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Emergence Monthly: Tech giants are coming for your bank account

Emergence
01/01/19

What we're seeing in the market

Enterprise and consumer fintech, accounting, and HR giants and startups alike are lining up to fight to loan you money. Gusto, Square, Clearbanc, ScaleFactor, Earnin are all following in big bank's footsteps to the real money (and profit): lending.

PayPal, Square, eBay, Shopify – they're all coming for your bank account.
PayPal, Square, eBay, Shopify – they're all coming for your bank account.

This isn't necessarily a new strategy – banks have borrowed from deposits to loan to others as personal loans (credit cards, mortgages, bonds, CDs) or business loans for centuries.

Each bank develops their own internal algorithm for deciding who receives a loan or interest rate based on how risky they perceive you to be. This algorithm uses the types of data banks typically have access to – in the case of a credit card, your credit score, income, and your previous banking history at the bank.

The issue: every bank is largely working with the same data. Some consumers get overcharged on interest, others get a great deal.

These credit scores are notoriously bad. 25% of all credit scores contain errors. People have been misidentified as terrorists, sex offenders, and deceased. Oh, and they can't even protect your data.

Tech giants have long battled to use their proprietary datasets to offer competitive small business loans to their best customers. Square, Clover, PayPal, Amazon, eBay, Shopify, Intuit, and newer competitors like ScaleFactor and Emergence portfolio company Clearbanc are all using their proprietary datasets – mostly gross revenue – to offer $10B+ in loans to their most promising customers as far back as 2013.

The next wave of tech-enabled loans is coming... to consumers. Enterprise companies are beginning to work directly with their customer's employees to offer individual pay-day loans at better rates than the shady pay-day lenders that have preyed on the poor for years.

🤑 Earnin just raised $125M to help low-wage workers track and cash out their earnings in real-time. The app works directly with consumers, tracking how long they spend at work using their phone's GPS. Used by employees at more than 50,000 businesses.

💰 Emergence portfolio company Gusto launched Flexible Pay to let employees pick when they get paid. Employees can opt-in individually, opening up a new revenue stream for the company. Gusto currently serves 1% of all employers in the US.

As startups everywhere double-down on profitability, fintech enterprise companies often create opportunities to provide additional services directly to employees, either for free to decrease churn or in exchange for interest payments, the bread and butter of fintech.

In the end, despite profitable motives, employees are the real winners. Better data and credit score algorithms lead to lower prices and interest rates for deserving candidates that are often ignored by larger financial institutions. Good riddance, shady payday loans. 👋

Other things are happening.

Autodesk bought BuildingConnected for $275M (after PlanGrid last month). Cisco bought semiconductor manufacturer Luxtera for $660M. InVision raised $115M at a $1.9B valuation. There's a new most valuable public co: Microsoft. Amplitude raised $80M at a $850M valuation. Wave Computing raised $86M to build better AI chips. EdCast raised $34M (from Softbank!) to teach workers things. Pypestream raised $15M to build AI chatbots. Samsara raised $100M to track sensor data. And... Mary Meeker is raising a ~$1.25B fund called Bond. Clearly a missed opportunity to name it Money Meeker.

What we're hearing from GTM leaders

It seems like everybody is hiring a CFO… and stealing from Amazon.

Airbnb just stole Amazon VP Dave Stephenson and Robinhood nabbed Amazon VP Jason Warnick, following in the footsteps of Francis Nzeuton who joined clothing startup Dia&Co.

Amazon – a public tech company with enough scale to warrant multiple VPs of finance – is the perfect breeding ground for future C-suite execs, especially for companies that are ramping up to an IPO.

Scaling tech companies – both consumer-facing and enterprise – are struggling to find qualified CFO candidates with enough context and industry-knowledge to walk fledgling companies through the daunting process of going public. And as companies fight to poach each other’s engineers, salespeople, and marketers with millions of dollars in ad spend and massive recruiting teams, it’s no surprise that the fight for qualified CFO talent has heated up.

Tactical Advice from the Emergence Team

The Founder's Guide to Hiring Your First VP of Sales

Massive stakes. Hypercompetitive market. Simple to get right. Learn how to prepare for, identify, and close your perfect hire, with inside tips from the teams behind Salesforce, Box, and Yammer. Read more.

 

Avoid the 7 Deadly Sins of Seed Financing

Don't scare off Series A investors with poorly structured seed rounds. We're here to help you do it right, spreadsheets included. Read more.

 

How to Diligence your VCs

Picking a VC is like getting married without the option of divorce. Don't risk it. Curated tips from the other side of the table. Read more.

Words from the team

A Multi-Cloud Future: Our Investment in LogDNA

Your data isn't just moving into the cloud – it's moving into every cloud. We're excited to lead LogDNA's $25M Series B, helping devs spend less time sorting through logs and more time building products that change the way the world works. Read More.

Five Leadership Traits VCs Look For

Companies should be driven by more than money. Jason Green talked with Inc Magazine about why big problems can become a binding force for growth, the value of values, and how leaders can position their entire teams for success. Read more.

Coaching Network Startups are Rocketships

Coaching Networks, or AIs that teach workers to do their jobs better, are coming sooner than you think. Both Guru and Chorus.ai raised big rounds – $25M and $33M respectively – to help surface knowledge automatically and train salespeople with AI-generated suggestions from the best sales teams.

A Capital Idea: Our Investment in Clearbanc

Not every business is the right fit for venture capital financing. Santi Subotovosky spoke with Axios on the heels of Clearbanc raising $120M last year to finance the millions of entrepreneurs running online businesses. Read more.

Our AI Emperors Have No Clothes

As AI algorithms are increasingly commoditized, expect to see a wave of once-hot AI startups in nearly every vertical—law, medicine, fintech – shut down. Gordon Ritter shared more of his predictions as part of a Forbes AI roundup. Read more.

Where we're headed

SaaStr Annual – Feb 5-7, San Francisco

Perfect if you’re looking to scale up your enterprise network. Sign up.

Veeva Summit – May 13-15, Philadelphia

Insights on how to engage your customers intelligently. Sign up.

BoxWorks – October 3-4, San Francisco

Dig dep into Box's blueprint for the future of work. Sign up.

Zoomtopia – October 15-16, San Jose

Learn about the future of enterprise communication. Sign up.

Find your new home

Director of Brand & Marketing Communications – Crunchbase is the leading destination for millions of users to discover industry trends, investments, and news about global companies. They’re looking for someone to own brand marketing and build a team of copywriters, designers, and PR professionals to help. Apply here.

Chief Sales Officer – p44 is revolutionizing the freight and logistics industry, working with 175,000+ carriers worldwide. They're looking a sales leader with 5-10 years of experience who can build, scale and manage a sales team during hyper growth. Apply here.

HR Business Partner – SalesLoft activates the authentic seller in all of us... and they're growing fast. North America's 7th Fastest Growing Company is looking for an internal HR leader with 10+ years experience to lead employee experience for the 300+ other "Lofters." Their email marketing tool is loved by their 2000+ clients (i.e. Square, Cisco, Alteryx, Dell, MuleSoft, etc.). Apply here.

Or... join theEmergence Talent network for priority access and referrals to 700+ jobs in our portfolio. Apply here. 👈

What we're enjoying right now

Reply All – Long Distance I & II

A telephone scammer calls an investigative journalist, who end up becoming friends. We've all received those annoying calls, most alluding to a fictional Mac virus or IRS warrant, but it's easy to forget that there are real people on the other side. Listen here.

Don't Eat Before Reading This

The late Anthony Bourdain on why you shouldn't order fish on Tuesdays, how some ingredients are "saved for well done," and why the professional kitchen is the "last refuge of the misfit." Before Kitchen Confidential and No Reservations, Bourdain was a time-honored writer who used his prowess to highlight the rotten, grungy, and often romantic parts of working in a kitchen. Read his best words here.

Bill Patterson's Thoughts on the Real World

Before penning Calvin & Hobbes, Bill Patterson was spent five years writing grocery store ads."A friend used to console me that cream always rises to the top. I used to think, so do people who throw themselves into the sea." The speech is from 1990, but his love for his work, wit, and wisdom carries through til today. Read the full speech.

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