Make America AAA Again


Aug 07, 2023


Sarah Parsons Wolter


Aug 07, 2023


Sarah Parsons Wolter


This week, Fitch Ratings downgraded the US debt rating from AAA (top-notch) to AA+, citing concerns around the government’s ability to work through debt burdens - exemplified through last month’s debt ceiling standoff in Congress. The last time a similar event occurred was in 2011 when S&P downgraded the US sovereign debt rating, and the S&P 500 lost 15% of its value within a month.

Debt ratings are critical to bond markets and broad investor confidence, although equity market reactions were much more muted this week in reaction to Fitch. Different parties reacted variably, however: Blackstone CEO Steve Schwartzman commented that he felt the rating downgrade was justified given debt statistics, while Treasury Secretary Janet Yellen called it unwarranted. Investment banks including Goldman Sachs and JP Morgan were both of the view that the downgrade itself will have little impact.

The global bond market is one of the biggest financial markets in the world, and was worth ~$141t at the end of 2022. Outside of the downgrade, this market also faces other challenges including shadow banking, which limits the ability of banks to control cost of credit, as well as rising inflation and interest rates. Sounds like there’s a laundry list of things to be fixed before America makes AAA again.

Newsletter Image - 8/5/23

Portfolio News

A venture-backed recordkeeper is winning every state-sponsored mandate - Vestwell, which already counts 30,000 small businesses and more than 1m investors as customers, has won every state contract for recordkeeping services since early last year. Read more

Underline's affordable fiber program challenges incumbents - Fiber network provider Underline announced the launch of its Opportunity Program to provide low-cost, high-tier internet service for households that qualify for the federal government’s Affordable Connectivity Program (ACP). Read more

Flutterwave expands remittance capabilities in the US, Canada, Egypt and rebrands $end to Send App by Flutterwave - With this relaunch, Send App users can send money from US and Canada and access new corridors to Egypt and Sénégal. This is in addition to countries like UK, EU, Nigeria and other African countries where Send App has been available in, since launch in 2021. Read more

Recapping ETHCC 2023 - Earlier this month, over 5,000 crypto-enthusiasts gathered at the largest annual Ethereum conference in Europe: ETHCC. Industry players from across the globe assembled for four days of intensive talks and social events, with over 200+ side events hosted. FTC DeFi team member Parker Jay-Pachirat shares her takeaways from this years conference, noting that three things were clear: progress is palpable, but challenges still remain, and we will soon face a crucial new set of path dependencies. Read more

Make America AAA Again

Fitch downgrades U.S. credit rating - The downgrade, the first by a major ratings firm in more than a decade, is evidence that increasingly frequent political skirmishes over the U.S. government’s finances are clouding the outlook for the $25t global market for Treasurys. Fitch’s rating on the U.S. now stands at “AA+”, or one notch below the top “AAA” grade. Read more

Blackstone CEO Schwarzman says ‘numbers justify’ Fitch downgrade - While JPMorgan Chase CEO Jamie Dimon said that the downgrade “doesn’t really matter that much,” and that US credit is sound and should be the highest-rated in the world, and Treasury Secretary Janet Yellen called the downgrade “entirely unwarranted", Schwarzman said Fitch's move was appropriate after multiple debt-limit standoffs. Read more

Industry News

Kenya suspends Worldcoin scans over security, privacy and financial concerns - The country’s Ministry of the Interior has issued a decree suspending Worldcoin enrollment in the country, citing concerns with the “authenticity and legality” of its activities in the areas of security, financial services and data protection. Read more

IRS expects faster refunds in 2024 for people who stop using paper - The IRS will allow taxpayers to file every major tax form online, the agency announced Wednesday, and will digitize its gargantuan paper catalogue by 2025, dramatically increasing its customer service capabilities and hastening refunds by four weeks to millions of taxpayers. Read more

Rapyd acquires a piece of PayU from Prosus for $610m to scale its fintech-as-a-service platform - PayU’s operations span some 50 countries, and Prosus is not selling all of these: it is selling what it calls the “Global Payment Organisation” (GPO) and will continue to hold on to PayU’s operations in India, Turkey and Southeast Asia, arguably the three biggest regions for the business. Additionally, the deal underscores Rapyd's ambitions to build out more scale and reach globally for its wider payments operations en route to an IPO. Read more

Small-business lending is about to change, with simpler requirements - The Small Business Administration is simplifying loan requirements, automating more of the process and expanding the pool of nonbank lenders licensed to issue SBA loans. The moves will make it easier for financial-technology firms to participate. Read more

SEC asked Coinbase to halt trading in everything except bitcoin, CEO says - The request would have meant ‘the end of the crypto industry in the US’, according to Coinbase CEO Brian Armstrong. If the company had agreed, that could have set a precedent that would have left the vast majority of the American crypto businesses operating outside the law unless they registered with the commission. Read more

Home insurers are charging more and insuring less - Double-digit premium hikes. Higher deductibles. New coverage limits. Drones to check the state of roofs and yards. The higher-cost, lower-coverage trend extends well beyond Florida, California and other states prone to hurricanes, floods or wildfires as losses for home-insurance companies continued to pile up in the first six months of this year. Read more

Stripe names Confluent executive Steffan Tomlinson as CFO - Tomlinson previously helped take data analytics company Confluent public as its CFO in 2021, which is notable as Stripe has been considered a major IPO candidate for several years now. The company hired investment banks to explore going public and approached investors about its listing plans, according to media reports earlier this year. Read more

The new banking as a service reality - Rather than facilitating a shift in banking, BaaS companies find themselves as M&A targets of established banks and service providers. Read more

European banks have to upgrade their core tech. Are U.S. banks next? - The European Commission has been making rules for the past decade that have pressed banks in the region to adopt modern core systems. U.S. banks are playing catch up as they attempt to integrate with The Clearing House's RTP network and the Federal Reserve's real-time-payment processing system FedNow. Read more

AngelList expands into private equity with acquisition of fintech startup Nova - With its acquisition of Nova (only the company’s second buy since inception), which has built investor management software for institutional private funds, AngelList continues to broaden its scope. Read more

The pandemic small-business boom is fueling the US economy - More than 5m new business applications were filed in 2022, a 42% increase from pre-pandemic levels. Read more

What is a CBDC and why do central banks want them? - While many countries including the U.S. haven’t decided if they want to introduce a central bank digital currency, some are acting faster. Read more

How bonds ate the entire financial system - The bond market is now facing one of its biggest tests in generations. Even if the market adapts, as it has in the past, its ballooning power, reach and complexity has some awkward implications for the global economy. Read more

FedNow, capital kanban and the art of discouraging bank runs - The important development is that everything on FedNow, even the smallest transactions, can be tracked in realtime on a gross basis. That alone is going to change how investors think about cash and precautionary liquidity. Read more

Select Financings

Converge Insurance - New York based cyber risk management and underwriting company raised $15m in Series A funding led by Forgepoint Capital. Read more

DebtBook - Charlotte based debt, lease, and subscription management software company raised $12.5m in Series A-1 funding led by Elephant Partners. Read more

Emtech - New York based provider of central banking infrastructure in Africa raised $4m in Seed funding led by Matrix Partners India. Read more

Financial Information Technologies - Tampa based provider of software and payments solutions for alcohol retailers, distributors, and suppliers raised an undisclosed amount in new funding led by General Atlantic. Read more

Finda - South Korea based loan comparison platform raised $37m in Series C funding led by JB Financial Group. Read more

Functional Finance - San Francisco based provider of data and reporting automation software for insurance companies raised $8m in Seed funding led by NEA. Read more

Knot API - New York based provider of card-on-file management tools raised $10m in Series A funding led by Nava Ventures. Read more

Lula - Miami based provider of insurance infrastructure raises $35.5m in Series B funding led by NextView Ventures. Read more

MasterExchange - Stockholm based music investment marketplace raised $2.7m in new funding led by Vectr Ventures. Read more

Micro Connect - Hong Kong based microfinance platform raised $458m in Series C funding. Read more

Mthmr - Saudi Arabia based personal expense management company raised $1.6m in Seed funding led by Wa'ed Ventures. Read more

Nium - Singapore based cross-border payments firm raised an undisclosed amount in new funding led by Bond. Read more

Orbital - London based traditional finance and crypto payments platform raised £5m in new funding led by Golden Record Ventures. Read more

Percayso - United Kingdom based provider of insurance intelligence services raised £2.7m in new funding led by Neil Utley. Read more

Petal - New York based consumer credit card startup raised $20m in new funding led by existing investors. Read more

Pockit - London based provider of financial services to underserved communities raised $10m in new funding led by Puma Private Equity. Read more

RupeeRedee - India based provider of personal loans for underserved segments raised $3.5m in new funding led by Digital Finance International. Read more

Traction - Nigeria based provider of POS solutions for small merchants raised $6m in Seed funding led by Ventures Platform. Read more

Tradeshift - Copenhagen based B2B payments and AP automation company raised $35m in strategic funding led by HSBC. Read more


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