serious bluesky FOMO
the venture debt renaissance and why payment giants are coming for crypto.
Welcome back to The Angle ✍️ I spent the majority of this week getting ready for my holiday, which included finally caving in and buying my first pair of Sketchers. So it’s official I am getting old but at least I will be getting old with comfortable feet.
Bluesky FOMO
The sun is finally out in London and the blue skies are just another harsh reminder that I am not one of the beta users that has early access to Bluesky.
Bluesky is a decentralized social media initiative that was initially funded by Twitter, the social media company it’s now trying to compete with. Twitter founder Jack Dorsey sits on the company board alongside BlueSky’s CEO Jay Graber and Jeremie Miller, the inventor of Jabber/XMPP.
It’s still early days for the social media application but it’s already had 245,000 downloads from iPhone users and over a million people are on the app’s waiting list, according to Bloomberg.
The surge in adoption could be a turning point for the Web3 vision (Don’t tell Dorsey however, he’s more focused on Web5). It’s the first time we have really seen mainstream users gravitate to an application underpinned by decentralized architecture.
Users aren’t flocking to Bluesky because they see decentralization as the future, they probably aren’t even thinking about the underlying architecture. They are moving because of frustrations with the existing tooling and Bluesky was ready to seize the moment.
I am one of those users actively seeking out alternatives. I am finding Twitter less useful by the day and have turned to Substack Notes, which is useful for finding interesting perspectives and articles but it often feels like screaming into a void being a new writer with a limited network on the platform.
Bluesky promises something different with an invite process that means most new users will have at least one known acquaintance ready to embrace them when they join.
I am looking forward to trying Bluesky (hint hint to anyone with an invite 🙏) with the hope of rediscovering content and conversations organically again like the early days of Twitter in the 2010s.
But as Alex Kantrowitz points out in his Substack this week, Clubhouse felt the exact same way in the pandemic and look how that turned out. 🤷♀️
With Bluesky there is more at stake as it is experimenting with an entirely new social media model. It has the potential to be a driving force in helping decentralized applications and architecture to be taken seriously outside of the crypto think bubble.
Revolut’s ‘liquidity facility’
Last week we talked about how some startup fundraising announcements aren’t always what they seem, thanks to the magic of fundraising wordsmithery.
This week we are looking at the use of “liquidity facilities” and how it might be helping one buzzy startup avoid fundraising in this challenging market environment.
AltFi reported this week that European fintech startup Revolut has secured a liquidity facility, which is a debt financing agreement that allows companies to draw on a pool of funds over a period of time.
“The line of credit is structured via a debenture, a legal security structured to provide a long-term return to the lender that is secured against assets.
It is typical for funding lines or other facility arrangements to include a security package to the lender via a debenture, which is the reason it has been filed at Companies House.
In this instance, the deal is done via Kroll, which gives anonymity to the lender.” - AltFi
Debt financing is typically leveraged by mature companies rather than venture backed startups. Now it’s seeing a renaissance amongst startups as interest rates surge and equity financing becomes expensive. It’s often used as a bridge between equity fundraises or by startups in the later stages.
Revolut ticks both of those boxes. The startup, which was founded in 2015, last raised a $800 million Series E funding round at a valuation of $33 billion in 2021. It’s long been rumoured to be gearing up to go public after looking to hire an investor relations head last year and reporting that it achieved profitability in 2021, which is viewed as the “holy grail” financial metric for venture backed fintechs and a sign of their growing maturity.
Debt financing could enable Revolut to tap into funding without further diluting its cap table ahead of going public. It could also be viewed as a more defensive move as a result of the recent banking crisis. This line from the article caught my attention:
“‘Liquidity facilities can be used by financial services companies in line with regulatory liquidity guidance and this facility takes us above and beyond the liquidity guidance as a prudent measure,’ they said.” - AltFi
Was there a point when Revolut sat below or at the liquidity guidance requirements? The filing on Companies House is dated April 19, which suggests this arrangement is relatively new.
Something to think about: In the U.K. Revolut is still considered an e-money institution, not a bank, therefore funds are safeguarded by Revolut itself rather than being protected by the independent statutory organization the Financial Services Compensation Scheme (FSCS) . If a Silicon Valley Bank style bank run occurred across the pond at Revolut last month would it have had the liquidity to cover it?
The startup has also faced challenges with shoring up its IT systems. Revolut was more than two months late in filing its 2021 financial results due to replacing its internal accounting system, Reuters reported. When the results were filed its auditor BDO said it couldn’t verify around 75% of the startup’s revenue, which it attributed to Revolut’s IT systems not being designed in a way that could be “effectively tested” over the year.
The payment giants come for crypto
Speaking of fintech, payment giants Mastercard and Visa are continuing to make deeper moves into crypto despite the regulatory headwinds in the U.S.
Cuy Sheffield, Visa’s head of crypto, tweeted this week that the payments company has an “ambitious product roadmap” as he announced open positions for Web3 software developers at Visa.
“The Visa Crypto Team is building the next generation of products to facilitate commerce in everyone's digital and mobile lives. Our focus is to build intuitive features that expose profound new value for our customers.” - Visa’s web3 software developer job spec.
The payments giant recently published a thought leadership article that explored how Ethereum’s account abstraction proposal could allow for smart contracts to be implemented to enable automated programmable payments.
Not to be out done, a few days after Sheffield’s tweet, Mastercard's head of crypto and blockchain Raj Dhamodharan told Reuters that Mastercard is intending to expand its cryptocurrency payment card programme by seeking more partnerships with crypto firms.
The interview with Dhamodharan coincided with Mastercard’s announcement of its new “crypto credential,” which the company describes as a set of common standards and infrastructure that will help verify interactions among consumers and businesses using blockchain networks.
“Lirium, Bit2Me, Mercado Bitcoin and Uphold are the first partners to join Mastercard in this journey, working on an initial project to enable transfers between U.S. and Latin America and the Caribbean corridors.
Mastercard is also teaming up with public blockchain network organizations Aptos Labs, Ava Labs, Polygon and The Solana Foundation, who will help bring Mastercard Crypto Credential to the application developers in their ecosystems.” - Mastercard press release.
The announcements come at an interesting time as scrutiny on crypto activities and companies within the U.S. intensifies. This week Binance.US called off its plans to buy bankrupt crypto lender Voyager’s assets citing a “hostile and uncertain regulatory climate in the U.S.” The sale had already been approved by the bankruptcy judge overseeing the case.
There is often a lag of at least six to 12 months between when large companies such as Mastercard and Visa will establish a project internally and then actually announce it publicly. Still neither player seems shy about announcing their crypto activities even as industry veterans get skittish about operating in the U.S. Both companies simply view themselves as providing the rails for just another type of payment system.
“‘We're not here to pick winners. We're not here to pick which transaction should happen or shouldn't happen,’ Dhamodharan said.” - Reuters
Sound familiar? That’s because Visa said almost the same thing a month prior.
Please note this post has been updated from when it was originally posted. See this introductory post for why.
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