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Blueprint: Home equity fintech Point raises $115MM , Otherside NFTs burned $160MM in ETH; Insurtech Alan valued at $2.7B
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INVESTING: Home equity fintech platform Point raises $115 million (link here), compared to Figure
INSURTECH: Alan raises €183 million (link here), compared to publich insurtech
LONG TAKE: 3 DeFintech life-style businesses to launch in a challenging market (link here)
PODCAST: Building a $200MM DeFi asset manager and DAO treasury management tools, with Mona El Isa of Enzyme (link here)
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INVESTING: Point raises $115 million (link here)
Home equity fintech platform Point has raised $115MM in Series C funding, led by WestCap and joined by existing investors a16z, Ribbit Capital, Redwood Trust, Atalya Capital Management, and DAG Ventures. Prudential financial led their Series B, which totalled $22MM in 2019. We are very interested in fintech companies taking on the real estate asset class, and the financing around it, given this is a traditional bread and butter of consumer banks.
Point allows its customers to gain access up to $500K in home equity financing; home owners collateralize the loan with a fractional share of the future value of their property. Funding volume in Q1 2022 is up more than 5x year-on-year, which also brought with it $1B in new capital commitments from real estate and mortgage-backed securities investors. Everyone wants yield.
This of course remind us of Figure (see our conversation with Mike Cagney here). Mike built SoFi targeted at student lending, as a point distributor. Figure was built around HELOCs, as a test case for its Provenance blockchain.
Since then, Provenance has generated quite a bit of interesting institutional adoption, from stablecoins to alternative finance to bank involvement. What was particularly notable as a takeaway was that distribution of HELOCs was seen as a sure thing, i.e., the easy part. You automate a human process into a digital process, and then place Web2 customer acquisition engines on top, since demand is *always* there. From that perspective, more entrants into the space, like Point, is a bullish development to drive prices down. The real product here, of course, is not just for consumers but for those providing the balance sheet.
NFTs: Otherside NFT Mint Burned More Than $157M in Ethereum (link here) and Bored Ape Creators Slammed for 'Nightmare' Ethereum NFT Land Drop, 'Tone Deaf' Response (link here)
The Yuga Labs (creators of the Bored Ape Yacht Club, our Long Take here) sale of Otherdeed NFTs, required to buy plots of land in the upcoming metaverse project Otherside, came with severe gas fees. There are lots of unhappy users. But, the “good news” is that gas wars lead to the destruction of ETH supply — in this case about 56,000 ETH or $160MM being removed from the market. The event lead to all-time burn highs across OpenSea, a Uniswap V3 Router, and MetaMask, with one user reportedly paying over $14,000 in Ethereum gas to mint just two of the NFTs.
This led Ethereum to have its first deflationary month in its history; issuance for May is currently at negative 53K ETH. Unfortunately, crypto prices have been driven far more by global macro concerns (growth down, inflation up, Fed tightens) than the fundamentals of the Ethereum protocol so far.
Separately, this also flags questions around the minting mechanisms that Yuga used, pricing out many investors on gas alone and reinforcing the reality that NFTs are a luxury good of a speculative nature. Notably, in the rush to YOLO into the sale, investors bought $APE currency and spent money on permissions.
The smart contract code has been called into question given it had minimal optimisations for gas, though there is debate on how much could be done. While Yuga Labs are refunding gas fees wasted on failed transactions, this still highlights (1) the fragility of the crypto ecosystem when it comes to widespread demand and (2) the importance of careful smart contract engineering to ensure a launch that appears fair to buyers.
A contrarian take would be to say that demand simply outstripped supply, and caveat emptor. While that may be fine, there are now so many tools — like using Polygon or another scaling solution — to mitigate bad user experiences, that not to do so feels opportunistic and should rightly draw the attention of regulators focused on consumer protections.
INSURTECH: Alan raises €183 million (link here)
Alan, a French health insurance startup, has raised €183MM at a €2.7B valuation in their Series E round. The platform has over 300K members and an ARR of €200MM - equating to a 14x multiple on revenue. Compared to other fintech valuations (10-50x ARR), this is a fairly reasonable one at the moment. That said, here’s a chart of how Insurtech is doing in the public markets. Reminder that “Revenue” and “Insurance Premia” are really, really, really super different concepts.
Earlier this year, the insurtech launched ‘Alan-as-a-service’, providing products that health insurers can integrate into their offerings, under their own branding. We see this akin to the B2C —> B2B2C pivot seen in roboadvice, digital lending, and neobanks.
It’s possible to build a reasonable business without completely replacing traditional models. There is value in providing the underlying technology — and in particular, a digital distribution chassis — for others. This way you can focus on developing integrated automated solutions, rather than cracking into consumer markets.
However, there is a natural limit for capturing market share, and such firms tend to stall out in the $5-10B range when public. The exception seems to be if you build API-first, such that you bypass traditional channels and integrate into Internet-native brand and commercial footprints instead.
Long Take: 3 DeFintech life-style businesses to launch in a challenging market (link here)
We review the challenges of the current market context — from stagflation, to the funding and exit environments.
Then we suggest three business ideas that could be pursued without aiming for creating a venture-backed business: (1) Metaverse real estate broker, (2) Fiat/Crypto balance sheet lender, (3) Multichain interoperability systems integrator. These ideas take advantage of the trends and the art of the possible, without requiring a long term lockup and fund-raise to get started.
Podcast Conversation: Building a $200MM DeFi asset manager and DAO treasury management tools, with Mona El Isa of Enzyme (link here)
In this conversation, we chat with Mona El Isa, the co-founder of Enzyme, one of the industry’s leading decentralised asset management protocols, and founder and CEO at Avantgarde Finance. She is also President of MAMA (Multichain Asset Managers Association), and was nominated Technology Pioneer by the World Economic Forum and Digital Shaper in Bilanz magazine.
More specifically, we touch on the magnificent and harrowing journey from institutional finance during the financial crisis, to family office portfolio management, to multiple attempts at Web3 and DeFi. Mona has been through some incredible successes, as well as, harsh failures. Give this one a listen!
Rest of the Best
Here are the rest of the updates hitting our radar.
CONSUMER: Truist acquires Long Game
INSURTECH: Getlife raises €6 million
INSURTECH: Turtlemint raises $120 million
NEOBANK: Neo Financial raises $145 million
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