Y Combinator - Fintech 2020 Special

Fintech was the second highest category in this year’s Y Combinator class. It’s so 🔥. In this post, I run through some key trends as well as share a perspective on each of the companies.

Huge hat tip has to go to Techcrunch for their write up and for the links to the homepages. Here are thoughts from whats available in the public domain. If there's something missing or incorrect please do reach out :)

Also - remember like and share :)

My big trends from the 25 Fintech's 👀

1. The SMB fintech space is now super crowded 🤔

2. X for Middle East / SEA is 🔥

3. Corporate account aggregation is 🎯 for where the market is heading (📺)

4. More great investment APIs 🔌

5. Credit builders are the new Neo Banks 🏦

6. The Latam opportunity is massive, but surprised it's not more lending focused 😲

7. Not much crypto or lending in this batch 👀

Y Combinator Day 1 Fintech Companies 🤑

1. thndr - Robinhood for Egypt 🏹

• This "robinhood for everywhere else" trend is absolutely happening. Egypt is a notoriously tricky regulatory market, so impressive to see this get off the ground.

• Surprised YC picked this company though, the homepage and brand doesn't scream quality (not that it should be a requirement these days but still).

• There are better things like this coming out of the same region, and the whole MENA region is going to get super interesting.

2. Perch - Credit score builder from recurring expenses e.g. subscriptions and rent payments 💸

• A very simple (and clean) looking service here that's predicated on, if you pay things on time it builds your credit score. 🧽

• This is quite similar to what we've seen from Chime and others, but offering this simply as a service feels like it could apply regardless of who your bank account is.

• Generally I'm a fan of services above accounts and think they're still discounted vs neo banks themselves as an area to cross sell and drive real user value.

3. Recurrency - Nice ERP add on that gives you customer targeting and dynamic pricing in B2B sales (covered on 19th July Brain food) 🧠

• I saw this and thought "Uber surge pricing but for everyone" sounds quite bad, but in B2B buyers are more sophisticated and harder to find. This absolutely has an audience.  

• It will be interesting to see if they are acquired by one of the big ERP vendors (e.g. SAP, Oracle etc) or if they manage to build out a genuine ERP alternative.

• PS. ERP is broken 😐

4. Conta simlples - Brex for Brazil 🇧🇷

• Conta focusses on spend control piece, interesting to see if this takes off like it has in the US given the market size of e-commerce, freelance and startups being more emerging (but then potentially higher growth).

• The brazil SME banking market is ready for growth because lending is broken. This is what Nubank fixed for consumers. There's a huge need there, especially the sub $2m businesses that have predictable supply and demand (e.g. retailers).

• Companies like Biz Capital are in the market and seeing good growth focusing on the under served segment with simple invoice factoring and sales finance. I wonder if we will see more lending focused, digital only businesses emerge?

5. Plunzo - Account aggregation for Latam SMBs 

• For bigger businesses it's normal to have many banks, many accounts and many currencies. And that's a giant pain. ☠

• Managing across all of those is a whole department's job (treasury), and where there's a finance team there's spreadsheets, inefficiency and ultimately someone, somewhere logging into the banks online portal and keying in payments.

• Plunzo does all of that, and automates common tasks (with a sort of if this then that interface). Big banks if you're watching, you should have offered this 10 years ago. 👀

• Also get the sense big corporates would LOVE this.

6. BIKAYI - Stripe atlas for Whatsapp SMBs in India 

• ❤ Love this, lets see if they get acquired, but massive market and need for this.

• India is absolutely having it's tech boom fueled by Jio and the India stack.

• Big tech has recognized this globally but home grown solutions like this have so much space to make a difference, especially when it's starting, running and managing a business from your phone. 📱

7. Atomic API - Investment accounts as an API

• Investment accounts are hot right now. In the pandemic the middle classes had extra deposits because they weren't commuting or eating out.  

• As Neo banks look to monetize this could be an interesting route for them, lending and deposits aren't the business they were pre-pandemic, and interchange fee's only go so far.

• Investment accounts drive new revenue, and create sticky users.  That has a headless API just seems handy, especially in a market where lending is broken.

• Ps. if you like this defintely check out drivewealth.

8. Evergreen - Employee expense request platform 🤝

• Seems a bit, niche? Given other tools out there like Brex, but so much happening in the SME tools space so who knows.

• In theory almost any Ops team could pull this together with no code, but then I'll bet most haven't, and have a janky google form doing it.

• Although why would you use Evergreen if you already had Brex? Hard to see the business here.

9. Blue Onion - Auto cash reconciliation 🏧

• Very simply, validating transactions between your accounting platform and your bank account is way harder than it should be. Blue Onion does that and then gets the data audit ready. If this works, amazing.

• Cash recs have a last mile problem, there's always something that doesn't quite match or user keyed. The simple things like slack subscriptions are the easy part. That said, PFM's solved this for consumer and if Blue Onion solved it properly for SMBs then good.

10. Heron - Transaction categorization engine 

• Plaid has been around for some time, but getting access to account data has a problem, how do you make any sense of it? Heron aims to tackle that with some pre-baked experience in doing so. 

• This data can be super useful as part of a larger whole for risk management as well as marketing. It's worth saying, they're up against Salt Edge who are considered the default in this area.

11. Lendtable - Helps you increase your employer 401k contribution 👴🗝

• The amount an employee contributes to a 401k is matched by an employer (to differing levels), but employees can't always contribute the maximum amount (due to living expenses). Lendtable helps fill this gap by lending the difference. 

• The USA is a big market, and this is a niche type of lending, but there's 31 million Americans not matching their 401k but could with this, this is in their long term interests, while they'd almost "not feel" the lending.

• Net net, I can't help but think employees would be better off with help on day to day expenses or learning the value of contributing more to their 401k. 🤷‍♂️ I can imagine this is especially helpful for younger people, who are typically lower income and may not realise the value that compounding in their pension now will have later in life.

12. Volopay - Brex for south east asia 

• Singapore is hosting some mega co's like Grab and Gojek, if they could sign a few of those big names, Volopay would be super well placed.

• We've seen a lot of "Brex for X region", and start-up hubs are a great place to be. 🏖

• They've gone more into automation of expenses than full cash management like Brex but it will be interesting to watch their evolution. 👀

Y Combinator Day 2 Fintech Companies 🤑

1. Capway - Financial inclusion for regions usually only served by credit unions 

• In theory Capway should compete with Chime or Current, but by playing not in urban areas but smaller regions, digital first, that's an interesting market to go after, makes me wonder how they will replicate that sense of community or go to market.

• I'd be paying super close attention to this as a regional or credit union...

2. Afriex - Transferwise but with stablecoins  👛

• Stablecoins in theory reduce further the costs of international payments and reduce settlement and credit risk by effectively having one shared view of accounts. Still, to make this work the cash in / out legs and agent networks will be key not the tech.

• FX is a hard business that means building relationships with lots of liquidity providers (something transferwise have done well). Big liquidity providers tend to be banks. Banks tend not to like stablecoins. They could be doing something super interesting with Infrastructure (like Sila) but this feels more like a straight consumer play.

• Don't get me wrong, the theory is great, but to scale they will need liquidity, and stablecoins as yet haven't started to get close (nor are they trending that way). They could, this feels early but not wrong.

3. Cradle - Payment Collections for SMBs in India  

• Another one for India SMBs, hard to see why them from the website and write ups, but the why now, India is absolutely having it's moment and SMBs are right in the middle of the growth fueled by Jio and the India stack 📈

• This is "collect payments without interchange fees", which for small businesses can be significant. The website doesn't give away how, but India's UPI should make that very possible. Interesting model to watch and for the world to learn from as non card payments take off.

• The website hints at "payments credit" too for business buyers. Affirm for B2B?

4. Dapi - Plaid for Middle East including Egypt, UAE and KSA 🌍

• The middle east and north africa are in the midst of a fintech boom, having direct account integrations in a region where this is especially hard is difficult. This is a well put together service that looks like an acquisition target for the big account API players like Plaid.

• Everyone I spoke to points out Dapi as a team they love, and they already have clients. One to watch. 👀

5. Spenmo - Payments management for SMBs in SEA 🌏

• Another SMBs can't keep track of payments play, but with impressive founder track. 

• Seems very Singapore focused, but there's a tech hub there, they could catch growth companies potentially but this is a super crowded market. Still great website and partnerships to date.

• Spenmo and Volopay seem to be eerily similar...

6. Letter - Digital banking for "high net worth".

• Ok lots to unpack here. Nobody has really done 100% digital for high net worth (yet) and this is an interesting take. But they're selling... get this. A metal card with NFC payments, and multiple cards for your family. 

• This is basically the Revolut metal card. There is almost nothing about this that solves for HNW other than a nice brand.  Chase Sapphire but 100% digital, that would be more like it.

• HNW is about investments being aligned to your objectives harder, estate planning, managing multiple family members etc. Not "here's a metal card with real time notifications". Their tag line is "more than you'd expect", but the website promises much less. Now I could be missing something amazing in the execution here... but what am I missing? 🤔

7. Maytana - A dashboard for global corporate accounts using open banking.

• Yes, yes, yes!

• Banks should have done years ago. Lets say you're a fast growing tech company and you have to open 10 offices, with 10 different currencies. You have to manage all of that FX risk which can amount to 10s of not 100s of milliosn per year at scale. The bank systems to do this stuff are awful. Mostly banks give you a human to talk to rather than neat digital. 

• This feels like fintech moving further up the customer complexity curve (see this video for what I mean by that) into corporates that operate in many countries.

• Absolutely love this as a trend as a veteran of payments and cash management (who pitched this in 2014, 'scuse me while I grab the tiny violin 🎻).

8. Safepay - Stripe for Pakistan 

• Again another market with a big need, and obvious potential acquirer.

• Pakistan is absolutely part of the middle east fintech revolution, this could be well timed for the merchants there, especially mid pandemic.

• (Complete aside, they're the only Ycom company this year who's website doesn't have a favicon).

9. Notebene - Crypto AML data sharing compliance as a service.

• Crypto exchanges must comply with the "travel rule" which means, anything above $1000 needs to be traceable across different exchanges. There are competing standards for how to do this. Notebene brings those together into a service. Neat.

• This saves everyone building a defi widget, wallet or exchange a lot of pain. If you're long crypto, then Notebene are selling shovels for the gold rush.

• Shout out to them partnering with Global Digital Finance too 👋

10. Bits - The credit builder card 

• As simple as it sounds, love the brand, 10k customers, $1.9m in revenue, they're doing something right. One to watch. This "credit builder" space is spot on, and lends itself to massive amounts of cross sell over time.

• No really check out their brand and homepage, whoever designed that, I want to meet. 🖼

11. Finch - Lets users grant access to their payroll data

• Useful for for rent applications, background checks, mortgage applications etc.

• This feels like a bit of plaid that was missing, very similar to pinwheel, there's room for people that do this well and fairly obvious well funded potential exists.

12. Finmark - Startup focused financial modelling 

• My first reaction was that this seems a bit niche, but then aiming at startups is a good place to be. I also spent a lot of this week looking at CAC vs LTV and burn projections and then suddenly thought, there has to be a better way, so maybe this is it. 🤷‍♂️

• Lots of good companies re-inventing spreadsheets too... but again who knows. So much in SMB replacing spreadsheets and so crowded. I like how Ramp have taken the concept of managing burn and built it into an actual Brex like spend management product more.

13. Yotta bank - a challenger bank that uses the UK's "premium bonds" idea where there is a prize draw every week.  

• This concept was actually illegal until 2015 in the USA. Using surprise and delight to get people saving more is really interesting. Part of it feels weird to me it feels a bit like gambling in how it's designed / positioned. But is it bad to use those design patterns to get people saving? I don't think so. But can't shake an icky feeling.

• Dozens in the UK who has done this in a more classic savings sense and it's an idea that my co-founder Jason Bates has been promoting for years, interesting to see it happen in the US.  

• I actually really like it though, people should save more, and using engagement that used to keep us scrolling to keep us saving, I'm all for.

Phew 😅

If you made it this far, thanks for reading.

Would love to know your thoughts. There's no doubt things I've missed, and I'd love to hear your thoughts 👂

Look out for regular 🧠 food as usual this Sunday

👋