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A tale of two surveys: Fintech VCs change tune on investment landscape – TechCrunch

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Welcome to The Interchange! If you received this in your inbox, thank you for signing up and your vote of confidence. If you’re reading this as a post on our site, sign up here so you can receive it directly in the future. Every week, I’ll take a look at the hottest fintech news of the previous week. This will include everything from funding rounds to trends to an analysis of a particular space to hot takes on a particular company or phenomenon. There’s a lot of fintech news out there and it’s my job to stay on top of it — and make sense of it — so you can stay in the know. — Mary Ann

What a difference a few months makes. In mid-February, we published a survey of 10 fintech investors with questions on topics such as what areas they are excited about and their outlook for the future. Here we are, not even six months later, and the vibe from the responses of our latest survey — this time of eight fintech investors — is a very different one.

A few examples…

When asked in February what differences in the landscape he saw in 2021 and if deals were much more competitive, Accel partner Ethan Choi responded: “On the investing side, deals were definitely more competitive and valuations certainly reflect that, even despite a correction in public fintech comps.”

And SoftBank Investment Advisers’ managing partner Munish Varma, in response to the same question, said: “The heightened level of funding has increased competition, especially for high-quality companies.”

In July, when asked the same question, Lightspeed Venture Partners’ Justin Overdorff said: “Seed hasn’t changed that much, but Series A and Series B round sizes have definitely compressed. Companies are raising less money at lower valuations than in 2021, which reflects the market sentiment.”

And Avid Ventures’ founder and managing partner Addie Lerner said: “Last year…given very low interest rates, investors were seeking yield anywhere they could find it and paying a premium for growth. Now, in a rising interest rate environment, investors across stages are valuing companies based on fundamentals and prioritizing capital-efficient growth, while looking more closely at public market comps for valuation guidance.”

Bottom line is that earlier this year, the sentiment was more of: “Woo hoo — everything is amazing and 2021 was a stellar year in the world of fintech.” And today, it’s more like: “We’re proceeding very, very cautiously — and you should too.”

I have to say that both my editors and I were very impressed with the thoughtfulness in the responses of these surveys. The VCs who responded — which this time around included Paul Stamas of General Atlantic, Alda Leu Dennis of Initialized Capital, Michael Gilroy of Coatue, Justin Overdorff of Lightspeed Venture Partners, Addie Lerner of Avid Ventures, David Jegen of F-Prime Capital, Nik Milanović of the Fintech Fund, Jay Ganatra of Infinity Ventures — clearly took their time to provide nuanced answers that help give us a better picture of the current fintech investment landscape. In my humble opinion, the quality of the responses along with all the fabulous analysis and overall content consistently produced on TechCrunch+ is well worth the $99/year cost of the subscription.

Weekly News

Starting his career in fintech as a software engineer, Rex Salisbury became a founding member of Andreessen Horowitz’s fintech practice alongside general partners Anish Acharya and Angela Strange before becoming a partner in 2019. During his two years at the firm, Salisbury went on to back the likes of now-decacorn Deel and Tally, two companies he had gotten to know through the Cambrian community he’s built up since 2016. Now he’s launched his own early-stage fund, Cambrian Ventures, out of which he plans to deploy $20 million “to back the next generation of fintech founders” at the angel, pre-seed and seed levels with checks up to $500,000.

Publicly traded Lemonade has laid off about 60 employees of Metromile, the auto insurtech company it recently acquired — adding to the volatility the technology sector has seen over the past 18 months. In an emailed statement, a Lemonade spokesperson told TechCrunch that it was “able to offer a role at Lemonade to about 80% of the Metromile team,” but that as the deal was “synergistic” it is able to “operate with fewer people than were needed to staff the two standalone.” Such staffing cuts are not abnormal in such business combinations, even if that is little comfort to those in eliminated roles. Meanwhile, sources tell me that many employees felt “blindsided” by the move and question whether Lemonade complied with the WARN Act. Those same sources also say that Lemonade required outgoing employees to sign a form with a “non-disparagement” clause. I reached out to Lemonade to ask about all of this, but got no reply.

China’s billionaire tech boss Jack Ma plans to cede control of Ant Group, the fintech powerhouse closely affiliated with Alibaba, the e-commerce giant he founded, the Wall Street Journal reported on July 28. If realized, the move will mark another important turn in Ant’s restructuring and power shuffling since China called off its $35 billion initial public offering nearly two years ago.

Instacart announced on July 25 that the Electronic Benefits Transfer and Supplemental Nutrition Assistance Program (EBT SNAP) can now be used to buy groceries online in 10 additional states through its app. The 10 states are Colorado, Hawaii, Idaho, Louisiana, Montana, New Mexico, Oregon, Utah, Washington and Wyoming. Instacart says Albertsons Companies and Sprouts Farmers Market are among the first to accept EBT SNAP online in these states. For some context on how the program came about in the first place, check out this article I wrote earlier this year.

Cardless announced plans to launch co-branded credit cards on the American Express network. The move follows Amex Ventures’ investment in the three-year-old San Francisco–based startup’s $40 million Series B round that was announced in July of 2021. The company declined to say how much Amex contributed specifically other than to say it was “significant.” Put simply, Cardless aims to help consumer brands launch credit cards “very quickly and easily” by handling the program creation, card underwriting, lending, issuance and customer service for brands.

As we discussed last week, many believe that the modern-era consumer credit score system is broken, locking millions of potential homeowners out of the American dream. Ready Life, a new fintech backed by Figure Technologies, has developed what it describes as a “revolutionary mortgage lending model” that relies on good rental payment history to qualify buyers for home purchases. “We are rewriting the rules for homeownership,” says Ready Life CEO Ashley D. Bell, a corporate finance attorney and a former White House policy advisor for Entrepreneurship and Innovation, in a press release. When the Ready Life platform launches this fall, consumers who pay their rent on time using the Ready Pay Visa Debit Card will qualify for mortgages without a credit score review, the company says.

Earlier this year, Apple revealed a new buy now, pay later feature, Apple Pay Later, that has reportedly now drawn the attention of the Consumer Financial Protection Bureau (CFPB), reports 9to5Mac. According to the publication, CFPB director Rohit Chopra said that Apple Pay Later raised “a host of issues,” with antitrust concerns. The Financial Revolutionist points out that “while Apple’s move into BNPL will leverage the Apple Pay network and Apple’s reach through hardware to scale quickly, this combination of software and hardware is what makes Apple Pay Later a potential privacy risk.”

Payments giant PayPal finally has attracted an activist in Elliott Management, a $50 billion hedge fund, reported the Wall Street Journal and Barron’s. The latter publication says, “PayPal had been a pandemic-darling as households increasingly shopped online but shares have slid more than 60% this year as people returned to their pre-pandemic spending habits. Earlier this year, the company cut its 2022 earnings forecast, which led to the company’s worst one-day selloff in its history as a publicly traded company.” PayPal’s valuation has tanked to $89 billion from $350 billion over the past year. Why should we care? Well, according to the Financial Revolutionist, If Elliott’s activist-investor takeover succeeds, then the hedge fund has several strategies at its disposal to correct the course at PayPal.”

Visa and Mastercard’s earnings are good indicators for the economy as a whole, according to Moody fintech analyst Peter Krukovsky, who wrote via email: “Card networks Visa and Mastercard are a terrific broad barometer of economic activity, and the strength of Visa’s US transaction flows in the June quarter and in July indicates sustained solid consumer demand. While the demand effect of higher interest rates may build over time, continued strong trends at the card networks point to sustained growth trends for the payment processing industry.”

After Brex’s controversial announcement that it would no longer work with SMBs, it has now tapped San Francisco–based startup Oxygen “to provide their small business customers a smooth transition.” Last November, TC’s Manish Singh had reported that Oxygen — a digital bank aimed at freelancers and small businesses — was reportedly raising funds at a $500 million valuation.

Speaking of spend management, Ruth Foxe Blader, partner at Anthemis Group; Eric Glyman, co-founder and CEO of Ramp; and Thejo Kote, founder and CEO of Airbase will talk about balancing runway and growth onstage at TechCrunch Disrupt on October 18–20 in San Francisco. For more details, head here. P.S. Hope to see you there!

Alternative investment platform Yieldstreet has appointed Timothy Schott to serve in the newly created role of chief financial officer. In a press release, the company said that Schott’s “expertise in a wide range of finance and business functions, as well as his significant capital markets and M&A experience, positions Yieldstreet for continued customer growth and long-term success.” When asked if this meant the company was eyeing the public markets, a spokesperson told me via email: “No plans! Tim’s just been brought on board to build out the infrastructure so the company can scale.”

There is no doubt that the COVID-19 pandemic has made it less common for people to use cash to pay for their everyday purchases. Because of hygiene and social distancing measures, merchants who used to frown upon letting customers pay small amounts by card are now encouraging contactless transactions. And with many outdoor activities simply out of the question, cash was more often hoarded than it was spent. Now it appears that contactless payments are here to stay.

Looking at Latin America’s socioeconomic conditions these days, you can find plenty of reasons to be pessimistic or at least daunted by how much is left to improve. Sure, problems are also opportunities, but what if there are just too many hurdles to overcome in the near future? And yet, despite the worsening global and local macroeconomic climate, unicorns keep being minted in the region. Here’s why Clocktower Technology Ventures remains bullish on the region’s fintechs.

Viber, the messaging app owned by Japanese e-commerce giant Rakuten, has long been dancing around the area of fintech, launching services like money transfer and chatbot payments in various countries over the years. Now it is making a move to double down on that strategy: It’s launching Payments on Viber — a new service that will let users set up digital wallets tied to their Viber accounts.

Funding and M&A

Balance raises $56M to tip the one-click checkout scales in favor of B2B merchants

Sequoia backs fintech Dbank in maiden Pakistan investment

Pogo lands millions to become the ‘Honey for the real world’

You can’t afford a house, but you can probably afford Nada

Fintech Guava raises $2.4M to provide banking services to Black small business owners

With over $3B in AUM, Portage Ventures targets $750M for its first late-stage fintech fund 

PSA: Startup Battlefield 200 Applications close soon. Apply today to join Startup Battlefield 200 for the chance to exhibit your startup for free at TechCrunch Disrupt this October and win the $100,000 equity-free prize. Applications close August 5.

One more thing, be sure to listen to fellow fintech enthusiasts Alex Wilhelm, Natasha Mascarenhas and I riff on a bunch of industry news in last week’s Friday edition of the award-winning Equity podcast.

With that, it’s time for me to go. Thank you for reading and may you have a wonderful week ahead. I can’t believe it is nearly August already. Where has the summer gone? xoxo, Mary Ann

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NorZinc agrees sale to investment fund with Dehcho mine in doubt – Cabin Radio

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NorZinc, the company trying to develop the Dehcho’s Prairie Creek Mine, has agreed to sell itself to a private investment fund as its debts mount.

In a news release on Friday, NorZinc said it had no reasonable alternative. The buyer, RCF VI CAD, is a Delaware-registered branch of Resource Capital Funds, which already held 48 percent of NorZinc’s shares.

The sale agreement, which must be ratified by shareholders in the coming months, comes as RCF provides NorZinc with an additional US$11 million loan “to address the company’s near-term liquidity needs.”

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RCF is offering NorZinc shareholders $0.0325 cash per share, a slight premium on the 45-day average of $0.0314. On Friday afternoon, shares were trading at $0.035 each on the Toronto Stock Exchange.

The fate of the Prairie Creek Mine is unclear.

NorZinc bills the mine, on a parcel of land entirely surrounded by the Nahanni National Park Reserve, as “Canada’s next high-grade zinc, silver and lead mine.”

But finding anyone with the money to get the mine built has been difficult.

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In theory, the mine could be operational by 2025. Regulatory permits for a mine to be constructed were received earlier this year and a winter road to the mine site has been in development.

On Friday, however, NorZinc said it had debts of more than $6 million, was at “material risk” of defaulting on that debt without a sale to RCF, and had “explored all viable strategic alternatives” to a sale without success.

The news release made plain that Prairie Creek is by no means certain to go into production, despite president and chief executive Rohan Hazelton’s statement on Friday that he and the company “remain bullish on the long-term viability of the project and the positive impact it will have on the local region.”

Several paragraphs later, the news release stated: “The company requires significant funding to advance its Prairie Creek project – particularly at this crucial point, as major work on site and access development is in progress.

“The company currently has limited cash and negative working capital to fund the necessary capital projects … has been seeking funding to support its long-term business plan since early 2021, and has been unsuccessful to date.

“It will be several years before the Prairie Creek project reaches commercial production, if at all.”

NorZinc has tried to drum up interest in Prairie Creek by pointing to zinc’s addition to Canada’s critical minerals list – a list of minerals “considered critical for the sustainable economic success of Canada and our allies,” according to the federal government.

But the company has faced trouble building its winter road and has not always enjoyed healthy relations with nearby First Nations.

In a letter to regulators earlier this summer, Fort Liard’s Acho Dene Koe First Nation highlighted the proposed mine’s potential impacts, such as increased heavy traffic and metals runoff.

“Our position is that our concerns have not been heard, have not been considered, and have not been accommodated,” the First Nation wrote.

“We look at how this project has been proposed and can’t help but feel there are better alternatives to the successful construction and operation of the Prairie Creek Mine.”

The Nahɂą Dehé Dene Band, in Nahanni Butte, stressed in a letter of its own that the mine site and proposed access road are entirely within its traditional territory.

Elder Jim Bedsaka said that while the community of Nahanni Butte supports the mine, the community had been “getting a lot of interference” from other communities claiming rights.

“We should be the one who approves it.” he said at the time. “There are so many little concerns outside of the community slowing down the project. We have money now. Let’s, if we can, approve it.”

The company, it transpires, did not have enough money to keep going without outside intervention.

“While we believe this asset has an exciting future, given the current capital markets, debt and equity position of the company, we believe this is the best alternative for the company and its shareholders at the present time,” Hazelton said of the proposed sale on Friday.

“We are proud of the recent milestones achieved in permitting and Indigenous community agreements that have advanced Prairie Creek development.”

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Three Rules For Successful Bear Market Investing – Forbes

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The markets are ugly: through the first three quarters of 2022, the S&P 500 is down nearly 24%, and the bond market, usually a safe haven when stocks are dropping, has shed 13%. Plus, the US economy seems destined for recession (we might be in one already), inflation continues to be stubbornly persistent, and Russia’s invasion of Ukraine, in addition to being a humanitarian tragedy, is causing dire economic effects.

All this bad news and accompanying market volatility increases our fears of uncertainty making us feel anxious and stressed. It’s not fun. Yet, investors aren’t powerless in the face of uncertainty; we can control our behavior. Below are three rules to help weather the bear market (defined as a market decline of 20% or more) and have better investing practices.

Rule #1: Adopt a Big Picture Perspective

I vividly remember New Year’s Eve 2019 because I was on a ski vacation and attended a party at a beautiful condo in Vail, Colorado. At the party, I struck up a conversation with a college student interested in investing who, once realizing what I do for a living, asked what I thought the stock market would do in 2020. My answer was that it would probably be up, but it might also be down (that’s my prediction every year, which you can access here: 2020, 2021, 2022). The student thought my answer was hilarious (probably helped along by beer), and our conversation moved on to other topics.

I think about that conversation a lot. What if on that New Year’s Eve I had a crystal ball and knew that a pandemic was about to sweep across the globe, killing tens of millions, shutting down vast swaths of the economy, and creating supply chain disruptions that would last years? What if I knew that Russia would attack Ukraine, that inflation would spike to over 9%, and that the Federal Reserve would increase the Fed Funds Rate by 3% within six months? If I had known all that in advance, what would my prediction for the stock market have been? It probably wouldn’t be that even after a 24% decline in the first three quarters of 2022, the S&P 500 would still be up 16% compared to December 31, 2019! You read that right. Even with everything that has happened in the past (almost) three years, the market is up 16% (dividends reinvested). And the market is up 41% compared to December 31, 2018, and 164% since December 31, 2009. The lesson to draw is that even if you knew advance about what would happen in the economy, it wouldn’t tell you what the stock market will do.

Whenever you feel anxious about your investments, reflect on how well you’ve done over the past five, ten, 20, and 30 years. As I advised in a recent article, don’t focus on the high watermark of your portfolio. Instead, pull back and adopt a long-term perspective.

Rule #2: Don’t Look at Your Portfolio

Successful investing requires adopting a long-term perspective, but frequently checking your portfolio, especially when it’s down, makes that challenging; it’s like trying to see something in the distance while wearing reading glasses. Seeing the value of your investments drop can make it feel like you are under attack, making it seem like you need to take action. Yet making portfolio changes in response to emotions is not a best practice; numerous studies have found that trading activity leads to lower returns.

My advice? If you work with a financial advisor, let them monitor your portfolio and advise when you should take action. If you manage your own investments, only look at your portfolio at regular intervals, such as quarterly or semi-annually.

Rule #3: Just Keep Buying

Now is a better time to put money to work in the market than a year ago because prices are lower. Lower stock prices are welcome news if you are a long-term investor and plan on adding to your portfolio. Because market bottoms and tops cannot be called accurately, the best strategy is to keep buying as the market gyrates. Invest as the market declines and invest as it rebounds. It’s a simple concept but not so easy to execute when it feels like the worst is yet to come. Plus, the stock market often rebounds while economic news is dire, so don’t let bad financial news keep you from investing. History has shown that when markets are volatile, the best course of action is almost always to ignore both the markets and our portfolios.

An effective way to overcome emotion is to set up your accounts, so money is automatically invested (like how 401[k] plans work).

Conclusion

Unfortunately, suffering through bear markets is the cost of being an investor. You can’t reap the benefits of investing without paying the cost. For years, investors have worried that the stock market’s strong returns and high valuations aren’t sustainable and that a bear market must be looming. Now the bear is here. Take a deep breath, broaden your perspective, don’t look at your portfolio, and keep putting money into the market.

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Targeted policies needed to boost investment in climate change fight – UNCTAD

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Attracting international private investment is crucial to closing financing gaps to better respond to countries’ specific needs in climate adaptation and mitigation.

© Shutterstock/Michel luiz de Freitas | Policies to curb climate change through foreign direct investment have focused primarily on the renewable energy and electricity sectors.

Ahead of the next UN climate change conference (COP27), UNCTAD has underscored the growing urgency of shoring up investment to combat the existential threat facing humanity.

A special edition of UNCTAD’s Investment Policy Monitor released on 29 September calls for effective measures to mobilize private sector investment and foreign direct investment (FDI) in key sectors related to climate mitigation and adaptation.

“Innovative ways and means are needed to foster public and private partnerships, improve the enabling policy frameworks and build capacity for preparing pipelines of bankable and impactful projects in developing countries,” the report says.

Previous estimates indicate that annual climate adaptation costs in developing countries could reach $300 billion in 2030 and, if mitigation targets are breached, as much as $500 billion by 2050.

All climate measures need equal policy attention

The report analyses investment policy trends related to climate change sectors between January 2010 and June 2022, during which 103 policy measures were adopted worldwide.

It finds that policy initiatives to promote climate change mitigation and adaptation through FDI focused primarily on the renewable energy and electricity sectors, which account for 60% of the total measures.

Although renewables play a key role in the transition to a low-carbon global economy, the report emphasizes that other mitigation policies – such as energy and resource efficiency technologies and other environmental technologies – also need to be promoted.

“Moreover, climate change adaptation-related sectors need to be defined on a country basis as vulnerabilities and priorities differ nationally and locally,” the reported says.

Varying concerns among countries

The report highlights differing concerns between developing and developed economies.

In the developing world, 30% of the investment policy measures related to climate change sectors aimed to liberalize water and electricity sectors, mostly through the unbundling of the energy market or the privatization of state-owned enterprises.

An additional 43% of the measures sought to promote investments in those sectors through incentives and investment facilitation – such as incentive schemes aimed at reducing the carbon footprint of the energy sector and that of industrial and agricultural production.

Overall, developing economies adopted investment incentives to attract FDI primarily in renewable energy (42%), environmental technologies and green industries (37%) and electricity and water (21%) sectors.

Tighter FDI access to developed economies

The report shows that in developed countries, three out of four policy measures had to do with introducing or widening FDI screening mechanisms, confirming the trend towards heightened national security concerns observed by UNCTAD in recent years.

“The global environment for international investment changed dramatically as a result of the war in Ukraine, which occurred while the world was still recovering from the impact of the [COVID-19] pandemic,” the report says.

“This trend is likely to continue in light of the energy security concerns raised by the war in Ukraine and its impact on energy supply and prices,” it notes.

Tackling climate investment challenges

The report shines a light on the challenges of channeling mitigation investment into developing countries and upscaling adaptation investment through viable business models.

It advocates for strategies that comprehensively address energy issues such as security of supply, efficiency, affordability and environmental sustainability, while addressing the development of climate change mitigation and adaptation sectors and technologies.

“Climate change strategies should embed investment promotion as a key component and communicate the government’s priorities in the medium and long run,” the report says.

“In parallel, the targets arising from the comprehensive climate change strategy should be embedded in investment promotion strategies to inform the activities of the actors involved.”

To increase investment in climate change mitigation and adaptation key sectors, countries need to consider new instruments and targeted policies to attract low-carbon investment.

The report recommends that countries consider providing political-risk insurance to de-risk climate FDI, adopting climate impact assessments when reviewing investment projects and developing facilitation services that specifically target climate FDI.

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