What Would Alexander Hamilton Do?🏦

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Happy Monday, folks.

I love you guys.

Seriously, you’re lucky it’s not February 14, or I’d ask every single one of you to be my Valentine.

To show my appreciation, I’m looking to turn the spotlight on you. Make sure to read to the bottom for more info!

Econ 101 Survivors, buckle up. This one’s for you.

I don’t mean those of you who studied it because you went to a liberal arts school but wanted to go into finance, either.

I’m talking to those of you who try to explain the IS-LM Curve to people at parties.

You know who you are. (okay it’s me.)

Opinions on Jerome Powell and the Central Bank are kinda a mixed bag (see: a new strike every day and things cost arm+leg% more than they did two years ago), but with global comparisons, we’re actually pretty fortunate.

In countries like Turkey, monetary policy means cutting rates even further despite rampant inflation doubling the price of your Big Mac by the time you remove the lettuce, making the choice between 100 bills in Liras and Monopoly Dollars a tough one. Slight lean towards the latter.

In many cases, this incompetency further fuels the poverty and poor living standards that separate the developed and developing worlds. Addressing this could bring billions out of poverty.

EMTECH is a fintech startup founded in 2020 with a mission to drive an inclusive modern financial system by providing revolutionary solutions for central banks and financial institutions.

• Side note, actually got to do some research with the Foundation for Economic and Industrial Research, the leading economic think tank in Greece, on best practices for government policy on fintech adoption. Pretty long, but if you’re into that kinda stuff, here’s a link. Warning, not nearly as many Netflix references.

For central banks, the New York-based startup offers:

• Regulatory Modernization: think digitizing everything from application reviews to compliance

• Risk Mitigation: real-time data tools for consumer protection and anti-money laundering (AML) and know-your-customer (KYC) requirements; safe experimentation frameworks like regulatory sandboxes

• Cash Digitization: payment modernization, cross-border settlements, and CBDC infrastructure for digital payments

And for financial service providers, the startup offers:

• Compliance Platform: streamlines regulatory readiness, applications, and licensing management, cutting costs up to 30%

• Real-time Reporting: pre-built developer-friendly APIs

The team is particularly interested in the potential of CBDCs, a high-potential monetary rather than cannabinolic innovation which creates digital versions of the national currency to streamline payments and expand access to financial services.

EMTECH’s offices in Africa and the Caribbean have allowed it to win clients and collaboration partners like The Central Bank of the Bahamas, Bank of Ghana, Central Bank of Nigeria, and the Fed. The company also recently signed a deal with the West Africa Monetary Institute and has about 200 fintech companies on its waitlist. Biggest collab since Tarantino and Margot Robbie’s feet.

To help bring its vision to life, the team has secured partnerships with leading tech giants like IBM, Hedera Hashgraph, Mastercard, Microsoft, and others, and it has 3 patents for its unique tech.

EMTECH raised a $4 million Seed round earlier this month, bringing its total funding to $10 million from investors such as Matrix Partners India and VestedWorld. With estimated revenue growth of 300% for 2022, and a projected growth of 500% in 2023, it’s easy to see why.

There is widespread curiosity from central banks in experimenting with CBDCs, a technology with the potential to replace the $10 trillion in cash in circulation globally.

• Like drugs in college, 98% have experimented or are planning to.

• According to this fancy schmancy tracker, 11 central banks have already fully launched CBDCs

• 19 of the G20 countries are in the advanced stages of developing them.

• The global market for providing the infrastructure for this is expected to reach $43.5 billion by 2028, growing at a CAGR of 25.8% from 2022 to 2028.

The company isn’t the only one in this market, facing competition from companies across the Blockchain and tradfi industries:

• ConsenSys

• R3

• IBM

• Digital Asset

• Fireblocks

EMTECH is a relatively new company with a small customer base, but its product is solving a clear problem for its customers, and it’s already making an impact and achieving its mission of expanding financial access.

The team is committed, having spent years around the problem and developing the skills necessary to address it:

• Carmelle Cadet, CEO: former Blockchain and Financial Services Business Development Executive at IBM

• Tunji Odumuboni, Executive Director - Africa: former Associate Director at KMPG Nigeria

• Diance Maurice, Chief Risk and Policy Officer: former stress test management at the Fed and risk management with the Treasury

It’s like providing every country with their own lil crypto Alexander Hamiltons. With a strong team, innovative products, and significant growth potential, they're poised to make waves in the fintech landscape.

Here’s to hoping Lin Manuel’s next soundtrack is just as fire.

TLDR: EMTECH is a fintech startup providing digital solutions to central banks, focusing on regulatory modernization and CBDCs. With key partnerships, clients like the Central Bank of the Bahamas, and $10 million in funding, they're poised to innovate central banking and drive financial inclusion globally.

Let’s Talk About Secs Baby

Let’s talk about all the good (for founders) things and the bad (for investors) things that may be (associated with the secondary market).

Secondaries are one of the least-discussed topics of the startup world, but that’s quickly changing. Secondaries refer to founders selling their own shares for cash, turning the 90% of their wealth that’s on paper into something which they can actually use, cause idk about you, but I don’t remember the last time I paid for gas with .000001% of The Startup Breakdown equity.

One of the reasons for the lack of open discussion on the topic is that it’s an obvious point of contention between founders and investors, one of the clearer points where each party’s incentives are misaligned.

For founders, they might want to sell some of their shares because they realize they’re currently overpriced, or maybe they’re looking for some portfolio diversification. Or, and this is crazy but hear me out, maybe they want to be able to pay for food?

For investors, they view founders selling shares as one of the Unforgivable Curses: Crucio, Imperio, Avada Kedavra, and Casho Outo. In their opinion, it’s a clear sign that the founder no longer believes in the vision and aren’t optimizing for the long-term valuation.

While the dilemma has always existed, it has come to the forefront in far more deal negotiations as of late with more VCs demanding that founders agree to not sell secondaries if they want capital. It’s a clear sign of the state of the market where investors feel like they’re Jalen Hurts strong.

However, even among VCs who are feeling the pressure building in the pot to return some liquidity to their own investors, secondaries are becoming increasingly attractive. For example, Tiger made news when it announced it was looking for buyers for some of its own holdings, and new funds are being set up specifically to buy this excess equity.

Needless to say, founders shouldn’t be criticized for opting for some liquidity, particularly when they’re already accepting far less than their market rate in salary. They should be able to afford a meal, Salt-N-Pepa (sorry)

Baby Are You Down, Down, Down, Down, Down?

If you’re a fundraising round that was completed in Q2, there’s a 20% that your answer to the above question is yes.

That’s right, a full 20% (historical average is ~10%) of deals completed from April-June was at a lower valuation than the most recent raise. That doesn’t even include rounds at the same valuation. You can like Jay Sean all you want, but that’s taking fandom to Swiftie level.

In addition, there was a sharp uptick in bridge rounds (38% of total), financing meant to get companies to the next full round.

The time between rounds jumped ~40%, a far cry from the market in 2021 that had founders gulping down easy money like at a bachelorette party in Nashville at Bottomless Mimosa Sunday Brunch.

Startups are feeling the burn, treading water to stay afloat and minimize the damage needed to keep the ship sailing, but as with the founder-friendly term sheets previously mentioned, things aren’t a-okay.

Even worse, it seems like the captains are having a hard time keeping the crew motivated and pointed up and to the right northeast towards Treasure Island. Employee option exercise rate, the rate at which employees exercise their option to purchase more shares, hit a multiyear low with only 26% exercising.

Don’t know how I got from Jay Sean (feat. Lil Wayne) to Blackbeard, but did you know the former is British? The more you know.

All Too Well (VC Associates’ Version)

And I, left my Patagonia vest there at your sister's house

And you've still got it in your drawer even now

I’d say to watch out for a spike in prices for Eras when it heads to the Bay, but frankly, Taylor is already literally impacting the local economy, so this one might be hard to quantify.

But an interesting startup was funded this week, one named Deckmatch which uses AI to go through pitch decks and rate their fit with the investment thesis of the firm they were sent to, acting as a moat to save investors’ time from having to open pdfs of companies that have literally nothing to do with what they invest in. In other words, AI is coming for the VC associates.

Having served in this role before, I can say that it’s needed. Can’t tell you how many utterly irrelevant decks founders send out to firms that could be speaking another language (and typos… it’s a dealbreaker, guys). However, given this entry-level position is the break-in role for so many successful VCs in the space, you’d have to imagine that this wouldn’t completely take off.

There’s no better learning experience than reps, and going through 100 decks a week and learning what to immediately throw out and what deserves a click to the second slide is a pretty good way to build up the ol’ sniffer for many young investors.

My even bigger question is what associate saw the deck for Deckmatch and decided to send it on for further review. It would be like Brett Favre calling the Packers GM to tell him to draft Aaron Rodgers. Good thing both of those guys are such great people who would never funnel welfare money into building their daughter a new volleyball stadium or fake a vaccination and sit alone in darkness for a few days.

Looking to showcase some of the work you guys are doing. Even if it’s not “startup of the week” worthy (yet!), would love to start promoting you. Whether you’re working on a side project, searching for a cofounder, or just feel like you deserve some clout (you absolutely do), reply with what you’re up to. Excited to see it!

In the meantime, if you’re looking for even more cutting-edge analysis into what’s going on in the world of early stage, check out one of my favorite newsletters on the topic 👇️ 

Cheers to another day,

Trey