Michael Rihani

Corporate card wars continue… Brex, Ramp, Rho, etc. American Express, Visa and Mastercard are also continuing to scale. Glorified reward programs, like Bilt Rewards, seem like interesting approaches, but is it not just a race to the bottom? So many companies are focused on rewards and niche markets, but the more appropriate path forward is workflow-driven solutions. The challenge is that the unit economics for card players are juicy, so if you partner on the commercial card side, you’re losing out on large attractive spreads. It’s a fascinating landscape with 100s of companies taking various approaches.

46

2 Comments

Want a front-row seat to the frontier of tech? We’ve got the role (or two) for you! We’re expanding our frontier-tech team at Blackbird by hiring a Frontier Tech Investments Associate and Foundry Fellows! Got questions? We've got answers... 1️⃣ What are the roles? 🧪 Associate = a full-time VC investment gig in our Blackbird Investments team, working directly with me. We’re looking for someone with a science and/or engineering background and more curiosity than they can handle. You’ll grow your own investment brand and practice, support our portfolio founders, and will help build Foundry, our early-stage frontier-tech accelerator. ✨ Foundry Fellow = a casual/contract gig in our Blackbird Investments team, ~15h per week for 3 months. The Fellowship is ideal for PhD students and ECRs who want to learn more about startups and VC. You’ll go deep on emerging areas relevant to your expertise (or curiosity!), get a front-row seat to groundbreaking companies in those areas, build out your non-academic network, and develop a solid writing practice. 2️⃣ Why are you hiring? We love frontier tech, and we’re ready to grow our team. 3️⃣ Wow, it’s so great that you’re starting to look at deep tech! Look, we get it: we don’t make a lot of noise about our frontier tech investing. Buuuut we’ve been deep-tech investors since we backed Tim Kentley-Klay to found Zoox back in 2014—we’ve been on incredible journeys with PsiQuantum (building the world's first utility-scale quantum computer right here in Australia!), Inventia Life Science (transforming drug discovery with high-fidelity cell models), Remedy Robotics (surgical robots for remote endovascular procedures), Opto Biosystems (minimally-invasive neural implants to treat cancer), and more. We believe that frontier technologies, and great frontier-tech investing, will be part of the solutions to the greatest problems humanity faces today. 4️⃣ When do applications close? May 31st at 11:59pm AEST. 5️⃣ I have more questions! I’m sure you do! Clare Birch and I are hosting an AMA to answer any and all questions about these roles. Want to know what a week in the life of our team looks like? What’s keeping us up at night? What our ideal candidate looks like? Come along and find out - registration link in the comments 👇 Apply for these roles: Associate - https://lnkd.in/gCfj4EUJ Foundry Fellowships - https://lnkd.in/gj6ATZVZ If you know anyone that we should meet, send me their details! Cameron Elise Ben Andrew Robin Joseph Adelaide James Olivia Lucinda Raghav Jesse Christie Mohamed Tom Amee Pablo Haya Loong Hon Joshua Benjamin Megan Harry Denzil Matthew Diana Daniel Tom Deanna Justin Amar Lilly Stone Thomas

114

4 Comments

When I first read Jevgenijs Kazanins's very excellent fintech take on why Cash App Pay could be the next major driver of Block’s growth, I was floored by his initially compelling case that if Cash App can incentivize more payments payments volume to go through Cash App Pay, they can drive massive gross profit uplift, because Cash App Pay’s take rate is substantially higher than Cash Card’s take rate on purchase volume (2-3x). But if it were true, why hasn’t Cash App taken advantage? Whereas Jevgenijs is more optimistic about the ~$2.5bn in GPV that Cash App Pay has generated in its first ~2.5 years of existence, I find it downright embarrassing. That’s less than 1% of Square’s GPV after two years in the wild? And that’s despite it being essentially pre-installed on every terminal with no change in hardware required. I started to have a sinking feeling that maybe something was missing in the calculus. And as I dove deeper, it became clear that the “magic” take rate uptick we thought we’d found was more of a magic trick, relying on some deception. The seeming increase in take rate comes about like this. Normally, when a Cash App user makes a purchase, Cash App acts as the Issuer which means there are several intermediaries between what the merchant is charged and what Block earns on the transaction, meaning its ultimate take rate is relatively low. But in the case of Cash App Pay, there’s potentially a few magic tricks at work. The first is that in this case, Block is facilitating the Square merchant’s acquiring POS AND it’s issuing the Cash App user’s debit card, thereby cutting the intermediaries down in the typical payments flow and seemingly increasing Cash App take rates by 35-50% (instead of just interchange, you’re now getting interchange and markup). But then gets even better with the second trick, because if you’re both the acquirer and the issuer, *you don’t even need the payment network at all*. You can simply move money by book transfer between your merchant’s bank account and your user’s bank account in a perfectly closed loop payment network. Suddenly, Cash App Pay has a magical 2.9% take rate with no money movement costs at all. The problem with these magic tricks, like the ones in life, is that they are actually using some deception to hide what’s truly happening. Let’s play it out. In the status quo, without Cash App Pay, Square would earn ~1.85% in acquirer markup and Cash App would earn 0.90% in interchange for a total of 2.75% in take rate. In the Cash App Pay case, Square and Cash App would split the 2.90% Merchant Discount rate they artfully charged without having any money movement. So instead of the 2-3x markup, the uptick is more like +15bps (+5%). So maybe there isn’t a massive take rate arbitrage, but Block should still be focusing on its closed loop payment network because it represents huge opportunity for other reasons. Read the full post at https://lnkd.in/d93nkn29.

38

1 Comment

🚨 Bookkeeping is HARD - a Lesson from Synapse's Collapse 🚨 I was recently quoted in Mary Ann Azevedo's TechCrunch article on the bankruptcy of Synapse, a banking-as-a-service startup. As someone who works at a CPA firm that does bookkeeping for clients, the Synapse situation really resonated with me. Synapse had essentially one job - to sit between fintech startups and banks, and keep track of where each end-customer's funds went. Sounds simple, right? WRONG. Bookkeeping, especially in the highly-regulated world of finance, is incredibly complex. When Silicon Valley tries to "move fast and break things" in fintech without truly understanding the accounting complexities, people can actually get hurt. Supposedly, Synapse's collapse has impacted up to 10 MILLION consumers who now can't access their money. 😱 That's a lot of ordinary people who are going to have problems paying their rent or getting groceries. I'm seeing a similar wave of unkept promises hitting the small business accounting space. Startups saying that they can "automate" complex accounting tasks, but not really understanding what they actually need to do. And not taking into account how their mistakes will impact their small business customers. The last time this happened there were a lot of business owners who ended up losing a lot of their hard-earned cash when their supposed expert accountants messed up or dropped the ball. 😞 I'm sure that will happen again, and it bums me out. I'm all for moving fast and breaking things, but not if it hurts other people. https://lnkd.in/g6p_5viM?

8

2 Comments

Calling all fintech start-ups! C10 Labs has exciting news to share. J.P. Morgan is now supporting C10 Labs and its cohorts of entrepreneurs. As part of this partnership, C10 Labs companies will have access to J.P. Morgan's insights, products, bankers, and technologists. This support will assist C10 founders through their entrepreneurial journey and help them accelerate business growth. If you're interested in co-creating AI-First ventures, especially those in fintech, C10 Labs' 2nd cohort is now open for applications. Apply here: https://lnkd.in/eCjnUBnn Contact a C10 Labs team member about partnership opportunities here: https://lnkd.in/ewGCfhBb We want to extend our thanks to the incredible support by the J.P. Morgan team. To connect with them, click here: https://lnkd.in/eeEgvzSC. #entrepreneurs #accelerate #AI #fintech #partnership

111

9 Comments

Today I have this proposal: \\" I wanted to get an accurate cost as to having these 2 Payment providers integrated on our website (client area): STRIPE - ACH, SEPA & BACS- Braintree and Paypal EXPRESS CHECKOUT (for the purpose of receiving payments from clients). What do we need to do to our end, e.g sign up to their services as a client etc. We want the job to be for 1 week, what sort of access do you need? Here is the website, it's a wordpress website: https://www.... ... .../ How long will this task take? What is your charge? We will need maybe 1 month support in case some error should occur and add that to your charge. "\\ Someone knows how to do this ?)

2

One of aspects of Carta's product development that excites me the most is not something we have an opportunity to talk about a lot. Its the infrastructure behind the product experiences we build that is so foundational to the ecosystem. Carta money movement infrastructure moves billions of dollars every year to facilitate crucial transactions. Now we are bringing automated money movement to fund admin and it is a game changer. This infrastructure will work to eliminate the manual, black box, and cumbersome ways that fund transactions are processed today. The future is transparent, seamless and predictable for Carta Fund Admin customers. I am pumped! https://lnkd.in/g3W_cRxn

98

3 Comments

It is very interesting to see Stripe decoupling embedded fintech from its core payments stack. This shows that Stripe's embedded suite is mature enough to stand on its own. This flexibility is very important to larger companies, which may want to use some elements of the platform but not all. Here at Tint, we also believe in flexibility, which is why we built our embedded insurance platform to be modularized. We offer the tech, services, and access to insurers that brands need to launch their solutions and let them choose from a plug-and-play solution to a bespoke combination of modules. In the end, flexibility will win in embedded insurance in the same way it won in embedded payments!

39

Block, the parent company of Square and Cash App, aims to leverage its dual ownership to create synergy between its point-of-sale software and peer-to-peer payments app. Jack Dorsey, Block's founder, highlighted the advantage of having relationships with both merchants and consumers, stating it's a rare position in commerce and payments. Ryan Budd, Cash App's head of financial products, hinted at plans to integrate a small business experience into Square and incentivize Cash App users to engage with Square merchants. Block is focused on connecting Cash App's consumer base with Square's merchant network, aiming to transform Cash App into a consumer app for interacting with Square merchants. This move aligns with Block's strategy to dominate various aspects of the consumer ecosystem and potentially monetize consumer spending data for advertising purposes. Read More Here: https://lnkd.in/eh-8KS9V Eugene Tsay Wade Robison John O'Beirne Emily C. Chiu Eileen Wiens Jim McKelvey Branded Hospitality Ventures #innovation #venturecapital #hospitality #technology Owen Jennings (OBJ) Brooke Ellis Jamie (Russo) HicksMing-Tai Huh

5

🚨 A fintech veteran and early-stage VC who’s backed companies including LendingClub and Practice Fusion, Canvas Ventures’ Rebecca Lynn joins us for for this week’s VC Wednesdays. 🚨 🖋️ You’ve invested mostly in fintech and digital health. What's your focus in 2024? I’m really excited about the boost AI gives both verticals. A lot of the models we’ve wanted to find or companies we’ve wanted to fund didn't make sense until technology caught up with them, and because of AI, we’re looking at them again. An illustration is Casetext, Part of Thomson Reuters. They were doing well and growing year-over-year, but they weren't a rocketship until that final puzzle piece with AI came into play, and they were truly able to deliver what they set out to — replacing legal associates. 🖋️ What other AI applications are you thinking about? In fintech, we’ve always really liked the wealth management space, and believed that technology can take the load off the investment adviser. Until generative AI came along, you couldn't do that efficiently, but now we're leading a deal doing exactly that. And in healthcare, there’s an opportunity to take patient communication off the shoulders of the doctor's office. We’re seeing both fintech and digital health companies solve things from the consumer perspective, but the real issue is on the payer and enterprise side, because they’re now going to have to deal with these inbound AI calls, and they're already overwhelmed. 🖋️ What’s the No. 1 thing you look for in a startup?   I look for the kind of company that if I wasn’t an investor, I'd want to start or join myself. That makes me say, ‘Damn, I should have thought of this.’ The team, market, opportunity and how big it can be comes below that. An example is Marvin. Behavioral health startups have their own set of challenges, but the CEO understood the issues well and developed a network of trained therapists to deal with high trauma patients: surgeons, doctors and anyone in the healthcare sector. When they came to us, they already had significant revenue and were selling to hospitals directly. The value-add of Marvin is that they have delegated credentialing, which solves the big problem of churn.   🖋️What’s the most atypical piece of advice you give startups? I don’t believe in a first mover at all, which is what I was taught by the CEO and president of Procter & Gamble. Why on earth would you ever want to be a first mover, when you have to pay so much money to get your consumer and prove out a market? Letting somebody else do that, and then coming in lightning fast on a more agile tech stack to win in the market is a much better way to do it. Which of the top companies today were first movers? Certainly not Google or Apple. I’d rather back a fast follower like LendingClub or Doximity — that did something other people had done in the past but did it infinitely better. #VCWednesdays #vc #venturecapital #startups #TechonLinkedIn

36

1 Comment

I recently talked with Paz Yanover, VP of Product at Amplication, about creating and managing effective docs. Here is his developer docs success formula (check 1st comment): In this interview, Paz shares his formula to creating developer docs that drive product adoption. You'll learn: - The important role docs plays in support and attracting devs - Tips for balancing technical accuracy with user-friendliness in your docs - Strategies for effective collaboration between technical writers and product teams Check the first comment for the full interview. --- Enjoy this? ♻️ Repost it to your network and follow Derick Ruiz for more.

19

1 Comment

Regulatory clarity for responsible crypto innovation is emerging in the US and stands to catalyze the market adoption of such innovations. When regulations are clear, consumers and innovators all benefit. Financial Innovation and Technology for the 21st Century Act (#FIT21) is expected to pass with bipartisan support in Congress. FIT21 would redefine how securities issuers have to comply with existing federal law and Supreme Court precedent. The bill would create a new definition specific to digital assets, to identify when they're digital securities or digital commodities and whether the SEC or CFTC should be the primary spot market regulator. This collaborative approach signals a shift away from the current unclear, antiquated and antagonistic processes in some of the US regulatory agencies.

24

4 Comments

Plaid Layer is an incredible experience but gives me heartburn -- Not because the product is bad, but because the conversion metric shouldn't be the only one. Plaid has launched Layer, a new service that allows users of finance products to get through KYC by simply entering their phone numbers. This aims to reduce onboarding to 15 seconds and deliver 17.5% higher conversion at onboarding. 1. Users enter their mobile number, and 2. If the Plaid network has data that makes them eligible to onboard, they can "instantly sign up." 3. Plaid performs fraud checks (like looking at the user's device) and 4. Then allows users to confirm what details they want to send. 🧠 As an industry, we desperately need portable KYC. KYC and onboarding are stuck in the analog era, pulling SSNs and asking for selfies. It's an expensive, leaky bucket that can be easily beaten by deep fakes and stolen data from the dark web. Pulling data from trusted sources (like another financial institution) bound to a device or telephone number is potentially more effective and a much better experience. 🧠 This is a fraud product masquerading as an onboarding product, and that's smart. The way to get the best possible fraud vs friction tradeoff is to do as much passive data detection as possible at onboarding. Looking at the user's device, email, and mobile history, with various two-factor authentications like SMS or passkeys, can add a ton of security. Plaid having that in their network and as a part of the onboarding sell is really good packaging. 🧠 Do you know how to get 100% conversion at onboarding? Let all the bad guys in. Look, I love this innovation, I love this product, and I get that Plaid is doing very clever things with data behind the scenes to actually make this potentially better than collecting an SSN and selfie at onboarding. All of that said, there's a reason a lot of sponsor banks are under consent orders for KYC/AML failings. We treated onboarding as a conversion problem, not a good customer conversion problem. Can we, as an industry, measure and benchmark that too? Even anonymously? All of that said - you have to love the execution here. Plaid are damn good at what they do. #fintech #kyc #fraud

270

22 Comments

Yelp has launched a new AI-powered assistant on their iOS app, revolutionizing the way users connect with local businesses. Located under the "Projects" tab, the Yelp Assistant allows users to easily find professional services by simply chatting with the AI, which smartly matches them to relevant professionals based on their needs. Yelp is empowering developers with the new Yelp Fusion AI API, enabling the integration of this conversational AI into third-party platforms for tailored business recommendations. On the restaurant front, Yelp has also revamped its Guest Manager tool, enhancing the dining experience for customers and streamlining operations for restaurant staff. Yelp continues to innovate, providing efficient solutions for discovering and connecting with local businesses. Read more from Techcrunch here => https://neoswap.cc/28e2a5 #YelpUpdate #AI #TechNews #LocalBusiness #Innovation

10

2 Comments

I've long been an advocate of getting more people to invest in startups, but aware that uneducated investors are not good for the ecosystem. 🤔 That's why I love the current efforts to educate and activate a new population of investors! In particular, I'm a huge fan of Hustle Fund 's Angel Squad 😍 , that are committed to developing an ecosystem of informed investors and evangelizing angel investing! 💸 Early stage investing can be a true win/win when done right and should be available and understandable to more folks! https://lnkd.in/gXsbsN_i #angelinvesting #venturecapital #startups #founders #TheFoundersForge

9

📖 Weekend Reading 📖 1️⃣ This week, Jevgenijs Kazanins kicked off quite a few Twitter threads with his piece, “a few reasons to be bullish on Paypal.” PayPal has three major parts of its business: Paypal checkout (ie. branded checkout), Braintree (ie. unbranded checkout), and Venmo (with some other services like Xoom and Zettle, but these are minor in comparison). Braintree is dominating in TPV (and growing) but is much lower margin than branded checkout, because processing is outsourced to Fiserv. As Simon Taylor pointed out, there is clearly a massive opportunity to bring this in house and push on branded checkout. Other clear opportunities include international and expanding wallet services. https://lnkd.in/dnxJQkaY 2️⃣ Philo (in MD&A) wrote the ultimate piece on buybacks vs. dividends, going through many of the standard claims around buybacks (ie. that they are immoral, that they juice exec comp, that they divert funds away from wage increases, etc.) and methodically dismantling them. In the process, they also provide some very helpful historical context around the rise of buybacks as an increasingly popular form of redistribution of earnings vs. dividends. “Buybacks initially put all of that cash into the hands of shareholders who want out, while dividends initially distribute the cash equally among all shareholders.” https://lnkd.in/dqVSvqZU 3️⃣ Perhaps the biggest product announcement in fintech this week was Visa’s flexible credentials. Tom Noyes summarizes the implications, in passing highlighting the power of Visa’s network. “To defeat Visa, you not only have to create a better network, but you must also create a better economic model for EVERYONE to switch AND overcome the combined investment of all current stakeholders.” https://lnkd.in/dpDecYBx That one’s a paid post, so if you’re just curious about the key points, here’s a nice Twitter thread by Terry Angelos: https://lnkd.in/dMgGKazV 4️⃣ Now for something completely different, an incredible bit of reporting on the Wagner Group’s influence in the Central African Republic, by @James Pogue (in Granta Publications). If you have ~45 min, get yourself a cup of coffee and read this article. It is wild and eye-opening and a sobering challenge to the stories the West tells itself about what its role might or should be in Africa. “People reproached the West less for being brutal than for being weak. The West had…kept the country colonized while trying to avoid the dirty work that came with being a colonizer.” https://lnkd.in/d_kiuEhH #fintech #paypal #ecommerce #venmo #checkout #payments #buybacks #dividends #visa #flexiblecredentials #bnpl #taptopay #a2a #wagner #putin

7

In the world of startups, a fascinating trend is emerging from Y Combinator (YC) cohorts: smaller rounds with higher valuations. Loren Straub of Bowery Capital noticed this shift while engaging with recent YC grads. These startups seek modest investments but aim for hefty post-money valuations, typically around $15 million. This departure from the norm reflects a nuanced understanding of market conditions. YC's stamp of approval holds weight, but founders are recalibrating their strategies. While some outliers like Leya and Yoneda Labs reel in substantial funding, many tread a leaner path, testing the waters with angel investors. Yet, this shift isn't without its complexities. This evolving narrative underscores the dynamic interplay between startup culture and investor sentiment. As the startup ecosystem continues to adapt, one thing remains clear: YC's influence reverberates far beyond Silicon Valley, shaping the contours of innovation. To delve deeper into this captivating narrative, check out the original article on TechCrunch.com 🚀 #StartupInsights #VCtrends #Cre8tiveCapital https://lnkd.in/g5aSS9gX

2

Closing out on YC W24 batch with the ever-present question: Are YC Valuations Too High? 🔥The same burning question resurfaces whenever Y Combinator unveils its latest batch. At Acacia, we dive into this semi-annual debate with a nuanced perspective. 🎓Start with the fundamentals of SAFE agreements, which cap the price of equity in future priced rounds. Valuations are not being set, but expectations sure are. 👩‍🍼Next acknowledge that many YC companies are in their nascent stages, often pre-revenue and reliant on their first external capital, usually from YC itself. 🤝Not only are valuations not being set, but YC isn't setting them. Founders set caps and target raise amounts considering market trends, YC terms, feedback from angels and VCs, and more. With a low acceptance rate and strong historical track record, YC founders ask for more (right or wrong.) 👉The process is intricate and merits a careful approach from investors like Acacia, who invest in companies, not an entire batch. 🎰 Often, we encounter YC startups asking for valuations that seem to include every possible future success. Our Investment Committee carefully considers whether the price reflects real-world potential or an over-optimistic scenario. Companies that rank strongly on revenue but are fully priced at 40x or higher multiples risk being priced to perfection. The biggest risk here is being set up for down rounds, as companies can miss growth targets for many reasons (recently, macroeconomic factors like interest rate spikes.) 🎯As we navigate the complexities of startup valuations, particularly those emerging from YC, our goal at Acacia isn’t just to invest. It’s to partner with companies whose potential to grow and succeed aligns realistically with our assessment and market trends. 🎤What’s your take on YC valuations? Have you experienced similar questions or challenges in your investment decisions? Share your thoughts below.

4