and apps and highlighted some specific scams that fraudsters are using to steal from BPNL businesses and merchants. For example, Telegram is a platform on which Sift said “the rapid proliferation of scammers advertises services they could provide with stolen information”, including fake credit cards and the sale of email ids. compromise. In one scheme, Sift observed a fraudster posting “unlimited access” to an account on three of BNPL’s top providers for just $35.

Adyen, offering end-to-end payment capabilities, said it has further improved its digital authentication solution, combining security and seamless payment experiences for its customers. In testing, Adyen was able to authenticate the consumer on behalf of the issuer, while they remained on the merchant’s checkout page, helping merchants achieve a conversion boost of up to 7%.

Financing and M&A

Seen on TechCrunch

Wingspan raises $14 million for its all-in-one payroll platform for entrepreneurs

Here’s a new corporate card startup, backed by $157 million in equity, debt, after Brex, Ramp

Metaverse Tilia payment platform secures strategic investment from JP Morgan

Indonesian Broom develops automated asset-backed loans for used car dealerships

Nigerian credit-led fintech FairMoney acquires PayForce in retail banking

And elsewhere

Mastro Secures $43M Growth Capital Investment Led by FTV Capital

Cover Genius, an insurtech for on-board protection, acquires Clyde

Greek fintech Natech obtains 10 million euros in convertible bonds to expand

Payments infrastructure startup Payabli closes $12 million

Apexx Global, a payments orchestration startup, raised $25 million

Chile-based recurring payments company Toku raises $7.15m

That’s all for the moment. I hope you enjoyed my cover of Mary Ann’s column. Don’t worry, she’ll be back for the March 26 edition! Have a good week Christine