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Novo, the SMB neobank, nabs $90M at a $700M valuation

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Novo, the SMB neobank, nabs $90M at a $700M valuation

Novo, the startup building a new kind of banking service from the ground up for small and medium businesses, has closed a significant round of funding to take the next step in growing its platform. It has raised $90 million, a Series B round that values the Miami-based startup at $700 million, funding that it will use to build out its infrastructure (going from 24,000 customers to 150,000 is no small feat); to add in new products, specifically around lending; and to acquire more customers.

There are a number of fintechs, some that describe themselves as challenger banks, in the market today catering to SMBs. (We’ve covered many of them; they include BrexRho, Juni, NorthOneLiliMercuryHatchAnnaTideViva WalletOpen and many more; and you could argue Amazon, offering other money management and spending tools, is also in the space.) But Novo sees incumbents as the real “challenger” here.

“We are competing against big banks. They are the only ones we are concerned with because they own 99% of the market,” said Michel Rangel, CEO of Novo, in an interview earlier this month. “We believe our product is better value for businesses, but we’re happy to see others also pushing the charge forward.”

The round is being led by Stripes, with Valar Ventures, Crosslink Capital, Rainfall Ventures, and BoxGroup — all of whom backed Novo in its $40 million Series A, just six months ago — also participating. The startup to date has raised just over $135 million.

A lot of startups are getting into patterns of raising large funding rounds in rapid succession to ride their respective waves of growth, and to capitalize on the huge opportunity right now to tap deep-pocketed investors looking for smart places to put their LPs’ money. That is very much the case here with Novo, too. The company has seen truly accelerated growth in the last year, and specifically the last six months, both in terms of customer numbers and in terms of how much its app is getting used.

Novo now has 150,000 SMB customers in the U.S., up by 50,000 on last June’s figures. And Novo has collectively now seen $5 billion in lifetime transactions, up by $4 billion on last June’s $1 billion. The company said that as of this month, it’s on track to see lifetime transactions for 2022 grow to $7 billion (although given it’s only January, that figure is likely to change).

“The pandemic was a catalyst for our growth,” said Rangel, who co-founded Novo with Tyler McIntylre, who is now the CTO. Rangel noted that this Series B came on the back of Stripes approaching Novo “at the tail end of its Series A” after the term sheets had already been signed. Watching its growth after that “validated” another quick round of funding, he added.

One thing that is very notable about Novo is that, unlike a number of other neobanks, it has not taken the “embedded finance” approach by porting in a number of basic services by way of APIs built by third parties that focus just on infrastructure and backend services. Instead, it decided to build its central functions from the ground up in-house. (It has a large development team, mostly based out of India, Rangel told me.)

“We say everything starting from the underlying core processor that powers the bank to what is in the hands of our 150,000 business customers has been built in house,” Rangel said. (Middlesex Federal Savings handles the banking license, FDIC insurance, and access to rails for Novo.) Rangel added that its choice to build was partly done out of necessity, since in 2016 there weren’t many banking-as-a-service platforms to provide those APIs. “That has unshackled us from someone else’s release schedule, and it means tighter margins,” he continued, but it does have its challenges, for example, in sometimes keeping product focus, and the investment needed to continue maintaining all that technology.

The company also hasn’t entirely opted out of APIs. Between its Series A and this latest round, the company launched a new Marketplace where it provides APIs for some 1,000 other apps and services that can be integrated into the Novo experience. Here, it focuses on features that sit otutside of the core functionality of a banking service, for example point of sale payments, e-commerce operations, invoice and payroll management and more. This, in fact, can also potentially provide a steer to Novo on what might be most popular and potentially worth considering as in-house products in the future, but for now it serves another couple of key purposes: it makes Novo more useful for its customers, and it provides more data sources to Novo to build future products.

Chief among those, Rangel said, will be a new lending product where loan applications will be evaluated quickly and (the hope is) more accurately by bringing in and considering a wider set of data that gives a more informed picture of how a business is operating. This is not unlike how, for example, Stripe and Shopify have built their own cash advance and credit products; the difference here is that Novo is intentionally aiming to source as much siloed data as possible to have the most complete picture of a business’s financial health.

This is not just about providing more accurate loans, but more of them overall.

“Despite being the heart of the U.S. economy, the more than 30 million small businesses in the U.S. have always struggled to access even basic financial services as they are constantly overlooked by the big banks,” said Saagar Kulkarni, a partner at Stripes, in a statement. “What sets Novo apart is a fundamentally different approach to helping small businesses succeed. Instead of opting for incremental change, Novo built its banking platform from the ground up so that it could not just deliver a great digital banking experience, but actually deliver de novo financial products to a customer base that is yearning for them. At Stripes, we only invest in companies building amazing products, and Novo’s rave reviews, strong retention, and incredible growth make it clear it has built something that small businesses love.” Kulkarni is joining Novo’s board with this round.

As the company continues to grow, Rangel said one other area it will be considering is picking up potential smaller players that fit with its bigger strategy. That’s if it doesn’t get acquired itself first. Rangel said it has been approached by at least one significant player in recent years but decided to stay solo. (That may have been for the best for other reasons, too: that company has since been acquired itself, one of the byproducts of changing tides due to the pandemic.)

“We’ve done the acquisition dance,” Rangel said, “but I think we’ll be the ones doing the acquiring now.”

Source: Tech

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Boston Dynamics’ warehouse robot gets a $15M gig working for DHL

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Back in March of last year, Boston Dynamics unveiled its second commercial robot, Stretch. The system, built from its impressive box-moving Handle concept, is designed to bring the company’s advanced robotics technologies into a warehouse/logistics setting – easily one of the hottest categories in robotics, these days.

Today the Hyundai-owned firm announced its first commercial customer – and it’s a big one. Logistics giant DHL has committed to a multi-year, $15 million deal (or “investment” as the parties are referring to it) set to bring the robot to its North American facilities. Specific details on the number of robots being purchased haven’t been revealed, but Boston Dynamics says it’s going to be bringing a “fleet” of the robots to DHL logistics centers over the next three years.

Stretch will get to work unloading trucks to start – a feature its creators have highlighted as a key part of its initial rollout. Additional tasks will be added, over the course of the roll out, in an effort to further automate the package handling process.

Says CEO Robert Playter, “Stretch is Boston Dynamics’ newest robot, designed specifically to remedy challenges within the warehouse space. We are thrilled to be working with DHL Supply Chain to deliver a fleet of robots that will further automate warehousing and improve safety for its associates. We believe Stretch can make a measurable impact on DHL’s business operations, and we’re excited to see the robot in action at scale.”

The partnership will be a key proving ground for Boston Dynamics’ commercial ambitions beyond its on-going Spot deployment. Package handling is an intensive, highly repetitive job that requires long hours, strain and multiple points of failure. This will be a major test for the company under Hyundai, which has sought to further its commercial ambitions.

For DHL, meanwhile, it’s an opportunity to automate some logistics roles during a time when blue collar jobs have proven difficult to keep staffed. It’s also a chance to more fully embrace automation as it competes with the likes of Amazon, which has begun steadily encroaching on the package delivery space.

Source: Tech

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Polly snags $37M in Menlo-led Series B to automate workflows for mortgage lenders

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Polly, a SaaS technology startup aiming to “transform” the mortgage capital markets, announced today that it has raised $37 million in a Series B funding round led by Menlo Ventures.

New backers Movement Mortgage, First American Financial and FinVC joined existing investors 8VC, Khosla Ventures and Fifth Wall in participating in the round. The latest financing brings the San Francisco-based startup’s total funding raised to $50 million.

Adam Carmel, founder and CEO of Polly, says the company has increased its customer count by nearly 3x over the past year, including “several of the country’s top 100 lenders.”

He founded the company in 2019 under the premise that while many industries have undergone digital transformation initiatives, the mortgage industry is still largely reliant on “the same expensive and cumbersome processes and tasks that have been in use for decades,” Carmel said. 

Polly’s mission is to fundamentally change the way lenders and loan buyers operate by giving them the ability to make data-driven decisions. The company’s software is “uniquely configured to automate customer workflows and improve execution — from rate lock to loan sale and delivery,” Carmel said.

Carmel previously founded Ethos Lending (which sold to Fenway Summers in 2014) and it was that experience that helped him conclude there were serious gaps in the market for automating workflows for lenders.

The need certainly seems to be there. For example, one company in the space is Optimal Blue, which was purchased by Black Knight for $1.8 billion in 2020. 

Carmel believes Polly stands out from others in the industry in that it is helping create a fourth category in the mortgage sector — capital markets.

“I viewed it as a sizable opportunity to build a vertically integrated software platform that would automate workflows for a mortgage company,” Carmel told TechCrunch. “My view is that over time consumers are going to expect not only a digital experience but also a mortgage product, loan and associated pricing that are customized and tailored for specific purposes.”

To that end, he added, Polly is laser focused on doing just that so that its customers “can configure individual loans as dynamically as they would like.”

“The goal is that ultimately, they are able to deliver a lower mortgage price to their consumers or to their customers while increasing their own profitability,” Carmel said. “We want to help these lenders move away from spreadsheets and telephony and email as a transaction medium, and instead do everything in the cloud. Over time, we want to be able to transition into a system of record for the customers themselves.”

Polly, he said, is able to help configure loans on a multi-dimensional basis.

The startup has increased its customer count by nearly “3x” over the past year and signed several of the country’s top 100 lenders. While it invested mostly on its product in 2021, it plans to put some of its new capital toward its go to market strategy while continuing to be “heads down focused on product.” That includes expanding its product and engineering teams and investing in AI and machine learning capabilities. 

“The next year or two is going to be a really exciting time for us,” Carmel said. “We see this as a compelling window and opportunity to really help transform the market.”

Menlo Ventures partner Tyler Sosin, who is joining Polly’s board of directors as part of the financing, believes the startup is “taking on a sector held back by sclerotic incumbents with dated, disconnected and dragging solutions” and “driving transformation and winning customers at an impressive rate.”

He said Menlo was interested in leading the company’s Series A round but “was a little bit too slow.” Impressed with Polly’s traction even at that point, the firm still participated in that financing with a smaller check and stayed close to the company.

We’ve gotten to know Adam and seen how the customers and the product and the team had evolved, so we leaned into the lead this round,” Sosin told TechCrunch.

Source: Tech

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Tinder updates its approach to handling reports of serious abuse and harassment

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As a result of its ongoing partnership with nonprofit and anti-sexual assault organization RAINN (Rape, Abuse & Incest National Network), Tinder today announced a handful of product improvements as well as training for internal teams at the dating app maker designed to better support survivors of abuse and harassment. Soon, Tinder also says its members will have access to background checks on their matches through Garbo, a nonprofit the dating app maker invested in last spring.

One key aspect of the partnership with RAINN involved training Tinder’s customer care team. Through the training, staff learned how survivors may report abuse and harassment, and how to spot reports of serious abuse — even if the reports use vague language to describe the events. The training, which is now also a mandatory part of Tinder’s onboarding and training curriculum, additionally provides instructions on how team members should respond to these types of reports when they occur.

Meanwhile, in the Tinder app, survivors will gain access to a more direct way to report someone they’ve unmatched with, even if they’ve waited some time before making their report. And they can now opt whether or not they want to receive follow-up information about actions taken, as some prefer to receive updates and others do not.

The app will also provide alternative support options, as not everyone will feel comfortable making a direct report. Through the Tinder Safety Center, a dedicated Crisis Text Line will be provided as well as the upcoming feature offering access to background checks on matches from Garbo. Tinder invested a seven-figure sum into New York-based Garbo in March 2021, which offers an alternative to traditional background checks that surface a wide variety of personal information — like drug offenses or minor traffic violations. Garbo instead focuses on whether or not someone’s background indicates a history of violence. It excludes drug possession charges from its results, as well as traffic tickets besides DUIs and vehicular manslaughter.

The Tinder Safety Center is now also accessible from anywhere in the app, reducing the number of taps it takes for a user to locate the resource.

“Our members are trusting us with an incredibly sensitive and vulnerable part of their lives, and we believe we have a responsibility to support them through every part of this journey, including when they have bad experiences on and off the app,” said Tracey Breeden, VP of Safety and Social Advocacy for Tinder and Match Group, in a statement about the changes. “Working with RAINN has allowed us to take a trauma-informed approach to member support for those impacted by harassment and assault,” she added.

Breeden, who held a similar position at Uber, joined Tinder in September 2020 as Match Group’s first-ever head of safety and social advocacy, tasked with overseeing the company’s safety policies across its apps, including Tinder, Hinge, Match, OkCupid, and Plenty of Fish.

Tinder and other dating apps have put a higher focus on member safety features after a 2019 report revealed how dating apps run by Tinder parent Match Group allowed known sexual predators to use its apps, due to the lack of background check features. Other reports have highlighted the very real safety concerns that accompany the dating app market, particularly those impacting young women — a key dating app demographic.

In early 2020, Tinder invested in Noonlight to help it power new safety features inside Tinder and other Match-owned dating apps, ahead of its investment in Garbo.

But Tinder’s changes aren’t only about protecting dating app users — they’re about protecting Tinder’s business, as well.

Tinder’s top U.S. competitor, Bumble has marketed itself as being more women-friendly, launching a number of features designed to keep users safe from bad actors, like one that prevents abusers from using the “unmatch” option to hide from victims, for example. Tinder has followed suit, launching new safety features of its own.

The company has also felt the pressure to get ahead of coming regulations impacting tech companies, like those operating social media apps and dating services. Tinder, which dominates the dating app market, today plays in social networking as well, with additions like quick chat features, an interactive video series, and other additions to its new Explore hub in the app.

“By adopting more trauma-informed support practices, Tinder will be better positioned to support members who may have experienced harm and take faster, more transparent action on bad actors,” noted Clara Kim, Vice President of Consulting Services at RAINN, in a statement.

Source: Tech

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