Blueprint: Marqeta buys Power Finance for $275MM; EigenLayer raising $50MM for restaking; Moov paytech raises $45MM

So many payment operations

Hi Fintech Futurists — 

You are the best, today’s agenda below.

1. EMBEDDED FINANCE: Marqeta Completes Acquisition of Power Finance, Inc. (link here)

2. WEB3: Ethereum restaking protocol EigenLayer is raising $50 million (link here)

3. PAYTECH: Announcing Moov’s $45M Series B funding (link here)

4. LONG TAKE: Custodia rejected from Federal Reserve membership, Silvergate & Signature borrow billions to survive (link here)

5. PODCAST CONVERSATION: Software contracts and composability unlocking economic growth, with Agoric CEO Dean Tribble (link here)

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Short Takes

EMBEDDED FINANCE: Marqeta announces plans to acquire Power Finance, Inc. (link here) and Marqeta Completes Acquisition of Power Finance, Inc. (link here)

Marqeta, an API-first card issuer and payment processor, has acquired their first company, Power Finance, in a $275MM all-cash deal expected to close in 2023Q3. Power Finance provides a cloud platform for credit card program management services, helping companies set up credit card programs. Marqeta is a paytech darling, went public in 2021, and at one point was worth $18 billion (15-20x revenue). It is now valued at $3.7B (4x revenue), down due to valuation multiple contraction, post-Covid digital commerce decrease, and the high interest rate enivironment putting pressure on consumer spending.

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Marqeta will enhance their API card issuing platform with credit card program management, giving clients with a broad solution for creating credit cards, their associated programs, and the overall management in one neat package. You can think of Power’s software as being higher up the stack from Marqeta, which is an infrastructure at the core, while Power presents a beautiful dashboard and focuses on private-label distribution of card programs. This is a go-to-market strategy.

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Credit cards are a huge market — over $4T is spent annually on credit cards in the US alone — with Marqeta’s current processing volume at $42B. However, profitability has been suffering lately, even at the scale of $200MM per quarter in revenue. We wonder about the operating economics of Power, and how well priced this acquisition is in today’s market. The company has 56 employees at pretty steady growth, so this ends up being about $5MM per employee. Ah wait, here’s the fine print:

The purchase price, which is subject to customary adjustments, consists of $223 million in cash, approximately one-third of which is payable over a two-year period subject to certain conditions, plus $52 million in cash subject to a milestone that is expected to be achieved within the next 12 months.

👑Related Coverage👑

• Long Take: Marqeta's $300MM of revenue & Ethereum's $20B in ann. transaction fees highlight opportunity and industry structure

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WEB3: Ethereum restaking protocol EigenLayer is raising $50 million (link here)

EigenLayer, an Ethereum-based restaking protocol, is raising $50MM in Series A funding. Restaking protocols have parallels to liquid-staking derivative (LSD) protocols, both enabling users to use their staked ETH for new purposes. The key difference is that LSD protocols, like Lido, give stakers a token representing their staked ETH (i.e., a derivative!).

Restaking instead uses the actual staked ETH to secure other protocols, providing additional rewards for stakers, as well as subjecting them to slashing from new sources. In effect, EigenLayer is able to aggregate cryptoeconomic security, and subsequent rewards, which creates a beneficial relationship for investors, Ethereum, and the applications running on it.

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If complete, the round would add to the $14MM the company raised so far, bringing total funds raised to $65MM. The protocol would be valued at a $250MM post-money equity valuation, and a $500MM fully diluted token valuation. EigenLayer does not currently have a token, which means that a portion of the funds raised are securing a token allocation likely at a considerable discount, since L1 and L2 protocols tend to reach multi-billion dollar valuations.

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Restaking is a relatively novel mechanism for boosting utility of staked tokens, and potentially is a way to create more return from committed capital. That said, returns always comes with risk, especially when rehypothecation is involved. We are excited to watch EigenLayer develop, but also are paying attention to systemic risks that emerge out of complex systems. In the long run, it’s a fair bet that Ethereum will find ways to integrate the scaling, sharding, and performance attributes of the architectures of other chains, in the same way it incorporated Proof of Stake last year. The road, however, is paved with lots of software development.

👑Related Coverage👑

• Podcast conversation: Implications of the Ethereum Merge for Web3, with Justin Drake of The Ethereum Foundation

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PAYTECH: Announcing Moov’s $45M Series B funding (link here)

Paytech and banking-as-a-service provider Moov has raised $45MM in Series B funding, bringing total funding to $77.5MM, led by Commerce Ventures and joined by a16z, Bain Capital Ventures, Visa and Sorenson Ventures.

Moov focuses on a full suite of money movement products — a view of money inflows, storage, outflows using a cloud-native API. The wallet and ledger products allow clients to automate workflows, whilst B2B companies get a dashboard and drop-in web components that allow for quick UX deployment.

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wadearnold @wadearnold

Announce @moov Series B. Thank you, @venturedan and @CommerceVC, for investing in the idea of a network-of-networks payments processor from day one! It's a line in the sand to reflect on the team's fantastic work and propels us to vision ahead. #fintech

moov.ioAnnouncing Moov’s $45M Series B fundingWhen I started in fintech, it wasn’t commonly called fintech yet. We just called it financial services back then. In that previous life, I spent a lot of time connecting to processors, and a lot of banking cores—42 of them, if I remember right.

Integrations to the main payment networks are key to the company’s success — the fintech has direct connections with The Clearing House, the Federal Reserve and all major card brands, as well as recently becoming a US-licensed Acquiring Processor, Issuer, and Program Manager. The amount of features available on its website is overwhelming, and is evidence to the company’s platform strategy.

Another notable feature of Moov is their focus on developing builder communities. They created fintech_devcon in 2021 for fintech developers in the ecosystem. Payment operations, ledgers, and other CFO-targeted features have been an important growth vector in the last several years, and we think there is consolidation to come in this space. Certainly this is delicious for the card networks.

👑Related Coverage👑

• Podcast Conversation: Powering billions of API-first payment operations, with Modern Treasury's CEO & Founder Dimitri Dadiomov

• Podcast Conversation: Investing in Web3 and fintech for CFOs, with Redpoint's Urvashi Barooah

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Long Take: Custodia rejected from Federal Reserve membership, Silvergate & Signature borrow billions to survive (link here)

We noticed two pieces of news that seem to rhyme — Custodia Bank failing to become a member of the Federal Reserve system, despite its Wyoming charter, and Silvergate Capital and Signature Bank borrowing billions from the Federal Home Loan Bank system.

Both of these news items show the importance of nation-scale insurance against bank runs, and the challenges that digital asset-exposed companies continue to have relative to their more traditional counterparts. But should we be surprised?

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Podcast Conversation: Software contracts and composability unlocking economic growth, with Agoric CEO Dean Tribble (link here)

In this conversation, we chat with Dean Tribble, co-founder and CEO of Agoric.

Agoric is a Proof-of-Stake chain utilizing secure JavaScript smart contracts to rapidly build and deploy DeFi, comprised of a team who are experts in smart contracts. Agoric was founded on open-source principles which look to build a public economy.

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Rest of the Best

Here are the rest of the updates hitting radar.

• WEALTHTECH - MoneyFarm Launches Platform as a Service in the UK Following Italy Success

• ROBOADVISOR - M&G Wealth rolls out hybrid robo advisor

• INVESTING - Regulator reforms China’s IPO process, leaving share pricing to market forces, with bourses to vet disclosures

• INVESTING - FINBOURNE Technology Secures £30m Debt Facility

• INVESTING - Music Lovers to Become Royalty Investors in New Trading Platform

• INSURTECH - OnSiteIQ raises $10 million

• INSURTECH - Revolutionary AI Underwriting Tool Unveiled: UnderwriteGPT Changes the Game for Insurance Industry

• AI - SG wealth management platform Kristal.AI eyes $30m Series B funding

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Wondering what’s shaping the future of Fintech and DeFi? At the Fintech Blueprint, we go down the rabbit hole in the DeFi and Fintech industries to help you make better investment decisions, innovate, and compete in the industry. 

• Read our Disclaimer here — this newsletter does not provide investment advice and represents solely the views and opinions of FINTECH BLUEPRINT LTD.

• Contributors: Lex, Laurence, Matt, Farhad, Daniel, Daniella

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