Restive Ventures

I chatted with Penny Crosman at American Banker about the current environment for fintechs. Summary: now is a great time to start a company, and if you do, give us a call! https://lnkd.in/gdCHq9tv

Last week I wrote in American Banker on how the next president can encourage real innovation in our financial services industry to make our system work better for the middle class and small businesses. For starters, it's time to appoint actual leaders of the our regulatory agencies. Without Senate appointed leaders, who enjoy bipartisan support, our regulators are hobbled in their ability to plan for the long term. It would be particularly nice if they had some experience in a "tech role". It's time to start using technology to better understand the risks that create systemic crises. It is also time to open banking. This means adopting rules that give consumers control over their data, while also making the banking industry more transparent. We need more players, not less. The next administration must seize the opportunity to reorient America's banking regulators on the problems we face in 2024, not on what we faced in 2008. It's time to bring the financial services industry forward. Let me know what you think: https://lnkd.in/g6hF97bD

Today, we are announcing our $8.1 M seed raise to Set the New Standard of Financial Licensing. We have been quietly building our product, team and delivering customer joy for the last 1 year but today we are moving to a new phase- Setting a new standard for Financial Licensing for the whole industry. We want to thank our earliest customers who trusted us a year ago when all we had was a vision. We also couldn't be where we are without our amazing investors who believed in the vision as strongly as we did - Ryan Falvey Cameron Peake Rex Salisbury Arpan Shah Mar Hershenson Kabir Kumar Emmalyn Shaw Matt Kelly Ethan Bloch Jordan Wright Todd H Baker Rushabh Doshi Samar Shah Read more about our next phase of building the future here-

THE NEWS IS OUT🌟 We're thrilled to announce our round lead by Restive Ventures - thank you Cameron Peake, Ryan Falvey and J. Tyler Griffin for your continuous support and trust in our vision! I want to take a moment to appreciate everyone that has helped us along our journey, starting with Ken Kruszka in the very early days, the NYU Entrepreneurial Institute (big appreciation for Frank Rimalovski and Emily Fallon Baum), the Antler team (special thanks to Jeff Becker, Tyler Norwood and Roslyn Jin), the Falls Fintech team, the Lair East Labs team, Caroline Farley, Tom Brown, and, most recently, the team at Spartan Innovations (big thank you to Kim Gamez and Filip Danielewicz) and Elizabeth Coston McCluskey and her team at TruStage. And, of course, we couldn't have done this without our team and the mentors (Michael and Adam Harris) that inspire me every day! 🙌🏻 https://lnkd.in/dYDp_UwD

Forbes has hailed Chime as America's Biggest Digital Bank. CNBC named Chime to its 2024 Disruptor 50 list. Who does Chime rely on to automate its fairness testing, monitoring and optimization? Today, we are thrilled to announce that Chime is using FairPlay's algorithmic fairness solutions to make more money and do more good. Welcome to the FairPlay Family, Chime! We're honored to be working with Chris Britt,  Aaron Plante, Shara Chang, Alex DiGrazia, Shashank Gadda, Rob Welbourn, Jennifer Kuperman, Sara El-Amine, Ph.D (hc), Hamza Siddiqui, Baishi Wu, Alex Lutch and the rest of this uniquely talented team to support Chime's next phase of growth. https://lnkd.in/eGSWTjXG

One of the toughest questions facing lenders and insurance companies today as they adopt AI and big data, is: How should I think about tradeoffs between accuracy and fairness when selecting models? At FairPlay, we’ve been thinking a lot about this issue. To properly assess accuracy vs. fairness, lenders and insurers need a framework for assessing whether a seemingly accurate fairer model will perform within their risk tolerance. Today, we're pleased to share our thoughts about how to choose a less discriminatory algorithm (LDA). We call it the FairPlay Framework for Picking a Fairer Model. It turns out that identifying LDAs that are actually viable is harder than it seems. It also turns out that picking the wrong LDA can be costly. To grapple with the potential pitfalls of choosing the wrong LDA, FairPlay has developed a method for evaluating whether seemingly accurate and fairer models will perform as desired in the real world. FairPlay accomplishes this by simulating LDA candidate performance under many different operating scenarios—because the economy changes, business policies change, and applicant mixtures change. Our Framework judges LDA viability by assessing: ▶ The less discriminatory algorithm’s profitability across a range of risk tolerances; ▶ Its fairness outcomes at various approval rates; and ▶ An LDA's profitability and fairness outcomes under other scenarios and market conditions that might plausibly occur—such as changes to marketing programs. Testing an LDA candidate in these ways ensures that its fairness and business outcomes will withstand changes in borrower populations and business policies, including when underwriting standards are tightened. To learn more about identifying and validating Less Discriminatory Algorithms, check out our FairPlay LDA Explainer video and download our accompanying E-book which provides a detailed guide to picking a fairer model. https://lnkd.in/gS2hwiT6

Let’s talk about exits in fintech. Although recent memory has been defined more by the lack of exits, we wanted to go back and look at the data from the most recent class of fintech exits to provide better context for founders and investors. The big takeaway: fintech as an industry has been defined by relatively consistent, large M&A transactions (approaching 20 per year) at an average value of $403M, and a few IPOs per year (2021 aside) at an average current market cap of $5.1B (as of March 2024). While it’s important to be ambitious and aim for those $1B+ outcomes, we also believe that founders and investors should take advantage of these unique M&A dynamics. For example, fintech represented about 1/3 of the top 100 IT software acquisitions. What does this mean? Practice valuation discipline. As companies approach $300M- $400M in company valuation, they risk (potentially unintentionally) getting cut off from the M&A market. Similarly, valuations over $2B should be for exceptional companies where the underlying fundamentals line up with public comps. The math around valuation can be the difference between a successful exit and one that is underwater. Fintech funds should not rely on IPOs alone to drive returns. This consistent and robust M&A cycle is a compelling aspect of the fintech market, and one where funds can get liquidity earlier for LPs. We expect the M&A path to become even more attractive to lean teams that don’t need to take on much outside capital, can grow efficiently, and achieve an outsized return. Much more is covered in the full report linked in the comments! And thanks to Axios for previewing the data in this Saturday’s newsletter. #venturecapital #fintech

Meet Naré Vardanyan, founder & CEO of Ntropy.  Originally from Armenia, Naré turned to entrepreneurship after college as her path to stay in the US- and she got hooked. Now on her second startup, she decided to tackle the challenge of deciphering financial data - especially across borders – and set about to fix it. In this episode we dive into:  - Nare's excitement about AI and the advancements she’s seen since starting Ntropy - How to build momentum in a fundraise - Gaining confidence as a leader- particularly around managing people and saying “no” - Her story around building traction in the company- and how close they came to stopping And much more!