Seattle’s new venture firm, Flying Fish, holds a first close on its targeted $80 million fund

The founding partners of the new Seattle-based venture firm Flying Fish  met as angel investors deploying capital in the talent-heavy, cash-light region around Amazon and Microsoft’s corporate headquarters.

“We’ve underperformed relative to the talent pool,” is how Heather Redman, one of the firm’s three founding partners describes the region.

Well, now Flying Fish has held a first close of $23 million on a targeted $80 million fund to bring some much needed institutional capital at the seed and Series A stage to a geography that’s seen a number of successful exits and a wealth of talented engineers crop up, but little in the way of regional investor talent to support it.

Seattle’s success extends beyond Microsoft’s Redmond, Wash. headquarters and Amazon’s downtown death star. There’re travel behemoths like Expedia, real estate riches pouring from Zillow and Redfin, titans of visualization and business intelligence software like Tableau, and up and coming success stories like Avalera.

All of those companies are bringing in talent from elsewhere to complement Seattle’s growing reputation as a hub for artificial intelligence and machine learning research and engineering talent thanks to programs at the University of Washington .

Joining Redman, a former executive at AtomShockwave, Inc., Getty Images, Inc., and PhotoDisc, Inc.; are two former Microsoft employees Geoff Harris, who served as General Manager for the Speech and Natural Language team, and Frank Chang. Harris and Chang met while working on natural language processing and machine learning for the gargantuan that Gates built before Chang absconded to Jeff Bezos’ Amazonian environs.

With its $28 million first close, Flying Fish is well on its way to joining a host of other investment firms that have launched or closed new investment funds in the Pacific Northwest since the beginning of the year. In all, at least $140 million in new capital has been committed to venture firms in the region like PSL Ventures, the venture capital firm started by development studio Pioneer Square Labs, and Founders Co-op, a longtime early stage investor on the Seattle scene.

 

“What we believe is that with the additional VC [firms] beginning to be formed here… that is going to increase the number of company starts geometrically,” says Redman. “The talent is here, the entrepreneurial spirit is here and the use is here… but [entrepreneurs] want to do it where there is the capital to support them.”

The firm is targeting around 25 investments for its $85 million first fund with a focus on machine learning, artificial intelligence and software services. Investments will range between $500,000 and $5 million, according to the firm’s partners.

Already, Flying Fish has put money to work in seven new deals.

  • Ad Lightning – Provides publishers a tool to manage bad ads on their sites
  • Otto Robotics – Robotic automation for the fast food industry. (still in stealth – no website)
  • MessageYes (Sold to Nordstrom) – Developers of an ecommerce chatbot over SMS, Facebook messenger etc.
  • Element Data – Developers of a decision engine that takes into account human emotion in the decision-making process
  • Tomorrow – Providing financial planning services such as wills, trusts and insurance 
  • Finn.ai – Pitching a financial services chatbot to engage with banks over Facebook messengers and other like platforms
  • Streem – Offering an augmented reality application connecting consumers with professionals in the home improvement and maintenance market

Cambridge Analytica was reportedly exploring an ICO

In the most 2018 thing of the year so far, Reuters and The New York Times are both reporting that Cambridge Analytica was talking to crytpocurrency experts in preparation for the launch of its own initial coin offering. Of course, things may have gotten a bit off-track when the company was revealed to have obtained the data of as many as 87 million Facebook users. Life, as they say, comes at you fast.

According to Reuters sources, the embattled firm was looking to issue its own digital currency in an effort to raise upwards of $30 million. Understandable, perhaps — startups reportedly raised $5.6 billion through ICOs in 2017 alone. Surely Cambridge Analytica was well-positioned to get in on that action. 

The company wouldn’t confirm whether it was still looking toward digital currency as a fundraising method moving forward, though it did tell the news agency that using blockchain for security purposes is still very much on the table.

“Prior to the Facebook controversy, we were developing a suite of technologies to help individuals reclaim their personal data from corporate entities and to have full transparency and control over how their personal data are used,” a spokesperson said. “We were exploring multiple options for people to manage and monetize their personal data, including blockchain technology.”

The Times also confirms via leaked emails that CA’s work with another digital currency, Dragon Coin, “associated the firm” with a gangster know as Broken Tooth. Though Dragon Coin’s founder denies any connection with Mr. Tooth.

Mobile money-saving app Qapital raises $30 million to spend on growth

Qapital, one of a slew of mobile applications trying to make it easier for users to save money (and spend it more wisely), has raised $30 million in fresh financing as it expands beyond savings to offer investment advisory services.

Since its launch in the U.S. in 2015, Qapital has amassed roughly 420,000 users that have saved nearly $500 million on the platform, according to the company.

But Qapital is more than just a Digit -style savings tool these days. The company has also folded in Qapital Spending through a linked Visa Debit Card that works with money saved through the app — as well as a budgeting tool called Qapital Weekly Spending Target.

The company now has designs on the robo-investment market through Qapital Invest, a new product that Qapital expects to roll out before the end of the year.

Financing that push into investment advisory is the $30 million warchest the company just raised from big Nordic investment firms Swedbank Robur, Norron, SEB Stiftelsen and Athanase, with additional participation from the Nordic venture capital firm Northzone.

Qapital’s approach combines tools that have been rolled out into financial services verticals by startups like Digit, Acorns, Betterment, Wealthfront and Clarity Money (which was recently acquired by Goldman Sachs) .

Using certain principles of behavioral economics, Qapital tries to encourage users to save money towards goals and make better financial choices overall.

The company’s executive team even includes the renowned fintech startup whisperer Dan Ariely, who serves as chief behavioral economist for Qapital when he’s not moonlighting as the James B. Duke professor of Psychology and Behavioral Economics at Duke University, and a ​New York Times​ best-selling author.

Ariely’s theories helped shape Qapital’s “rules” and “goals” approach to money management, where users set short term and long term goals for themselves and then create spending rules to help them achieve those goals. Rules can vary from “save a dollar every time I buy a coffee” to “save $2 when anytime I use a credit or debit card”.

“Building personal banking products that people love is hard, and traditional banks to date haven’t done enough to inspire and engage their customers,” said Pär Jörgen Pärson, Chairman of the Qapital Board and General Partner of Northzone, in a statement. “Qapital understands that through building a great product that is easy to use and winning its customers’ trust, we will inspire happiness and empower people to meet their goals.”

The new capital should provide some defensibility for Qapital as the industry looks to head into a period of consolidation. 

As George Friedman, Qapital’s chief executive and co-founder noted in an email, “banks haven’t done enough to inspire and engage customers, and … banks simply can’t match the innovation speed of start-up challengers.”

With the Goldman Sachs acquisition of Clarity Money, Friedman says,”there is real demand among consumers for financial products with financial management tools built in.”

 

Funding Societies, a Southeast Asian lending platform, gets $25M Series B led by Softbank Ventures Korea

Funding Societies co-founders Reynold Wijaya and Kelvin Teo.

Funding Societies, a peer-to-peer lending platform in Southeast Asia, said today that it has raised a $25 million Series B led by Softbank Ventures Korea, the Japanese tech conglomerate’s early-stage venture capital unit. The round included returning investors Sequoia India, which led the Singapore-based startup’s Series A two years ago, Golden Gate Ventures and Alpha JWC Ventures, as well as new backers Qualgro and LINE Ventures.

Funding Societies also said it has raised credit lines from banks and financial institutions to lend to small- to medium-sized businesses. Founded in 2015 by Kelvin Teo and Reynold Wijaya, the startup’s name represents its “vision of financial inclusion in Southeast Asia.”

Its Series B was oversubscribed, says Funding Societies, which operates in Singapore, Indonesia, where it is called Modalku, and Malaysia.

When it announced its $7.5 million Series A in August 2016, Funding Societies had disbursed $8.7 million Singaporean dollars, a number that has since grown to $145 million SGD, chief executive officer Teo tells TechCrunch. Since its launch, the startup has increased its lender base to more than 60,000 and now claims a default rate of less than 1.5%, down from about 2% to 3% two years ago, thanks to improvements in its underwriting model.

In a press statement, Softbank Ventures Korea partner and managing director Sean Lee said the firm “has been actively investing across Southeast Asia. SME digital lending across Southeast Asia is where we saw huge growth potential. Among many players, we were most impressed with Funding Societies for what it has achieved in a short period of time and its potential to continue to become the number one player.”

Though Teo says Funding Societies is “always exploring other markets, there is still tons of work we need to do in our current three markets.” Despite its considerable growth over the past three years, the startup’s mantra is “slow and steady,” a phrase Teo repeated often during our interview.

“One of the key things we highlight is that it’s more important for us to grow slowly and steadily instead of fast and recklessly, because it’s a trust-based industry,” says Teo.

“We need to give out loans and be able to collect them back, so we focus on learning the market, understanding the market and solving key pain points instead of giving out a bunch of loans to chalk up high numbers and attract VCs.”

For example, though the platform may offer personal loans in the future, Teo said it currently only lends to SMEs because “we believe that we are strategically better suited to serving small businesses and, in terms of our company’s values, we think that serving SMEs is an expansionary effort. Consumer financing, in our personal view, is more consumptive finance. It doesn’t help grow economies.”

Many of the SMEs the company serves are very small. Some of its Indonesian borrowers, for example, make annual revenue of about $5,000 USD per year.

“Many of these borrowers are seeking their first business loan and do not have other sources of financing. A lot of financial institutions take a collateral underwriting approach and a lot of budding businesses would not be able to secure financing that way,” says Teo.

“But we also see some of them come to us as a form of top-up. They already have a bank loan, but it is insufficient for them, so they come to us because they are limited by the size of their collateral. Also, we are able to process financing faster than traditional institutions.”

Funding Societies was created to give SMEs, many of which had previously relied mostly on friends and family loans, access to more means of financing. The company points to a recent study by Ernst & Young, UOB and Dun & Bradstreet that says 65.2% of SMEs in Southeast Asia do not have easy access to traditional business financing, even though most are open to other options, including peer-to-peer lending platforms.

The company says it was the first online peer-to-peer lending platform in Malaysia and that based on third-party data, it is now the leading SME lending platform there, as well as one of Singapore’s three largest peer-to-peer lending platforms. It also holds sizable market share in Indonesia.

Though its platform uses algorithms for initial application screening, a significant portion of work, depending on loan size, is still done by Funding Societies’ employees, who have grown in number from 70 in 2016 to 165 now (Teo says the company is currently hiring in earnest and willing to pay relocation costs for promising talent). Almost all applicants talk directly to someone from the company. Micro-loans, which range in size from $500 USD to $40,000 USD, usually take about two business hours to approve and disburse, while applicants for larger loans may have to wait a few days to about a week.

“We’ve debated and discussed internally a lot if we leave too much money on the table, because our default rate is lower than certain banks in the markets we are serving, but given that we are still at a relatively nascent stage in the lending market and have no control over financial crises, it is more important to stay prudent than to grow recklessly,” says Teo.

This methodical approach is also important when entering new markets. Though many outside observers take the umbrella term “Southeast Asia” a little too literally, ignoring cultural differences between each country, Teo says it is still a fragmented market, so financial service companies need to localize carefully. When Funding Societies enters a new market, it can probably port about 50% of its tech and business model from its previous market, but the other half has to be built from ground up to account for economic and cultural differences, he adds.

“SME financing is a very localized business. With sufficient capital you can win the market and it’s really driven by subsidies and strong marketing,” Teo says. “But for SMEs, you really, really need to understand the local market.”

Coinbase gears up to jump through regulatory hoops with new CFO and other big hires

The Coinbase hiring spree continues. In the last week and a half, the company has picked up a new CTO, a new VP of communications, a global head of inclusion and now a new CFO. In a blog post today, the company announced the addition of Alesia Haas, who joins the team from New York-based alternative asset management firm Oz Management. Previously she held roles with Merrill Lynch and General Electric.

“I’m incredibly excited to have Alesia join Coinbase as our new CFO. She brings deep financial services experience to our growing company,” Coinbase CEO Brian Armstrong said of the hire.

“As a fintech company, finance is core to everything that we do. We plan to continue bringing the best and brightest from both finance and technology companies to help create an open financial system for the world.”

Coinbase’s other very recent hires:

But that’s not all for Coinbase’s recent staff-up. The company also recently brought on board: Emilie Choi, Vice President of Corporate and Business Development, Tina Bhatnagar, Vice President of Operations and Technology and Eric Scro, Vice President of Finance. In a blog post, the company noted that it was “working quickly to expand our executive team” during the current period of extreme growth. While it’s certain that the company is undergoing some major growth, it’s also girding for potential regulation.

Earlier in April, Coinbase reportedly approached the SEC about the possibility of registering as a licensed brokerage firm and electronic trading venue. Such a move would allow Coinbase to invite coins currently under scrutiny for looking like securities into its elite ranks. If that comes to pass, the company could see a major expansion beyond the four coins (Bitcoin, Bitcoin Cash, Ethereum, Litecoin) that trade on the platform now, particularly a move toward bringing ERC20 tokens into the fold as the company signaled it would in late March.

Disclosure: The author holds a small position in some cryptocurrencies. Regrettably, it is not enough for a Lambo.

New York launches a fact-finding inquiry into Coinbase, Binance and other exchanges

As cryptocurrencies continued shaking off their April hangover, the state of New York is trying to figure out what to do with this whole coin thing.

On Tuesday, New York Attorney General Eric Schneiderman announced something called the Virtual Markets Integrity Initiative, a state-level effort to examine the policies and practices of the major cryptocurrency exchanges. Schneiderman’s office emphasized to TechCrunch that the endeavor is a “a fact-finding inquiry” and not an “investigation” as it’s not apparent there is any wrongdoing.

“With cryptocurrency on the rise, consumers in New York and across the country have a right to transparency and accountability when they invest their money. Yet too often, consumers don’t have the basic facts they need to assess the fairness, integrity, and security of these trading platforms,” Schneiderman said.

“Our Virtual Markets Integrity Initiative sets out to change that, promoting the accountability and transparency in the virtual currency marketplace that investors and consumers deserve.”

Schneiderman’s office is often early to defend consumer rights in the state of New York, so the cryptocurrency inquiry is very in line with the kind of work his office already does on behalf of New York state residents.

The attorney general’s office addressed a standard questionnaire to 13 cryptocurrency platforms, from the biggest names in the business to more obscure exchanges.

  • Coinbase, Inc. (GDAX)
  • Gemini Trust Company
  • bitFlyer USA, Inc.
  • iFinex Inc. (Bitfinex)
  • Bitstamp USA Inc.
  • Payward, Inc. (Kraken)
  • Bittrex, Inc.
  • Circle Internet Financial Limited (Poloniex LLC)
  • Binance Limited
  • Elite Way Developments LLP (Tidex.com)
  • Gate Technology Incorporated (Gate.io)
  • itBit Trust Company
  • Huobi Global Limited (Huobi.Pro)

The letter seeks basic information about the company’s operations, broken down across eight major categories. Those questions span from basic inquiries about ownership to anti-money laundering precautions to a request for a detailed breakdown of the fees that consumers might incur. You can read the full text of the “Virtual Markets Integrity Initiative Questionnaire” here.

Again, the letter is a broad, standardized fact-finding mission, not an investigation based on specific knowledge. Schneiderman’s office clarified that the initiative seeks to illuminate any potential for market manipulation, abrupt trade outages that go unexplained, and problems customers have withdrawing funds, among other cryptocurrency trader headaches. Still, it’ll tap into some thorny issues (money laundering, anyone?) that some exchanges might not yet have a proper way of handling. Ultimately they hope to use that information to make these platforms more fair and transparent for consumers, regulators and investors alike.

While anxious bullish investors might see the New York inquiry as a threat, many of the relevant exchanges are taking it in stride so far (at least so they say) even applauding the inquiry’s effort to create more transparency that could pave the wave for thoughtful rather than heavy-handed regulation.

Q1 2018 global diversity investment report: Investing trends in female founders

In this report, we look at venture and seed investment trends in female-founded startups over the last five quarters. For this time period, we look at more than 9,119 venture deals and 6,802 seed deals for companies with founders associated.

To begin, $3.6 billion was invested in companies with at least one female founder in Q1 2018. That result was up 60 percent from Q1 2017’s $2.2 billion tally but down from Q4 2017 by 30 percent. We fully expect this amount to go up as more fundings are added for the quarter retroactively.

Overall, the money invested into companies with at least one female founder represents just nine percent of venture dollars invested in Q1 2018. That is one percentage point below Q1 2017’s 10 percent result. The second, third and fourth quarters of 2017 all presented higher percentages, as well: 14, 15 and 15 percent of venture dollars invested in those quarters, respectively.

When we narrow the criteria, however, the figures fall. In the Q1 2018, three percent of venture dollars were invested in solo female founders.

From a deal volume perspective, Q1 2018 saw 14 percent of venture deals include at least one female founder. That result mirrored the year-ago, Q1 2017 figure. However, in line with what we saw when looking at 2017’s dollar volume breakdown between teams with and without women, the interim quarters showed a higher deal count at 15 and 16 percent of all venture deals.

Deals of note

While the deal and dollar volume progress will disappoint many, inside the data are a host of interesting deals that we’d like to highlight. However, in the interest of space, we’ve selected three to share.

Here are the notable venture deals made in Q1 2018 with female founders that caught our eye:

  • Glossier: A New York-based direct to consumer beauty company founded by Emily Weiss. Glossier raised a $52 million Series C round. Index Venture and Institutional Venture Partners led the Series C round.
  • DataVisor: A Silicon Valley-based fraud prevention company led by two female founders, Yinglian Xie and Fang Yu. DataVisor raised a Series C round of $40 million. Sequoia Capital China led the round with previous investors NEA and GSR Ventures participating.
  • Zum: A provider of scheduled on-demand rides for parents of children for highly vetted drivers, founded by Ritu Narayan. Zum raised a $19 million Series B round from Spark Capital with previous investors Sequoia Capital and AngelPad participating.

Next, we’ll turn to who is cutting the checks. Or, more precisely, which firms are investing in companies with female founders.

Leading venture investors in female founders

Investors that represented the highest deal count in startups with at least one female founder include Sequoia Capital with seven investments and Omidyar Network with New Enterprise Associates at five each for Q1 2018.

But, of course, investors have different focuses, especially when it comes to startup maturity. So, to that end, we’ll break down investment into companies with female founders of one particular stage.

Seed investments in female founders

Seed-funded companies with at least one female founder raised $218 million in Q1 2018. This represented 18 percent of all seed dollar volume for the quarter, up from 15 percent in Q4 2017 and 17 percent in Q1 2017.

Overall, seed is a leading indicator for venture, and it has been growing year over year in absolute dollar terms and by percent since 2009 when we first started measuring these trends. That means that if the percentage of deals and dollars at the seed level that women are raising is going up, we may be able to expect more women-founded early, middle and late-stage companies to raise venture capital in time.

Here’s a look at the dollar volume of seed capital invested into companies with and without female founders:

Next here’s the same data in relative percentage terms.

Returning to the big picture, seed deal counts are down slightly quarter over quarter. As more than 59 percent of seed deal volume is reported after the end of a specific quarter, the count of seed deals will increase from what is listed below:

Again, we now want to know who was closing these deals with female founders.

Leading seed investors

Leading seed investors in companies with at least one female founder include Y Combinator with 28, SOSV with 10 and BBG Ventures and Innovation Works at five investments each.

Investing in diverse founders

Kapor CapitalBackstage CapitalBBG VenturesBroadway AngelsPipeline Angels and more have been leading the charge to invest in diverse founders. With the increase in the number of female founders in the last five years, pressure has been growing on the broader venture capital community. With 74 percent of the top 100 firms with no female investing partners, bringing women and minorities both into their ranks and into their investment portfolios is a goal.

All Raise sets new goals for investing in diverse founders

AllRaise.org, which launched this past week, led by prominent female venture investors, seeks to impact these numbers. The organization has set the goal within the U.S. for the percent of female investing partners to double from 9 percent to 18 percent within 10 years or by 2028.

Why 10 years? For the venture industry that’s the typical life term of a single fund. Venture is a cottage industry with partners typically committing to stay for the lifetime of one or more funds. Therefore, turnover at the partner level tends to be much slower than other industries. With funds raising ever-larger amounts, and more often, expanding teams provides an opportunity to bring on diverse candidates. According to All Raise, the fastest growth for female partners is not with existing firms, but with new funds.

In the next five years, All Raise would like to see venture investments in female-founded companies move up from 15 percent to 25 percent. The organization is leading efforts to impact these numbers directly with Female Founder Office Hours supporting women who are seeking funding, to having tech founders and CEOs commit to increasing diversity in their team, board and investors.

Crunchbase is partnering with All Raise to keep abreast of these numbers within the U.S. market. For venture investments in female founders, we have a ways to go to get to 25 percent within the next five years. Reviewing the data over the last 10 years, 2015 is the first year that companies with at least one female founder have broken through the threshold of 10 percent of venture dollars. 2017 represents the best full year to date, at 14 percent of venture dollars.

The U.S. market mirrors this percent. We would need to see an average of two percentage growth points each year to reach this goal. With the number of female-founded companies growing slowly each year, these numbers are a stretch; however, it may still be attainable.

Ripple’s Brad Garlinghouse and Michael Arrington to talk cryptocurrency at Disrupt SF

Ripple CEO Brad Garlinghouse and Arrington XRP Capital founder (and TechCrunch founder) Michael Arrington will be joining us at TechCrunch Disrupt SF in September to talk money.

Garlinghouse has had a long and storied career in the tech industry, serving as a Senior Vice President at Yahoo!, President of Consumer Applications at AOL, and CEO of the file collaboration service Hightail. But in 2016, Garlinghouse was promoted from COO to CEO at payment services company Ripple.

Ripple’s goal is to try to make it as easy as possible to transfer money between two stores of value. Right now, that process is incredibly tedious, with no unifying structure to send money overseas or to underbanked communities. The notion of a unifying ledger is not a new one, but it’s one that’s transformed Ripple into a full-fledged company.

But Ripple also created the world’s third-largest digital token, XRP. The token has a current total market cap around $30 billion, and the company is working to expand the use cases for XRP, which has primarily been marketed as a tool for banks but has only attracted cross-border payment services.

As cryptocurrencies continue to evolve and gain mainstream attention, questions continue to mount around how these tokens will revolutionize the economy and gain utility.

TechCrunch founder and former Editor-In-Chief Michael Arrington will join Garlinghouse on stage to discuss the evolution of cryptocurrencies. Arrington left TechCrunch in 2011 and went on to start CrunchFund, which has invested in big name startups such as Uber, Airbnb, and Yammer.

In 2016, Arrington reduced his role at CrunchFund and has since started Arrington XRP Capital, a $100 million digital asset management firm in blockchain-based capital markets. Ripple is one of the first portfolio companies for Arrington XRP Capital.

This comes at a time when the SEC is doing everything it can to learn more about cryptocurrencies, sending out subpoenas to crypto funds far and wide, including Arrington XRP Capital.

This conversation is sure to be an interesting one, and one you won’t want to miss. Tickets to Disrupt SF (September 5 to September 7) are available now.