Robinhood's crypto bet, AI-powered healthcare, and more on the fall of Fisker

As always, there was a lot happening in startup land this week, and the Equity team had so much fun breaking it down for you. On today’s episode of TechCrunch’s Equity podcast, Mary Ann and Rebecca discussed Robinhood’s plans to buy European crypto exchange Bitstamp for $200 million in cash and why they weren’t really surprised by the news. The duo then dug into not just one but two exciting health-care related deals. Rebecca wanted to riff on Sword Health’s innovative AI-powered virtual physical therapy tech and recent fundraise and corresponding cool valuation bump. Mary Ann then brought up Eko Health, which just raised $41 million after getting FDA clearance to help detect the first signs of heart failure during a routine medical exam (really, how cool is that?!). From there, they got to grill transportation reporter extraordinaire Sean O’Kane about his in-depth investigation into the mess at electric vehicle manufacturer Fisker. Think hoods flying off and pinching parts from the production line kind of mess. Oof. From there, they talked about the drama at AI mortgage startup LoanSnap and how that company is being sued left and right among other things. On a more positive note, they then riffed about two very interesting fintech startups focused on Gen Z, Frich (which stands for ‘effin rich) and Fizz – the latter of which is a YC alum just raised $14.4 million in a seed round led by Kleiner Perkins. That’s it for this week, but we’ll be back bright and early Monday with more tech and startup news. Talk soon! Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Monday, Wednesday and Friday. Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads at @EquityPod. For the full episode transcript, for those who prefer reading over listening, check out our full archive of episodes over at Simplecast. Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:11Speaker 00

  Hello and welcome back to Equity TechCrunch's flagship podcast about the business of startups. Today is June 7, 2024. I'm Mary Ann Azevedo and joining me is Senior TC Reporter on the Transportation Desk, Rebecca Boulon. Rebecca, how are you this week?

• 0:27Rebecca Bellan?

  I'm doing great, Mary Ann. Thanks so much.

• 0:29Speaker 00

  Happy to have you on as always. Before we get to the show rundown, I want to ask our listeners, please don't forget to rate and review us on Apple Podcasts, Spotify, or whatever your preferred pod streamer is. We really appreciate it. Now let's talk about what we're going to have on the show today. Before we get into our deals of the week, we'll be talking about news that broke yesterday about Robinhood acquiring global crypto exchange Bitstamp. Then we'll talk about two healthcare startups raising money. And then we'll dig into Fisker's collapse and have our Transportation Reporter Sean O'Kane give us all the details of his months-long investigation into what went on there. Finally, we'll get into the next generation of fintech. Lots happening as always, some good, some not so good.

• 1:13Speaker 00

  And on that fintech note, as mentioned, news broke yesterday that Robinhood acquired Bitstamp for $200 million, or is going to acquire Bitstamp. This was a surprise and yet it wasn't. Robinhood has been dabbling around in the crypto space for a while. It's been acquiring different companies left and right. I don't think anyone quite expected this, though. They're paying $200 million in cash for this company, which is European. And it just shows that the company is really serious about crypto and its future and its potential. Rebecca, what did you think? Were you surprised by this?

• 1:45Rebecca Bellan?

  I was not surprised by this. I think that Robinhood will only continue to embrace cryptocurrency, even though I think that it's had some restrictions with Bitcoin in the past due to regulatory scrutiny in the US. But one thing that I thought was interesting about this was, as you said, this is a European company. So I think it also signals that Robinhood is pushing not just further into crypto, but also just into international markets.

• 2:07Speaker 00

  Yeah, I mean, definitely. It launched its core stock trading product in the UK last November. It started offering crypto trading in the EU shortly after that. So yeah, I mean, I think Robinhood, talking about ups and downs like we were earlier, Robinhood has had its ups and downs, right? It went public in mid 2021. Things were kind of like going great. Its IPO valuation was around 32 billion, got up to like more than 40 billion. It's kind of down now to about 19 billion, which still isn't bad. It had

• 2:36Rebecca Bellan?

  Yeah, so far down.

• 2:38Speaker 00

  Yeah, so far down. Only 19 billion dollars, but it did have record earnings. I think it was in the first quarter. So I mean, it's not doing too bad. I think a lot of the interest revenue has helped over the past year or so. The deal, I think, is expected to close, let's see, in the first half of 2025. So it'll be interesting to see what happens as Robinhood integrates it into its, its offering.

• 3:01Rebecca Bellan?

  What does Bitstamp bring to the table exactly?

• 3:04Speaker 00

  Let's see, it's a pretty, I mean, it's been around for a while, right? It's founded in 2011. It's one of the world's oldest cryptocurrency exchanges, which I did not know. It allows companies, individuals to trade in all, all manner of cryptocurrency. It was actually acquired by a Belgian investment company in 2018. Ripple bought a stake last year. So I think it's just going to really help Robinhood grow its crypto business generally. They, they said in a statement that the team has established one of the strongest reputations across retail and institutional crypto investors. So the, the company will be better positioned to expand its footprint outside of the US and welcome institutional customers to Robinhood.

• 3:43Rebecca Bellan?

  Yeah, I like the kind of blending of making it easy to invest in just normal stocks and then also kind of decentralized markets as well.

• 3:53Speaker 00

  Yeah, definitely. So let's move on to our deals of the week. We both picked healthcare related deals, which I think is, is great. We do have a new venture reporter, Marina Temkin on board, who's been with us a few months now, who's looking more closely at the health tech space. And there's a lot happening there. Rebecca, tell us about Sword Health.

• 4:09Rebecca Bellan?

  Yeah, so Sword Health has just raised in total 130 million dollars and its valuation has soared to 3 billion dollars as a result of that. I like this story for two reasons. So the first is that Sword Health Is an interesting product, right? It's an AI-powered virtual physical therapy startup. And I think that's really cool because physical therapy is... I've been trying to get an appointment with a physical therapist for weeks and I'm often too busy. Their hours don't work for me. It's really expensive. So like, I think something like this could really democratize access to physical therapy.

• 4:42Speaker 00

  Mm-hmm.

• 4:43Rebecca Bellan?

  And I think that they're using the funds to, you know, beef up the AI as expected. Introduce a human-like voice for its Gen AI named Phoenix to its musculoskeletal therapy. And also help with women's pelvic healthcare therapy, which is so important. And I want to see more startups doing this, okay? Clients include employers and health plans of Fortune 500 companies. That's cool. Now, what I think is really interesting about this, aside from the product, is how they raised this money. So like I said, it's 130 million in total, but that's 30 million in equity. And then they let their employees sell 100 million dollars' worth of equity to new and existing investors, including Cosla Ventures. So they actually initially planned to only do 100 million dollars in a secondary round,

• 5:28Rebecca Bellan?

  but the company decided at the end of the day to then raise the 30 million primary round to update its valuation after seeing the secondary round was oversubscribed. So the reason I think that's interesting is because secondaries, well, they don't exactly give the company that 100 million dollars to play with, right? But it does help them, one, with a better valuation. Two, it's a way to attract institutional investors who'd rather buy big stakes from existing shareholders rather than dealing with the complications of primary equity financing. It could signal that Sword Health is prepping for an IPO. You know, the founder and CEO, Virgilio Bento, said they don't need the influx of capital because they're expecting to be profitable by end of year. And so that 30 million will just sit in the bank and collect interest.

• 6:12Rebecca Bellan?

  But yeah, I just think it's an interesting financial instrument to use. And I think, Marian, you were telling me earlier that another company has done this as well, right?

• 6:19Speaker 00

  Yeah, Rippling, HR tech company, recently also closed a similar round. I think, I'm trying to remember the exact details. There was, yeah, it was 200 million dollars raised in new capital, but another 670 million dollars' worth of shares being sold by existing stockholders. So this, I don't, I don't want to say this is a trend, but I can see that companies that seem to be doing pretty well, like these two, are seeing, seeing this as an opportunity to... Give some of these existing shareholders some liquidity, raise capital. You're right, it's an interesting strategy. Sword Health is in a unique position, I think, in the startup world today to be able to do this, to just raise the extra 30 million to have it sit in the bank.

• 7:02Speaker 00

  And they said they, like you said, they mainly wanted to be able to increase their valuation in a competitive environment, too. I think it was a signal that they wanted to send out publicly. They compete heavily with Hinge Health, which is also a multi-billion dollar company. So there's a lot of interesting aspects to this deal. And I agree with you, too, that the actual technology is pretty fascinating as well.

• 7:22Rebecca Bellan?

  Yeah, so I guess, I think Sword Health was founded to treat musculoskeletal, I hate that word, musculoskeletal conditions.

• 7:29Speaker 00

  It's hard to say.

• 7:31Rebecca Bellan?

  That range from a sprained ankle to a disc compression. So its platform will connect consumers to a virtual physical therapist. Consumers get a tablet and then motion sensors, so they can kind of go through the motions, literally, and then get feedback and tips through this digital therapist. So yeah, interesting tech, interesting way to raise money. And, you know, healthcare is just booming right now, I guess, as we all continue to sit at our desks and hurt our backs, right?

• 8:00Speaker 00

  Yeah, I mean, let's face it, healthcare is something that's always going to be needed because, hey, we're all going to get older, we're all going to age, and we're all going to probably, unfortunately, eventually have some health problems as we age. So yes, to your point, healthcare space is kind of hot right now. My deal of the week is a company called Echo Health. They just raised $41 million, and I loved this company. What they've built is an AI-enhanced stethoscope, and they've sold 500, more than 500 of these to physicians and healthcare providers. So this is fascinating to me. What this stethoscope does, and talk about really cool applications of AI, is it can

• 8:43Speaker 00

  actually help detect heart conditions. So, you know, with a normal stethoscope, there's only so much a doctor can hear, right? And there's only so much that they can detect. But with their stethoscope, because they've amassed this large data set of chest sounds and ECG information, which ECG stands for electrocardiogram, for those who don't know, they've developed these algorithms to detect certain heart conditions like murmurs, even like the beginnings of heart disease, which is fascinating. And one of the things also they're trying to do, oh, because, sorry, they can also detect the first signs of heart failure during a routine exam is one of the things that they claim. Yeah. And in April, they got FDA clearance for using its AI to help detect the first signs of heart failure, which is incredible. So yeah, it was clear to detect heart murmurs, which

• 9:28Speaker 00

  could be a sign of abnormal heart valves. And also what they're trying to do next, I think, is develop some AI algorithms to detect pulmonary conditions such as asthma and pneumonia.

• 9:38Rebecca Bellan?

  That's so cool. I love that.

• 9:40Speaker 00

  Isn't that incredible? I, so I've had, not to get too deep into personal experiences, I've had family members with a lot of health problems over the years. And in one case, someone very close to me had pneumonia, was not detected by his doctor in the office, and he got very, very sick as a result. And I'm thinking, well, how can you go to a doctor, have them check your lungs, they tell you everything's fine, sounds okay, send you home. Two days later, you end up in the ER, find out that you have pneumonia so bad that they tell you that, you know, if you go home, you could die? Like, I don't get that. So when I read about things like this, it's like, wow. I mean, how many lives could

• 10:20Speaker 00

  be saved by this technology? Heart disease as well? I mean, how are heart failure? You know, how many people are probably suffering from heart failure and have absolutely no clue? Because how do you know what you don't know? You don't know, okay, maybe I need to go get ultrasound or ECG or whatever the case may be. How do you know to do that? So if that can be detected during a routine medical exam, again, think about all the lives that could be saved.

• 10:48Rebecca Bellan?

  Not just lives, but also time. Like, I actually recently had to go get an ECG and do a stress test. And first of all, these things take like a lot of time. And to get an appointment, it takes weeks to get an appointment with your doctor. Like, people are on these waiting lists for ages. If you could just do all of that in, during the routine exam, I mean, that just cuts out. So much time and hassle and the need maybe for someone to have to, you know, get hooked up to a bunch of wires and sprint on a treadmill in a small doctor's office. It's a very strange experience. But by the way, I also want to note that you, you said that more than 500 of these have been sold. It was more than 500,000, I think is what you meant to say.

• 11:27Speaker 00

  Oh, did I say 500? I meant 500,000, which is a huge difference. Thank you for catching that.

• 11:32Rebecca Bellan?

  No, it's fine. I mean, like, look, all the zeros, we see so many zeros in our line of work that it's, you know.

• 11:38Speaker 00

  Thanks for pointing that out. And speaking of numbers, I don't know if I mentioned that the company just raised a $41 million Series D round.

• 11:44Rebecca Bellan?

  Wow.

• 11:45Speaker 00

  We don't know its valuation, but still a pretty significant size in this environment. So kudos to both these companies. Love to see it. Hope we see more of it. Next, we're going to have a break and then we'll talk to our transportation reporter, Sean O'Kane, about Fisker and some drama in fintech.

• 12:06Speaker 00

  And we're back with our first theme today. I'm so excited to say that we have our transportation reporter extraordinaire, Sean O'Kane, on the show with us to talk about his months-long investigative story into EV startup Fisker. Wow, talk about drama. Sean, first of all, how many months exactly did you work on this story?

• 12:29Sean O'Kane?

  Good question and also happy to be here. Thank you for having me. I would say, you know, in earnest, I was really working on this version of this story for a couple of weeks to maybe a month or two. But some of the stuff that's in it are things that I've, I've been talking to people about for many, many, many more months, like dating back to, I mean, around the time some of these things happened. Some of the stuff in the story takes place in, in like June of last year. And it wasn't long after that, that I started hearing about some of these things. And it was really just sort of, it's been a months-long process of just trying to corroborate as much of that as possible to make sure that we get it right.

• 13:05Speaker 00

  Well, fill our listeners in for those who haven't read this incredible story. What exactly happened at Fisker? I mean, I have to say, first of all, when I read your articles and I looked at the photos and I was like, wow, that's actually a really, really pretty car, a really beautiful vehicle. And then I would read your stories and I was like, oh my gosh, but they're just a mess inside the company and the cars. So fill the listeners in. What happened there?

• 13:31Sean O'Kane?

  Sure. It's actually, that's a great way into it because for people who are unfamiliar with the company, it's a company that was started by a relatively well-known vehicle designer named Henrik Fisker, who has designed cars for BMW. He's had a long career. He even had a startup back in sort of the first clean tech boom around the time of the recession, where he was trying to make a hybrid sports car at the time. This is his second go at coming up with a startup like this. This time it's all electric. And yeah, I mean, this vehicle, the Ocean SUV, launched in 2022, or it started getting built in 2022. The whole idea of this version of the company is essentially, he wanted to take an asset-light

• 14:12Sean O'Kane?

  approach, outsource pretty much as much as possible, have a tier-one supplier build the car. That really stands in contrast to a lot of these other startups in the space like Rivian, or Lucid Motors, who are basically trying to do it all themselves, still supplying things from suppliers in the automotive world, but trying to build the factories, trying to do pretty much everything that Tesla does. And so, a lot of attention has been put on the design of the car. It's a pretty sharp-looking SUV. It's still an SUV. It's nothing radical, but there are some nice touches to it and it looks pretty good. But as I get into in the story, the problem at this company that you can sort of apply to all the other things

• 14:54Sean O'Kane?

  that have gone wrong with it so far is there's just not really been any process in place. The sort of proper processes and procedures that companies tend to take when building a car company from scratch, a lot of those weren't here. They maybe sort of cavalierly believed that they could get away with not doing some of these things because they were a startup and they were trying to embrace the chaos. But this is a very heavily heavily regulated industry. It's a very heavily regulated product. As it should be. Not take that approach as it should be. Yeah, people's lives are literally on the on the line. And so they just did not go down that path. And the story really gets into a couple of clear examples where

• 15:37Sean O'Kane?

  that sort of metastasized, you know, this one in particular, where in the run up to releasing the car, these the first of these SUVs were shipped last June in the US. And in the run up to that, all of a sudden, you know, after the design had been sort of set out and they were already working to build the cars with the supplier in in Austria. Henrik Fisker decided, you know, I want to have wheel spacers put on these cars and wheel spacers are these just sort of inserts that go in between the wheel and the wheel hub, and they really are just a cosmetic type thing where, you know, it pushes the wheel out a little bit, maybe makes the car look a little meaner. You know, it's it's really a design thing. It's unsurprising that it came from him, but to do something that late in the game with a car.

• 16:20Sean O'Kane?

  When usually car companies have these designs locked years ahead of time before they do anything like that, it's just, it's really kind of unheard of. And it set off this kind of reaction inside the company of just sort of like, what is going on? Like this goes well beyond the natural tension between the design side and the engineering side, you know, with hardware startups. That's always an intention, but here it was just sort of like, this is going really far. And in the story, we get into how, you know, there were people on the engineering team who really pushed back. They weren't saying, let's not do this. They were saying, let's find the right way forward to do it. And that was just never really embraced from what I've been told. And so the rest of the story gets into a lot of other examples like that where it's just like,

• 17:01Sean O'Kane?

  the company felt it didn't need to build out a large stockpile of spare parts, which most companies do. And then all of a sudden, they started having trouble with the cars when they started getting on the road in in big numbers. And now they didn't have any spare parts. So they started pinching parts from the production line in Austria. They started taking apart some of the marketing cars they had. They even harvested parts for Henrik's own car. That's crazy. And I will say real quick, and then you can ask me anything else. You know, Fisker has denied some of those things on the record. To us, they have told us they didn't pinch parts, they didn't take cars apart to put parts in customer cars. But it's just not true. I don't know why they're denying that so forcefully. But it's not true. We're not the only one to report some of this stuff, but we have, I think, the most detail on it.

• 17:42Sean O'Kane?

  And from everybody I've spoken to, it's just, you know, this is what they had to do inside to try to keep the company moving forward. And now they're at a position where they've stopped production of the car. They're basically on the brink of bankruptcy and it's hard to see sort of a way out for them.

• 17:58Rebecca Bellan?

  One of the lines that I I pulled out of your story that I was like, I almost screamed when I read it. And I just want to read it to our audience is the bolts on the ocean's hood had a tendency to come loose, which led to some flying up and cracking the windshield and doing damage to the body. I was like, what are they saying? And and not only, not only are these cars, you know, potentially dangerous and falling apart, but also apparently, as you reported, Fisker was cutting corners on customer service. Instead of having like live humans, they were wanting chatbots or something. But it's like, with so many problems, like you, you would think that customer service would be a real differentiator for that kind of a company. I mean, we've seen from Tesla having, you know, also not great customer service.

• 18:42Rebecca Bellan?

  I mean, their cars function way better, but this is kind of a thing that really bothers people across industries is not being able to talk to someone who can help them fix their problems. And when that is a multi thousand dollar, very expensive luxury vehicle, it's, it's pretty, yeah.

• 18:58Speaker 00

  I mean, John, yeah, I would just follow up on that point. Another thing you had written was that customers, you know, like they had dying cars, faulty brakes, stuck doors. They were waiting weeks or months for repairs and and then the company was getting sued left and right. Those lemon lawsuits. I just find it horrifying that there are people that have operate with such hubris to think that they can make cars in such a faulty manner. And how do you sleep at night? Like, how do you sleep at night knowing that you're making money or trying to make money by selling people? These vehicles that are so shoddy is just actually infuriates me.

• 19:33Sean O'Kane?

  Yeah, it's, you know, I think the thing I keep coming back to is you look at the history that Henry Fiskers had with that first startup that I mentioned, there were a lot of things that went wrong that doomed that startup because that startup ended up going into bankruptcy after he left as CEO, but it wound up failing in that way. But, you know, to me, this whole time that I've been reporting on them, I've just keep coming back to this idea of like, one of the things that actually really did that company in, among other things, was that they got into production, they got that car on the road, and then they weren't really ready to handle this sort of myriad problems that happen just to every car company, no matter how good your car is. And you have to be ready to handle all these edge cases

• 20:15Sean O'Kane?

  because driving is insane. People drive a lot so that there's just more and more, you know, the more cars that get on the road, more people use them, the more time you have for them to get into trouble with them. And, you know, to me, I keep coming back to this idea of like, if there was one lesson, you would imagine someone like him would have learned from the failure of that startup, it's to be absolutely as ready as possible to handle the customer service, to handle all of this, you know, it's called in the industry, after sales, all of this stuff, building out customer service team, having a stockpile of service parts, having reliable partners who can help fix the car, you know, and, and just so much of that wasn't there. And that wasn't for lack of trying on the employee's side. I mean, I've spoken to employees who, there was one in a story that

• 20:59Sean O'Kane?

  I wrote in February for us, where a customer told me he was trying to get help in, had so much trouble getting in touch with the company to get customer service, he wound up talking to one of these people who had helped work on his car, and they were picking up on their personal cell phone at a funeral, you know, like, all these employees were putting in so much time and effort, and, and also, again, trying to tell the leadership, hey, like, there is ways to get through this. And employees tell me, there's this feeling of a lack of trust in the people that were hired there amongst the leadership. It's like, they didn't want to rely on the experience that these people had, for whatever reason. And so this is where we're at, you know, and it's, yeah. There's been so many scary instances with some of these problems. Some of these cars have died on the highway at high speeds.

• 21:44Sean O'Kane?

  The hoods popping up was a relatively limited thing, probably in the dozen or so range, maybe a little bit more, but still. Part of me is at least sort of thankful that they were only able to ship around 7,000 of these things so far because I think if it had, if they had been able to hit the targets they were promising, which originally was supposed to be 40,000 cars last year. There would just be so many more problems on the road, given the quality of the cars that we've seen so far. And so, you know, I think to an extent they're only still around because they were only able to ship around 7,000 cars. Cause if they had gone any further than that, the, the problems I think would have overwhelmed them by then.

• 22:18Rebecca Bellan?

  One of the things I loved about this article or like the main thing I loved about it and how deep you went into it is it's just a reminder that companies are not just these like corporate entities. They're made up of many humans who have conflicting ideas, who make mistakes, who get into arguments and, and have these, you know, differences of opinion. And that has real consequences and it's just, yeah, the drama is tea. And it's like, I mean, I guess this is why succession was so successful, right? You're looking, you know, really under the, looking under the hood, right? To make a bad pun. It's such a great read. I encourage our readers to take a look at it.

• 22:53Speaker 00

  Really is Sean. Um, you do amazing work. Thank you so much for joining us today. And yes, to our listeners, if you haven't yet read it, look it up. The article is an excellent read. Well, we're going to let Sean get back to work, but even though he's leaving, we're going to talk about another one of his investigative stories. This one he worked on with Dominique Midori Davis and it involved a company called Loan Snap. And yeah, talk about drama. This is a, an AI mortgage startup that's being sued left and right from creditors. I think there's about seven or so lawsuits against it right now. It's been evicted from its headquarters in Southern California and. What is most astounding about all this is despite all that, this company has managed

• 23:36Speaker 00

  to raise about $100 million in funding and debt in the past few years, $90 million of which was secured between 2021 and 2023 while it was having a lot of these problems. So this just makes me wonder, like, did investors do any due diligence? I mean, what the heck happened here? I mean, Rebecca, what did you think when you read about this?

• 23:59Rebecca Bellan?

  Well, one of the backers is, is this the lead singer of Chainsmokers? What's going on? Chainsmokers, Mantis Ventures?

• 24:07Speaker 00

  Oh, yeah. Yeah, they're venture.

• 24:08Rebecca Bellan?

  Not to cast aspersions, maybe they're really good at doing their due diligence. But, um, yeah, it's pretty intense. And I think that the company is not yet shut down, but employees are understandably very concerned. I think they used to, at their high point, they had employed more than 100 people. And then after layoffs and attrition, that number is less than 50, according to a source that spoke to TechCrunch. I wonder if there's like a case for fraud at this stage, considering this management of funds potentially.

• 24:37Speaker 00

  Yeah. I mean, the entities, the seven different creditors that have sued the company or are suing the company collectively allege that the startup owes them more than $2 million. It's also been fined by state and federal agencies and nearly lost its license to operate in Connecticut. Ouch.

• 24:54Rebecca Bellan?

  Wow.

• 24:55Speaker 00

  Yeah, a lot going on there. And, you know, we're not really sure what happened. I know that a lot of mortgage companies got hit really hard in 2022, I guess, when interest rates started rising. So that's my guess, is maybe the company was doing pretty well when interest rates were super low. I mean, during the pandemic, like, we refinanced our home for like 2.5%. And then, you know, they surged to like 8%. I think it got up to like 8% last year. So I don't know. My guess is maybe the company ran into some, some troubles there. According to the story, in 2021, LoanSnap originated nearly 1,300 loans for a total value of almost 500 million. But by 2023, the company reported to the Consumer

• 25:38Speaker 00

  Financial Protection Bureau that it had originated only 122 loans for the year.

• 25:44Rebecca Bellan?

  Wow. I'm reading from Sean and Dominic that people who spoke to TechCrunch say that, you know, they're, they're kind of. As usual, kind of blaming the current state that it's in on, quote, terrible leadership, overspending on futility and institutional investors falling for the charming facade that Carl can show. And Carl is the founder Carl Jacob.

• 26:05Speaker 00

  Yeah, I mean, it's happened so many times more than we can count, right? Adam Newman is an example where investors get caught up in the charisma of a founder and just sort of blindly keep backing them. Yeah, I mean, since 2021, there's been several complaints filed against the company with the Better Business Bureau, which now has an F rating on there about that. So, yeah, so allegations of charging non-refundable fees, failing to close on loans in a timely manner, failing to pay taxes from an escrow account. Boy, I'd be livid if that were me. So, anyway, lots going on there. Kudos once again to Sean for his investigative reporting and Dom as well, who pitched in. We will have to wait and see what happens at LoanSnap. But hey, not everything is

• 26:47Speaker 00

  bad in fintech. I wrote about a couple of very interesting startups in the past couple of weeks that are focused on the Gen Z market. And this was really interesting to me, I think, because there were a lot of similarities between the two companies, although they do different things. One of them is called Fritsch. And Rebecca, I'll let you share what that stands for.

• 27:09Rebecca Bellan?

  Stands for F and Rich.

• 27:10Speaker 00

  That's right.

• 27:11Rebecca Bellan?

  F and Rich. Okay, let's keep it PG, people.

• 27:14Speaker 00

  Thank you. Yeah, Fritsch and then Fizz. So, Fritsch was founded by two young ladies who met while they were at NYU Abu Dhabi. And one of them was a former model, team model. She became financially independent at a young age. And then the other, she just also said she had to learn to manage money early on. And they kind of bonded because they were like, wow, I mean, it's not easy to learn how to manage money. We don't have a lot of resources to do that. Why don't we create something to help our generation? So, they founded this company called Fritsch. And they say it wants to be kind of a social financial community for the Gen Z population. They said that, you know, right now with social media, there's a lot of people who are like touting things like on TikTok or

• 27:55Speaker 00

  Instagram about, oh, I make money doing this. I make so much money doing that. And making it seem like they live these lavish lifestyles. And they're like, you know, this is just not always realistic. They're setting examples that aren't necessarily authentic for people. We want to Help Gen Z'ers like truly understand how they compare to their peers financially. So users of Fritsch can get on the app, they can ask questions anonymously. They can see what others with similar backgrounds spend on entertainment, investing in rent. They can ask questions like, how much are people my age investing? Do my classmates have allowances? Stuff like that. So the company has raised $2.8 million in a seed funding round led by Rest of Ventures.

• 28:36Speaker 00

  And looking to grow, they said they have over 100,000 users so far nationwide.

• 28:41Rebecca Bellan?

  I have a couple of questions. One of them is, okay, Gen Z users nationwide. Is this like, are Gen Z's looking for, I sound so old. Are Gen Z looking for help with their finances because they are increasingly pursuing kind of non-traditional roles that allow them to, you know, make money off their TikToks? That's one question. And then the other question is, what is the business model exactly for Fritsch? Like, how are they making money?

• 29:06Speaker 00

  Yeah, yeah, that's, that's a really good question. So at first they started like by advertising, but now they partner with a lot of brands that they use to kind of help educate their users on things. So that's, that's how they're making money, kind of actually a SaaS model where they, they charge like a subscription. And as for demand, yeah, I, I think this generation, yeah, that's a good point. They're making money in different ways, right? A lot of them are doing things independently or as creators. And also just in general, you know, they, they might be like credit card averse too. And they're already starting to think at a young age, how can I save? How can I be financially independent? And so as one of the co-founders said, they just, they want to like be able to understand

• 29:50Speaker 00

  how others their age are doing and how they're doing it. So, yeah, so that's, so Fritsch, you know, they team up with these financial brands, which they connect to these users to say like, hey, these are brands that can help you or do things, like I said, and that's how they, they make money through this B2B subscription model.

• 30:08Rebecca Bellan?

  So will they like link you to, you know, Robin Hood or something?

• 30:11Speaker 00

  Or like a credit builder. Yeah, like a credit builder. Here's a credit builder that can help you build your credit.

• 30:16Rebecca Bellan?

  Right.

• 30:17Speaker 00

  Things like that.

• 30:18Rebecca Bellan?

  Does it teach them how to invest and things like that as well?

• 30:21Speaker 00

  Yeah, different, all sorts of different brands. And so then they, they charge the brands and those companies a fee.

• 30:27Rebecca Bellan?

  I'm interested to see how this works out. And there's another one, right? It's another Gen Z fintech?

• 30:31Speaker 00

  Yeah. So I also wrote about Fizz. And so it was started by two young men. And this company to me also is very interesting. There's a lot of unique things about its model. So first of all, the two founders, they dropped out of Harvard and Cornell. And they were ages 19 and 21 when they decided to do this, to start this company, which like, wow, okay. I, okay, I'm gonna say something. If I were a parent and my kid had gotten into one of these schools and decided to drop out to, uh, found a startup, I'm, I'm gonna have to admit, yeah, I'd be supportive, but I'd, I'd be a little bit like seething inside too, because I mean, you know, wow, you get your, your kid gets in,

• 31:12Speaker 00

  accepted, you're paying all this money for them to go to these schools. And they're like, all right, now I don't want to do this anymore. But okay. Now, forget the parenting hat. In general, I do admire, um, I admire the fact that they took this risk. They took these chances. Good for them. So far, it seems to be paying off. So they built what they called Fizz. It's, first it started out as this debit card for, uh, the younger generation, but they, they really wanted to make it so much more than that. They wanted it to be a card that helps them learn how to build credit. And so they incorporated into it an artificial intelligence based budgeting product. And then they offered gamified financial literacy courses as well, so that these people also, their target demographic is college students,

• 31:55Speaker 00

  a fun and interactive way to learn. So a few other interesting things about this company, they decided to build their own infrastructure from scratch. Instead of like what they described, becoming a patchwork quilt of fintech SaaS vendors, which, hey, also good for them. They said they spent about two years building this infrastructure. And also, they decided they didn't want to partner with like a BaaS provider, banking as a service provider. They went to build their own banking relationship directly with the lead bank. Considering what's been going on in BaaS, I think that seemed like not such a bad move. And now they've raised $14.4 million in seed funding, which was led by Kleiner Perkins. They've gone through the Y Combinator Summer 2021 cohort. YC also invested in its seed round. So.

• 32:40Speaker 00

  They seem to be growing quite a bit. They are available to students at over 300 campuses in the US right now. Would this make them a neo-bank? Could they fall under that category? That's a good question. I, I wouldn't call them necessarily a neo-bank just yet, although they do offer this debit card. But that, no, that's a good question because I don't, I don't think they offer a lot of the other services that traditionally neo-banks do, like savings or, you know, other things that are associated with just like traditional banks, for example, beyond the debit card. But FIZ is definitely, you know, its aim is to help these users learn how to build their credit. But I think the good news with them is they

• 33:21Speaker 00

  have partnered directly with this bank. It's called Lead Bank. So I think they're taking very seriously, you know, the matters of compliance and they're not just like letting someone else handle that. Like I said, not saying, okay, here's to a BaaS provider, you take the money and you make sure it gets to where, you know, somewhere safe. They have ownership of that and that direct relationship with the bank. So I feel like that's where they've addressed that part of it, if that makes sense. Hmm. Yeah, no, that totally makes sense. Yeah. And so I, you know, I applaud these young people. I admire all of them for just taking these chances and they're all, you know, it's kind of refreshing having covered for a tick for a while, talking to these people who really just are earnest,

• 34:05Speaker 00

  right? They seem like they have, they have such passion for what they're doing and I love it. I love it very much. I think it's awesome. And Kleiner Perkins partner, Ilya Fishman, who joined FIZ's board as part of the financing, he said that, you know, this is a really crucial time and, you know, this is when a lot of people get their first like credit cards on like when they're in college and then become, start becoming financially independent. So instead of offering, because I remember when I was in college, I think my first card was like a Discover. So a lot of these traditional credit cards have hidden fees, high interest rates. FIZ is saying, no, we're going to offer you a credit line based on your spending patterns and we're not requiring credit checks or security deposits, things like that. So they really want to just kind of. Make it easier for these younger people to become financially independent without getting

• 34:50Speaker 00

  in over their heads in debt.

• 34:53Rebecca Bellan?

  Do we know how many people they have signed up so far?

• 34:57Speaker 00

  Yeah, they said tens of thousands of users so far.

• 35:00Rebecca Bellan?

  Wow. And it's for Gen Z, right? Like, can anyone sign up? Like, you know, there's plenty of people who aren't financially literate, who aren't, who aren't in that age bracket.

• 35:08Speaker 00

  Yeah, I'm sure they're not going to turn away anybody who doesn't necessarily fall into this bracket, but that is their target demographic. But yeah, but I think if someone who's not Gen Z said, I really, you know, want to use this card, I doubt they'd say no.

• 35:20Rebecca Bellan?

  Yeah, I certainly hope not.

• 35:22Speaker 00

  I would hope not, but on that note, we're gonna have to end the show. Thank you so much for joining us. Equity will be back on Monday. Until then, you can find me on X, Bay Area Writer, and Equity under the handle EquityPod on X and Threads. Don't forget to check out our sister show, Found, which dives deep into the stories behind startups with the founders who built them. Thank you again for joining us, Rebecca. It was a blast. Hope everyone has a good weekend. Bye bye.

• 35:47Rebecca Bellan?

  Thanks so much for having me.

• 35:48Speaker 00

  Bye.

• 35:52Speaker 00

  Equity is produced by Teresa Loquenzolo with editing by Kel. Bryce Durbin is our illustrator, and we'd like to give a big thanks to our audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thanks so much for listening, and we'll talk to you next time.