WORKWEEK

Life comes at ya fast. 

Last weekend was great—the folks at 137 Ventures had a great event Saturday night in Miami and ran into a lot of friends I hadn’t seen in awhile, or hadn’t met in person ever! Sunday, my wife and I had a brunch reservation at Mila. Halfway through I got a shocking call from my mother: my grandmother passed away out of the blue at 97. 

She was like a second mother to me—she lived in our house till I was 15, taught my brother and I how to cook Indian food (poorly), taught us Bengali (pretty decently), and most importantly, taught us all about life. She grew up in rural Calcutta and somehow spent 40+ years in the US; the different perspective that she gleaned from those two vastly different experiences shaped a lot of who I am today. I try to appreciate all that I was given by just being born in the US, while also remembering how tough and different life was for my parents and grandmother. 

She was a great person and had a dope life, but I’ll miss her a ton. If you have grandparents or parents that are older, give them a call this weekend if you can. I’m lucky that I got to see my grandma a month ago but not many people get that chance. 

Also, sorry there’s no playlist this week either—I haven’t really had time or been in the mood to listen to music this week (I’m listening to Future’s new album as I write though and it’s fire.) 

Alrightly now back to what happened this week in fintech!

CANDIDATE OF THE WEEK

Have gotten some great folks interested in being candidates for new gigs in fintech and crypto, which I’m HYPED about! A lot of ex-fintech execs with years of experience looking for new challenges, especially in crypto. 

We’re gonna start this segment in May but send me an email at [email protected] if you want to be one of the first candidates!

Remember: you can be fully anonymous too if you’d like, happy to chat a bit more about that via email if you’re interested in learning more!

THIS WEEK IN NEWS

Elon Musk = Based

I could bullshit you and somehow tie in PayPal cofounder Elon Musk, or figure out some crypto angle to write about Elon Musk’s absolutely goat acquisition of Twitter for $44 billion. But I respect you too much and frankly I just share a few thoughts:

• This is a pretty big financial risk for Musk, but banks are getting a great, GREAT, deal. When the transaction finally goes through, the outcomes here are relatively binary: either Twitter does better as a company, or worse. But in either case, banks are making out like bandits: they get their money back and upside into Twitter if Musk figures out how to monetize the product better and increase margins. If he doesn’t, then a lot of the debt and margin loan is collateralized by Tesla stock. So, the bear case here is that lenders get huge chunks of equity in Tesla? Reuters reported that some banks were cautious around the riskiness of the deal, but to me its a no brainer. 
• Moderation is a tough problem to solve for any platform, particularly one as politically charged as Twitter. Put a lot of the problems stem from the implementation of their policy—Twitter seems to focus on harassment issues that are highly political and appease whoever’s in office, but don’t seem as focused on protecting users. If they were, wouldn’t they focus more on stopping fraudulent NFT spam, dick pics in women’s DM’s (there’s a LOT of that), and more control around Tweet visibility and who can interact with you. Moderation’s such a broad topic but at Twitter its’ seemed like the levers that they care about are skewed by what the media and politicians think is important.  
• Finally I leave you with a quote from Bobby Axelrod: “what’s the point of having fuck you money if you never say fuck you?

Wall Street Hates Fintech Again 

Post-COVID world is already reaching normalcy—Wall Street hates fintech again! Back in the pre-pandemic days, Wall Street used to hate companies like Lending Club and OnDeck Capital (marketplace lending was all the rage, an era I called “Fintech 1.0” in a series last summer.

To be fair, it’s pretty well deserved; those companies had a lot of problems. And it looks like Fintech 2.0 companies are facing backlash in the public markets too, though my assessment is that fintech companies are suffering from a ton of macroeconomic trends too. 

Robinhood’s getting hammered—revenue fell 43% year over year, just a few days after announcing its laying off 9% of full time employees. But, in the earnings call, both the CEO and CFO emphasized that in most of Robinhood’s existence, they’ve been operating in an almost-ideal macro environment that was changing dramatically. 

Nothing is trending in the right direction: Q1 transaction revenue dropped 48%, average revenue per use dropped 62%, crypto revenue fell 39%, and monthly actives dropped 10%. So, Robinhood’s not making as much money and their users aren’t even using the app as much as it was during peak COVID. 

Wall Street doesn’t hate PayPal as much—shares rose 5% after the market closed. But things look grim here too—a part of me wonders if Wall Street is more interested in PayPal’s cost cutting measures than the business itself. Techcrunch reported earlier this week that PayPal was shuttering its SF office, similar to other payments companies. This tweet illuminated the fact that fintech companies with low margins—Block (formerly Square), Brex, Stripe, Credit Karma—have all left SF because of Prop C, which taxes any company that makes more in $50m in gross receipts.

Wall Street Institutions Love Crypto Products Now

How the tides have turned—while investors hate fintech companies, Wall Street banks are offering more sophisticated crypto products too.

This week, Goldman Sachs and Fidelity had some fascinating announcements. At GS, the investment bank offered its first Bitcoin-collateralized loan. According to Bloomberg, a GS spokesperson said that the firm was interested in “its structure and 24-hour risk management,” the latter being something that I hadn’t expected as a value proposition but makes a ton of sense. 

Fidelity finally launched something that made sense about 5 years ago—allowing users to put bitcoin into their 401(k) plans. In theory there could some regulatory risk—regulators prefer assets that are within 401(k)’s to be relatively stable—but Fidelity seems to be mitigating that only allowing a max of 20% to be put into bitcoin. At the end of the day, its really up to the employers that use Fidelity to offer it to the employees, which experts who spoke to the WSJ say could be a potential hurdle to adoption. 

Nonetheless, institutional adoption of crypto is here, and so are institutional products too. And given their expertise in  in complex financial products, banks may be better suited to offer products like crypto-collateralized lending than crypto-native companies.

TWEETS OF THE WEEK

• @brandur highlighted the fact that a bunch of fintech and payments companies have left SF recently—perhaps in part due to Prop C. 
• Did you know Visa & Mastercard were not-for-profit companies, until the mid-2000’s? Even I didn’t until I read this brief thread from @petertluce.
• I loved this piece from @ttunguz on tokens as a way to replace traditional customer acquisition strategies, like paid marketing on Facebook and Google. 
• Rising interest rates are gonna be a nightmare for fintech lenders to manager—Commerce Ventures’ @venturedan had a great thread on it this week.
• OpenSea bought Gem.xyz earlier this week. There weren’t many details shared, but this is why crypto is fun: there’s a ton of on-chain data and analysis you can do after a deal like this to make a bit more sense of it. Luckily for us, @joel_john95 had a great thread on just that.
• Airdrops in crypto are still in the beginning stages—Optimism, a crypto firm, is looking to make airdrops much simpler to implement and customize. Loved this thread on the potential from @haonan​​​​.