In recent months, fintech M&A hasn’t been as active as one might think. So my ears perked up when Goldman Sachs revealed this week that it was buying NextCapital, a fintech firm that gives automated advice to participants in corporate retirement plans.
Before fintech was hip, NextCapital was a fintech startup. According to Crunchbase, the Chicago-based startup, which was founded in 2013 (or 2014 depending on the source), has raised over $82 million in funding from investors such as FinTech Collective and Oak HC/FT.
Employers are aiming to provide their employees with personalised solutions and customisable advice that can better support individual saving and investing needs to enhance retirement savings results, said Luke Sarsfield, co-head of Goldman Sachs Asset Management, in a statement.
We believe that personalisation is the way of the future when it comes to retirement savings, and that it will be at the forefront of the next wave of innovative retirement solutions. “
The move is noteworthy because the investing behemoth has been methodically acquiring fintech firms for years. According to Crunchbase, Goldman Sachs has bought 27 startups over the years. It announced in September that it would acquire GreenSky, a purchase-now-pay-later fintech, for $2.24 billion in an all-stock deal that reflected its sustained push into consumer financing. That transaction was completed last week.
In the case of NextCapital, which uses algorithms and automation to allow users to invest in retirement funds, Goldman didn’t say how much it was shelling out.
It’s another example of an incumbent recognising that buying a business that has built the technology it wants makes more sense than developing it from scratch, which would take significantly longer and require far more resources than a straightforward acquisition.
NextCapital, an early investor, said it backed NextCapital at a period when robo advisers were just getting started.
In a recent newsletter, the business stated, “We felt that the underlying infrastructure supporting the change from investment products to digital advice was a more durable, intriguing market to be committing capital to.”
It also pointed out that Goldman’s intention to buy NextCapital “follows other initiatives by multiline stalwarts (e.g., Morgan Stanley and JP Morgan) to diversify into stable income sources and expand their product offerings.”
Crunchbase data shows that Goldman has invested in over 900 startups over the years and has led 343 of them. The bank invested in a record 53 businesses during the dot.com boom in the first quarter of 2000. In the second quarter of 2000, that number fell to 46. And, of course, by the third quarter, it had dropped to only 13.
Its investment activities began to ramp up again in late 2018, and in the fourth quarter of 2019, the bank supported 30 businesses. According to Crunchbase statistics, it made checks to 17 firms in the first quarter of this year, including a couple that TechCrunch has covered, such as corporate expenditure company Ramp, tech-enabled homebuilder Homebound, and Indian food delivery giant Swiggy.
I’ll be interested in seeing who else Goldman backs or purchases in Q2.
The speed at which it travels slows down.
Fast, which provides internet businesses with a one-click checkout service, made only $600,000 in sales in 2021, according to a report published this week by The Information. According to The Information, its greatest competitor, Bolt, raised “nearly 50 times that amount.”
Fast was last covered by TechCrunch in January 2021, when the company raised $102 million in Series B funding, spearheaded by Stripe. Index Ventures, Susa Ventures, and Global Founders Capital are among the other investors. According to the information, it failed to find takers for a $100 million Series C investment at a valuation of over $1 billion later in the year.
There’s more, though. After an unsuccessful crowdfunding attempt, the website reported on April 1 (and no, it wasn’t an April Fool’s joke) that Fast was looking for a buyer.
According to reports, the company hired roughly 400 people last year and spent about $10 million per month for the majority of that time. $600,000 divided by 12 equals $50,000 in monthly revenue. Spending $10 million per month on a product that only generates $50,000 in the same time period does not appear to be prudent. My highly talented colleague Ingrid Lunden put it this way: “This is the scenario for a lot of businesses, but maybe particularly ironic since it’s a financial startup created to process and produce money.” Many of these payment companies are based on this exact principle.
Add in a CEO, Domm Holland, who is known for his “brash style” and had a history of scandal in Australia before launching Fast. Tow.com.au, Holland’s previous firm that sought to be “the Uber of towing,” failed in a “disaster,” according to at least one source. Holland’s previous firm was mired “in a multimillion-dollar billing dispute with the Australian state government over towing and impounding costs that led to the startup’s insolvency in 2018,” according to an article published by NPR in February.
“How far the envelope can be pushed before breaking ethical lines,” it continued, “raises issues about how far Holland has rewritten and polished his past.”
