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9 big things: Fintech unicorns find pandemic funding

A wave of new fundings for high-profile fintech startups joins huge PE funds, huge VC funds and a growing list of layoffs in our recap of the week.

For decades now, technology has been transforming how people manage and spend their money. Whether it’s online banking or online shopping, cross-border payments or high-frequency trading, the financial world was already in the midst of a slow-motion revolution.

Then the coronavirus arrived. In a new reality where nearly every aspect of life has shifted from the analog to the digital, that fintech revolution could be accelerating.

Some of the biggest startups in fintech are chasing down new funding, and one of the biggest firms in VC is leading the charge. That combination is one of nine things you need to know from the past week:

(CSA Images/Getty Images)

1. Money moves

The most notable funding was at Stripe, which said it raised $600 million at a $36 billion valuation, just the latest example of payments processing startups loading up on VC dollars.

The round is an extension of a $250 million Series G that Stripe raised in September at a $35 billion pre-money valuation, so while the figures are massive, the shift in valuation isn’t. But perhaps that should be taken with a grain of salt: Considering widespread expectations that VC valuations are in line for a decline in the coming months, a whole lot of unicorns might be just fine with hauling in a few hundred million in what’s essentially a flat round.

Stripe’s services are central to many companies that are increasingly relevant during a time of social distancing, including names like Instacart, DoorDash, Slack, DocuSign and Blue Apron. That’s probably one reason big-name investors such as Andreessen Horowitz, General Catalyst and Sequoia were willing to write big checks for the second time in less than a year.

Sequoia may also soon provide new funding to a different fintech unicorn. The firm is in talks with Robinhood to lead a $250 million round at a pre-money valuation of around $8 billion, according to Bloomberg. The provider of online stock brokerage services was valued at $7.6 billion with a VC round last fall, according to PitchBook data. So once again, the new capital wouldn’t represent a huge valuation leap. But in this environment, raising funds at just about any figure might count as a victory.

Early last month, as the stock market began to plummet, Robinhood experienced multiple high-profile platform outages, prompting outrage from users and skepticism about its scalability. But hidden within the bad news was a kernel of optimism: The company attributed the issues in part to record numbers of new accounts. In some ways, at least, it seems like the current market turmoil could be good for Robinhood’s business—if it can keep up with the traffic.

The wave of fintech fundings this week reached all the way to Australia, where Airwallex raised $160 million in Series D funding at a reported $1.8 billion valuation to continue building its cross-border payments platform. And once again, Sequoia is an investor, this time via its Sequoia China arm.

The firm and Airwallex’s other investors are backing a business built on the idea that the fintech revolution will be total. “The global shift to digital is imminent,” CEO Jack Zhang said in a written statement. “We envision a world in the not-too-distant future where all businesses will operate and conduct their affairs online.”

It isn’t only new VC deals: Other fintech startups have been garnering hefty price tags in recent months on the M&A market. Visa agreed to buy Plaid for $5.3 billion. Intuit is planning a $7.1 billion purchase of Credit Karma. And last week, SoFi lined up a $1.2 billion acquisition of Galileo Financial Technologies.

Each of the past two years, the fintech industry set a new annual record for cumulative global investment across VC, PE and M&A, according to PitchBook data. Even in the face of a global disaster, it could be in line for another new record in 2020.

2. SoftBank-backed layoffs

Lost jobs continue to mount across the startup sector, and companies funded by SoftBank continue to be among those hit the hardest. Home-buying startup Opendoor laid off a reported 600 workers this week, representing about 35% of its staff, a little more than a year after attaining a $3.8 billion valuation. Zume, a unicorn originally known for developing pizza-making robots, reportedly conducted 200 layoffs, its second major round of cuts this year. And TechCrunch reported that View, a SoftBank-funded maker of dynamic glass, has parted ways with an unspecified number of workers.

3. PE-backed bankruptcies

Tough times in the energy and retail sectors are creating major financial woes for some PE portfolio companies. Power-plant operator Longview Power, which is backed by KKR, filed for Chapter 11 bankruptcy protection this week, with plans to use a small-business loan from the recent government stimulus package to meet payroll, according to The Wall Street Journal. True Religion Apparel, which has received backing from TowerBrook Capital Partners, also reportedly filed for Chapter 11 protection, in this case for the second time in four years.

4. Big healthcare bucks

Blackstone made an unorthodox bet on biotech this week, agreeing to invest $2 billion in debt and equity in publicly traded Alnylam. The deal calls for Blackstone to receive 10% of all future royalties from a new treatment for high cholesterol called inclisiran. Elsewhere, PE Hub reported that TPG Capital agreed to invest in LifeStance Health Partners, a provider of outpatient behavioral health service based near Seattle, at a $1.2 billion valuation.

The coronavirus crisis is causing increased investor interest in healthcare. (Marco Di Lauro/Getty Images News)

5. Full steam ahead

Fantasy sports specialist DraftKings revealed this week that it plans to go forward with a $3.3 billion reverse merger that was announced in December, even though there are no sports going on for its users to follow. The energy industry is also in turmoil, but Blackstone seems set to complete its planned $6.3 billion acquisition of Tallgrass Energy after the pipeline operator’s shareholders approved the deal this week.

6. Huge buyout funds

A fundraising drought is expected to materialize soon. But it hasn’t arrived yet. Clearlake Capital closed its latest fund this week on more than $7 billion. Francisco Partners registered its newest flagship effort with the SEC, indicating a $6.6 billion target. Clayton, Dubilier & Rice has so far raised $6 billion for an in-progress vehicle, according to PE Hub. And General Atlantic is reportedly planning a new $5 billion fund along with longtime credit investor Tripp Smith.

7. Huge venture funds

Top-tier firms are also still raising funds in VC. Lightspeed closed three massive funds by itself, collecting a total of $4.2 billion across separate early-stage, growth and opportunities vehicles. Andreessen Horowitz, meanwhile, is seeking $450 million for its second cryptocurrency fund, the Financial Times reported this week.

8. Rack ‘em up

With a couple exceptions, IPOs have vanished entirely during the coronavirus crisis. An enormous offering could soon be in the offing, though, as Reuters reported this week that Rackspace has filed for a stock-market debut that could value the cloud services company at some $10 billion. At that level, it could be a very profitable exit for Apollo Global Management, which has owned Rackspace since taking the company private for $4.3 billion in 2016.

9. Experimental beer

Searching for optimism in these trying times? Look no further than Province Brands, a startup that raised $1.6 million in venture funding this week to support a truly groundbreaking technology: It “has developed a way to make beer from any plant material,” according to TechCrunch, an idea that originated from the company’s earlier efforts to brew beer using cannabis. Who needs barley when you have bamboo and bananas?

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    Written by Kevin Dowd

    Kevin Dowd wrote The Weekend Pitch newsletter for PitchBook, covering startups, buyouts and the rest of the private market.

    A native of the Pacific Northwest, he’s an alumnus of the University of Washington with a degree in creative writing and journalism. He enjoys books and basketball and, most especially, books about basketball. He feels uncomfortable writing about himself in the third person.

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