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Two months after going public on the Nasdaq, digital banking app Dave is doubling down on its cryptocurrency plans after receiving a new $100 million investment from crypto exchange FTX.
The deal furthers Dave’s ambitions to rival competitors such as SoFi, which offers banking, investing and crypto-trading services all in one app. Crypto has been a target market of Dave’s dating back to before it went public this January via a SPAC merger.
The West Hollywood-based fintech startup already had ties to FTX: Alameda Research, the crypto trading firm founded by FTX CEO Sam Bankman-Fried, invested $15 million in Dave in a pre-IPO private placement deal last year.
Now, FTX is investing $100 million in Dave through its $2 billion FTX Ventures fund, while FTX US—the crypto exchange’s U.S. unit—is teaming with Dave on a “strategic partnership” meant to help it expand its crypto offerings. In a statement, the companies said FTX US will serve as Dave’s “exclusive partner for cryptocurrencies,” while the two firms will look to “introduce digital asset payments into Dave’s platform.”
In an interview with dot.LA earlier this year, Dave CFO Kyle Beilman said the startup was interested in using crypto to facilitate cross-border money transfers between the U.S. and Mexico.
On Dave’s fourth-quarter earnings call Monday, Beilman said the company could also use the money raised from FTX to pursue acquisitions, which he described as an “attractive component of our growth and capital allocation strategy.” FTX’s $100 million investment is not an equity deal, but rather takes the form of unsecured convertible notes—a type of short-term debt—that bear an annual interest rate of 3%.
In addition to announcing the FTX financing deal, Dave also released its first quarterly earnings report as a public company on Monday, covering both the fourth quarter and overall 2021 fiscal year. The firm reported quarterly revenues ($41.2 million) and full-year revenues ($153 million) that were up 16% and 26%, respectively, from their year-earlier periods—though it also posted a $15.2 million fourth-quarter net loss that contributed to $20 million in losses in the full 2021 fiscal year (up from $7 million in fiscal year 2020).
Dave also shared a bullish revenue guidance for 2022, projecting them at between $200 and $230 million in the ongoing fiscal year. The company also reported a growing customer base that surpassed 6 million users and more than 1.5 million monthly transacting members at the end of last year.
Those factors, plus Dave’s deal with FTX, sent the company’s stock climb more than 20% at one point in after-hours trading Monday—though it quickly moderated closer to Monday’s closing price of $10.60 per share.
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West Hollywood-based banking app Dave made its much-hyped debut as a publicly traded company on the Nasdaq stock exchange on Thursday.
Shares in Dave (ticker: DAVE) opened trading at $8.27, giving the company a market capitalization of roughly $3 billion. After swooning close to $7 per share, Dave’s stock rebounded above the $9 mark before closing the day at $8.53.
The fintech startup, which is notably backed by famed billionaire investor Mark Cuban, wrapped up its merger with a special purpose acquisition company (SPAC) sponsored by Chicago-based investment firm Victory Park Capital on Wednesday. The company is expected to raise up to $465 million in capital as a result of the merger, and is looking to use the proceeds to further grow its business—including a potential foray into crypto.
Dave founder and CEO Jason Wilk told dot.LA that part of the reason the company decided to go public was because he had personally grown weary of “the distraction of having to raise private capital.”
“We had a lot of interest in the private market, but we really thought to go public—and give the everyday retail investor the chance to invest in the company and grow with us—was a really good opportunity,” he said. “It makes it easier for us to raise more capital as a public company. Of course, there are some headaches of being a public business, but access to capital is far easier.”
Dave is among a wave of fintech startups aiming to disrupt the retail banking sector with low-fee, digitally-enabled banking services. The firm launched in 2017 as a financial planning app to help customers avoid the billions of dollars in overdraft fees charged annually by traditional banks.
It has since grown its offerings to include a checking account, and now has 11 million customers who use its services for banking, overdraft protection, building credit and finding side-gigs. Dave estimates that it has helped customers avoid nearly $1 billion in overdraft fees to date through its flagship feature, ExtraCash, and earn over $200 million in income through its gig-economy job board, Side Hustle.
As part of the IPO, Wilk and several other Dave executives rang the Nasdaq’s opening bell on Thursday—though the ceremony actually took place in L.A. several days ago, and not in New York City on the day of the company’s market debut.
Because of COVID-19 protocols and social distancing restrictions, the stock exchange shipped a duplicate podium to Dave’s old offices in the Mid-Wilshire district. The podium arrived from San Francisco, where it is occasionally used for bell-ringing ceremonies involving Silicon Valley tech firms.
Though Dave moved its headquarters in October to the Pacific Design Center in West Hollywood, Wilk and the other executives pre-recorded the opening bell ceremony in their old digs on Tuesday. “It was really cool to ring the bell in the place where we used to pump out code with just a few of us sitting around a desk or a coffee table,” Wilk said.
Dave is not the only L.A.-based neo-bank that has looked to go public via a SPAC merger. Marina del Rey-based Aspiration, which offers banking services with an environmentally-conscious angle, is pursuing a similar route and aims to make its market debut by the end of March.
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Los Angeles-based banking app Dave is poised to debut as a publicly traded company via a SPAC deal this week, and has plans to use some of the proceeds to wade into the crypto waters.
Dave, which is valued at $4 billion and backed by famed investor Mark Cuban, anticipates closing its merger with blank-check firm VPC Impact Acquisition Holdings III this Wednesday. If all goes according to plan, it will begin trading on the Nasdaq stock exchange on Thursday.
According to Kyle Beilman, Dave’s chief financial officer, the fintech company is looking to deploy some of the $465 million raised from the SPAC deal to explore cryptocurrency product offerings for its 11 million customers.
One area that Beilman said is under consideration: money transfers, which are ripe for disruption by crypto and blockchain technology. He cited the U.S.-Mexico remittance corridor, which is among the largest in the world with more than $40 billion sent from the U.S. to Mexico in 2020, according to Mexico’s central bank.
Dave Chief Financial Officer Kyle Beilman
“It’s hard to ignore the impact that crypto is having on the overall market, and I think there’s an opportunity for us to participate there,” Beilman told dot.LA. “We see the U.S.-Mexico cross-border remittance market as an interesting potential opportunity for us to explore.”
Dave already has well-placed partners in the crypto sector. In August, Alameda Research—a crypto trading firm founded by Sam Bankman-Fried, the billionaire founder and CEO of crypto exchange FTX—invested $15 million in Dave through a private placement funding deal in advance of the SPAC merger. That investment was part of a larger $210 million private investment in public equity (PIPE) deal, led by New York-based investment firm Tiger Global Management, that will flow into Dave’s coffers after its trading debut.
“It gives us a little bit more firepower leading up to the [SPAC] close,” said Beilman, noting that Dave and FTX are exploring potential partnerships. “It really highlights their commitment to the business that they were just willing to step up early and support us.”
Dave is part of a wave of L.A.-based tech firms that have pursued SPAC mergers over the past year—a group that includes fellow “neo-bank” startup Aspiration, as well as electric automakers Faraday Future and Xos.
After an explosive 2020, the SPAC market cooled somewhat in 2021 thanks in part to regulatory concerns. In the case of Dave, heightened regulatory scrutiny caused the company to delay its IPO by several months, forcing it to downsize its financial projections for 2021 and beyond, Beilman explained.
After generating revenues of $122 million in 2020, Dave had expected to grow that figure by 58% to $193 million in 2021. But after pushing back its plans for a late-summer IPO, that target was cut by roughly 20% to the mid-$150 million range, Beilman said.
Having delayed some of its planned investment initiatives as a result, Dave is now eyeing acquisitions and new product developments with the windfall from the SPAC merger.
“M&A is a really attractive potential way for us to accelerate our ability to be that one-stop shop and be at the center of our members’ financial lives,” Beilman said.
Dave also is considering a non-crypto crowdfunding product, modeled after GoFundMe, which would allow people to raise money for events and expenses, and has plans to launch a peer-to-peer money-transfer product similar to Venmo, Beilman said.
The startup, founded in 2017 by CEO Jason Wilk, recently moved its headquarters in October from Mid-Wishire to the Pacific Design Center in West Hollywood. It ramped up its workforce in 2021—growing to more than 265 employees, with plans to eclipse 400 within the next year or so.
“The bulk of the hiring will be done here in L.A.,” said Beilman, adding that the company is hiring engineers, marketing specialists and others across the country as it builds out its business.
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