Blockchain, Capital Markets, Emerging Markets
Tipping Gasoline On A Good Ol’ Fashioned Bank Run
Hearsay has never been so dangerous as in the age of the Internet. Silicon Valley Bank experienced an unprecedented bank run on March 9 when customers withdrew $42b in a single day, leaving the bank with a negative $1b cash balance. While this action was made possible by digital banking capabilities to transfer balances in a few quick simple clicks, the rapid spread of information on social media exacerbated the situation.
House Financial Services Committee chair Patrick McHenry has called SVB’s crisis the world’s first “Twitter-fueled bank run.” A team of five American economists crunched through 5.4m Tweets since 2020, and concluded that social media directly led to the bank run, as bank share prices reflected Twitter sentiment on an hourly basis, and those banks that were most affected were the same ones with significant exposure to social media.
The inherent asymmetry of banking systems vs social media were exposed as part of this process: Twitter and banking systems operate 24/7, but the Fed’s discount window closes at 7pm ET. Additionally, combing through for accurate information can prove difficult to nearly impossible during high frenzy. A whole industry - known as online disinformation detectives, have emerged as a function of this phenomenon, hired by companies who want to protect themselves from social media manipulation.
The Fed is expected to release its own report on SVB on May 1 to address some of the issues inherent in the sequence leading into the bank’s collapse. Amongst them, the role of social media and other institutions’ exposure to the same types of actions should be center stage. Either way, it’ll likely tighten banking regulation, ICYMI (in case you missed it).
Constrafor, a construction procurement company, goes ‘SAFE’ route with new capital - After raising $106.3m in equity and debt in 2022, Constrafor is back with another cash infusion of $7.5m via a SAFE note, led by Motive Partners, that closed this month. New investor Fifth Wall joined existing investors, including FinTech Collective, Clocktower Technology Ventures, Commerce Ventures, FJ Labs and NotreVis, in the round. In addition, the investment includes access to a credit facility with Apollo. Read more
Axoni raises $20m in equity financing - Congratulations to portfolio company Axoni on their recent round of financing, which was led by EJF Ventures, with participation from Laurion Capital Management, Communitas Capital, and existing investors (which included Andreessen Horowitz, Citi, CME Ventures, Coatue, DCG, Deutsche Bank, DCVC, FinTech Collective, F-Prime, Franklin Templeton, Goldman Sachs, HSBC, Intel Capital, J.P. Morgan, LSEG, Nyca Partners, UBS, Wells Fargo, and Y Combinator). The company, which has raised more than $110M since inception, intends to use the funds to expand operations and its business reach. Read more
ProRata: Nima Pourshasb, Founder @ minu <> Carlos Alonso-Torras, Principal @ Fintech Collective - Listen to ProRata's podcast here as Carlos and Nima discuss the macro trend of entrenchment away from emerging markets, whether there is going to continue to be a removal of capital and more. Read more
MoneyLion announces 1-for-30 reverse stock split of class A common stock - At the effective time of the Reverse Stock Split, every 30 shares of the Class A Common Stock either issued and outstanding or held as treasury stock will be automatically reclassified into one new share of Class A Common Stock. The total number of shares of Class A Common Stock authorized for issuance will be reduced by a corresponding proportion from 2,000,000,000 shares to 66,666,666 shares. Read more
Tipping Gasoline On A Good Ol’ Fashioned Bank Run
Twitter poses a risk to the financial system and helped fuel the SVB run, says first major study to investigate the topic - Professors from five different universities have released a study confirming that social media contributed to the run on Silicon Valley Bank, and they say other banks have similar risks. The researchers dissected roughly 5.4m tweets from the start of the year through March 14 about publicly traded banking stocks, finding that the risk of a bank run “increases markedly” when firms are repeatedly mentioned during “periods of intense Twitter conversation.” Read more
Wake up to the dangers of digital bank runs - In the wake of SVB, this big question is what should regulators and investors do? Some might think (or hope) that SVB was an anomaly. And as the economists’ study shows, many depositors congregated online in a tribal echo chamber, fueling feedback loops. But while SVB was an extreme case, it also revealed a bigger pattern: neither banks nor governments are prepared to deal with a social media-infused world that operates at warp speed. Read more
These online detectives have raised $300m to keep lies from triggering the next bank run - The SVB crisis illustrates why there’s such interest in cybersecurity startups that wade through the online muck on behalf of companies, nonprofits and governments that want to protect themselves from internet lies and social media manipulation. Built over years or decades, an organization’s reputation represents intangible wealth that can make up much of its value. In the internet era, it can be destroyed overnight. Read more
First Republic works on plan to prevent government seizure - First Republic’s advisers are working on a private-sector solution they hope can overcome skepticism in Washington and keep the embattled California bank from being shut down by the Federal Deposit Insurance Corporation. JPMorgan, which has been acting as First Republic’s banker and is the largest US lender, is involved in the conversations, but other large institutions are also likely to participate in some way. Read more
Apple’s new savings account is convenient. Is that a good thing? - Apple turned millions of iPhones into piggy banks with the launch of its new high-yield savings accounts. The savings account is unusual in another way, too: It is attached to Apple Card, a credit card. Some are arguing that having savings tied to credit card, payments app could tempt some users into overspending. Read more
Platform for loans looks to revamp market by getting traders off the phone - A fintech platform looking to transform the trading of leveraged loans by doing away with phone calls launched this week, the latest in a series of firms that aim to modernize the market that saw a record $824b of loans changed hands in the secondary markets last year. Read more
Credit agency giant TransUnion will deliver credit scores for crypto lending - TransUnion will provide traditional (off-chain) credit scores for individuals when they apply for loans on blockchain-based protocols without compromising applicants’ privacy, according to the press release. The firm is teaming up with data security firm Spring Labs and DeFi identity and compliance software developer Quadrata to provide the service. Read more
JPMorgan creates AI model to analyze 25 years of fed speeches - A week before the Federal Reserve’s next meeting, JPMorgan Chase unveiled an artificial intelligence-powered model that aims to decipher the central bank’s messaging and uncover potential trading signals. Read more
Will Apple take a big bite out of the banks? - The question for banks and other providers of financial services is how worried they should be about a tech company with 1.2b iPhone users, a $2.6t market cap and a history of disruptive innovation making moves on to their territory. Apple’s scale makes even the world’s largest banks look little. And the company hasn’t been shy about its ambitions in this space. Read more
Coinbase sues SEC after months of silence from federal regulator - Coinbase took legal action against the SEC on Monday, asking a federal judge to force the regulator to share its answer on Coinbase’s July 2022 petition on whether existing securities rule-making processes could be extended to the crypto industry. The 2022 petition didn’t receive a specific public response from the SEC, which has pursued a spate of enforcement actions against individuals and entities in the crypto industry. Read more
Ansa - San Francisco based digital wallet startup raised $5.4m in Seed funding led by Bain Capital Ventures. Read more
Berachain - Toronto based bear-themed Layer 1 blockchain raised $42m in Series A funding led by Polychain Capital. Read more
CarbonChain - London based carbon accounting platform raised $10m in Series A funding led by USV and Voyager Ventures. Read more
Clara - Brazil based spending management firm raised $60m in Series B funding led by GGV Capital. Read more
Credora - New York based crypto lending creditworthiness company raised $6m in new funding led by S&P Global and Coinbase Ventures. Read more
DFlow - Chicago based decentralized payment for order flow protocol raised $5.5m in Seed funding led by Framework Ventures. Read more
Dori - Atlanta based automation platform for private market transactions raised $2m in Seed funding led by Counterpart Ventures. Read more
IDPartner Systems - San Francisco based startup providing online identity verification raised $3.1m in Seed funding led by Abstract Ventures. Read more
Ledgebrook - Boston based E&S insurtech company raised $4.6m in Seed funding led by Markd. Read more
M3ter - London based provider of use-based SaaS pricing tools raised $14m in Series A funding led by Notion Capital. Read more
Plumery - Amsterdam based banking technology startup raised $4.5m in Seed funding led by Better Tomorrow Ventures. Read more
Summer - New York based debt repayment company raised $6m in Series A extension funding led by General Catalyst. Read more
Super.com - San Francisco based savings app formerly known as Snapcommerce raised $60m in Series C funding led by Inovia Capital. Read more
Tembo - London based digital-mortgage business raised £5m in Series A funding led by Lone Ventures and Harold McPike. Read more
Thetanuts Finance - Virginia based DeFi trading company raised $17m in new funding led by Polychain Capital, Hyperchain Capital and Magnus Capital. Read more
Wayhome - UK based alternative to mortgages raised £8m in Series A funding led by Allianz X and Augmentum Fintech. Read more
Zodia Custody - London based crypto custodian controlled by Standard Chartered raised $36m in Series A funding led by SBI Holdings. Read more
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