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Summary List PlacementA fintech founded by two former investment bankers has big plans for 2021 — and they all revolve around helping small banks upgrade their digital offerings.
While major players like Bank of America and JPMorgan Chase hold an outsized share of deposits across banks in the US, nearly 50% of market share is held by banks outside the nation’s 15 largest – including more than 4,500 community banks spread across the country, according to FDIC data.
These are also the financial institutions that, even before the COVID-19 pandemic began nearly a year ago, have been most hard-pressed to develop digital banking services – from remote check deposits to account openings – that can be costly to develop and require significant, long-term investment.
Narmi is a startup that’s looking to bridge that divide. The fintech offers cloud-based technology to regional and community banks that includes digital banking and account opening tools for consumers and a digital business banking service for small businesses.
On Tuesday, New York-based Narmi announced that it had raised $20.4 million in a Series A fundraising round that was led by New Enterprise Associates, or NEA, a venture capital firm with more than $24 billion in assets that’s also invested in companies like Salesforce and Plaid. Executives from Plaid and Brex also invested in the round although their names were not disclosed.
See more: Smaller banks have been forced to evolve in the wake of the pandemic. Insiders explain how fintechs are playing a key role in the future plans of regional and community banks.
“We do think we have a very strong differentiation strategy,” Nikhil Lakhanpal, Narmi’s co-founder, told Insider, adding that the capital raise will allow Narmi to execute its key focuses as a company in 2021: developing more business banking digital tools, enhancing the user experience of regional and community bank customers, and doubling down on their open-source strategy (Narmi’s API code is publicly available online.)
“It’s a massive catalyst to our company in so many ways,” Lakhanpal continued.
Both Lakhanpal and Chris Griffin, Narmi’s other co-founder, experienced the tech challenges smaller banks can face when trying to reach customers online. While students at Georgetown, they led the Georgetown University Alumni and Student Federal Credit Union, with Lakhanpal as CEO and Griffin as CIO.
“We ran this financial institution and we really just wanted to give our customers, our end users, a really awesome digital experience, like nothing else mattered. That was critical. And we just couldn’t do it. We looked at the vendor landscape, it’s really crowded with legacy tech. You’re paying a premium, not for a premium product, but for a larger company,” Lakhanpal said.
After stints in the investment banking world at Citibank and Barclays, respectively, Lakhanpal and Griffin launched Narmi in 2016. The startup counts Radius Bank, the Boston-based online community bank that was acquired by LendingClub for $185 million in February 2020, and Berkshire Bank among its customers. Lakhanpal said the company doubled headcount in 2020 and is planning on doing the same this year.
Read more: Plaid’s breakout stars: These are the 14 people heading up key projects at the $5.3 billion fintech looking to make financial data more accessible
A big backer in NEA
NEA, meanwhile, brings both capital and experience to the table, something that Lakhanpal said was particularly valuable given the venture firm’s experience in growing companies at scale.
As for NEA’s part, it has a veteran of both the e-commerce and banking world in Liz Landsman, who helped close the round. Landsman previously headed the internet, digital, and mobile teams for Citi’s North America consumer banking business, was the chief marketing officer of E-trade, and served as the president of Jet.com, the e-commerce startup that was acquired by Walmart for $3.3 billion in 2016 (NEA was also an investor in the site.)
“We were very excited when we met these guys, both because we thought they were exactly the right team, we thought the platform they built was thoughtful and technically strong, but also coming out of those unique insights of having lived on the other side of the table,” Landsman told Insider.SEE ALSO: Citi just announced a leadership reshuffle in its consumer bank as new head Anand Selva takes the reins, and the promotions point to a big digital push
SEE ALSO: Digital-lending startup Blend just nabbed $300 million from backers including Coatue and Tiger and is now valued at more than $3 billion. Here’s how it’s disrupting consumer banking.
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