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Couldn't raise, so he collected 50 SAFEs
He had drawn up a banking solution, and the banking-as-a-service licenses it required were out of reach. He pivoted to card-linked offers, which gave him another path to the same outcome.
Money was the second wall. He couldn't raise a round, so he collected 50 SAFEs and put the funding together from those.
The company now does 700K in monthly revenue, and he is building the banking solution he first drew up.
Why do fintechs rent banking licenses?
In the United States, only chartered banks can hold insured deposits and connect to the core payment systems. Building a bank takes years of regulatory approval and large amounts of capital. Fintech companies therefore partner with an existing bank that holds the charter, an arrangement called banking-as-a-service. The partner bank stays answerable to regulators for what the fintech does with its customers.
How do card-linked offers pay for themselves?
A shopper links a payment card to an app, and the app learns about purchases through card-network transaction data. Merchants fund the offers, paying a share of the sale when a linked card is used at their store. The match happens automatically, so nobody scans a coupon or types a code. Merchants pay only when a qualifying purchase actually happens.
How do SAFEs let founders raise in pieces?
Y Combinator introduced the SAFE, short for simple agreement for future equity, in 2013. An investor sends money now and receives shares later, at the price of the next priced funding round, with no interest rate or repayment date. Because the document is short and standard, a founder can sign one whenever a check arrives instead of negotiating a full round. Each SAFE can carry its own valuation cap, so many of them add up to a mix of terms.
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