The FinTAM Explosion

The Fintech boom (at least for instividuals/retail) has come a LONG way since 2006 and the days of Etrade, Yahoo Finance and CNBC.

Way back in 2006, I was all in on Wallstrip to leverage the video network boom started by Youtube.

I was at CBS post Wallstrip acquisition when the bug hit me to start Stocktwits. I felt Twitter, Facebook and YouTube were going to start a boom in financial services, e-commerce and customer support/enterprise software solutions.

At the same time, my partner Tom and I started Social Leverage to invest our own money in as many companies as we could that fit into these categories (Lifelock, Buddy Media, Tweetdeck, Business Insider, Tubemogul, Ticketfly, Techstars, GolfNow). When I met Yoni in Tel Aviv in 2010 I knew the next eTrade would be mobile first and invested and when I flew up to meet Vlad and Baiju to see their mobile brokerage idea Robinhood I knew that if they could build it and launch it, people would come!

We also backed our future partner Gary at Assistly whose company went on to build a great customer support company that was acquired by Salesforce.

So here we are in 2020 and I have this new thought in my head around financial services called FinTAM.

Venture Capitalists are now saying that everything is fintech.

I simply see the TAM (total addressable market) of financial services exploding.

A key next driver of the FinTAM explosion beyond the social networks are API’s. This idea drove our investment in Alpaca last year (Fund 3).

TechCrunch wrote a piece on this API phenomenon titled ‘What’s driving API-powered startups forward in 2020?‘. The gist:

It’s not hard to find a startup with an API-based delivery model that is doing well this year. This column noted a grip of recently funded API-focused startups in May, for example, underscoring how attractive they are to venture capitalists today.

Yesterday, I caught up with Alpaca, a startup whose API allows other companies to add equities-trading capabilities to their own services. The company’s business is skyrocketing this year. According to data it provided to TechCrunch, Alpaca’s trading volume, processed for its developer users and customers, has grown from $388.1 million in January to nearly $1.6 billion in both June and July. Volume fell some in August, but according to CEO Yoshi Yokokawa, September’s trading volume could see Alpaca surpass its summer records.

Alpaca announced a $6 million round from Spark Capital last November that TechCrunch covered, with Social Leverage, Portag3, Fathom Capital and Zillionize helping boost its total capital raised to nearly $12 million. We confirmed with Yokokawa that his startup’s revenue scales with volume, meaning that the company’s top line has exploded this year, with trading volumes up 10x from July 2019 to July 2020.

Alpaca is a good example of what to think of when we consider an API-powered company versus something more traditional, like Robinhood, which provides services to end users. Alpaca considers developers as its users, and those developers bring Alpaca to market in their own fashion.

The developer-first model can lead to efficiencies. As Twilio CEO Jeff Lawson told TechCrunch regarding new software products: “I don’t want to go through a sales process,” he said, adding that he also doesn’t want to wait “a week to get a call back” but would rather “start exploring now.” With many API companies offering a free tier or low-cost options for tinkering, lowering sales and marketing costs in certain instances when developers sell themselves on an API-delivered service.

At Social Leverage we continue to be excited about the FinTAM explosion in financial services that API’s, social networks (exposure, education, mentorship and idea flow), fractionalization and the universal language of money, price and volume. Hundreds of millions of new investors and savers around the globe will have access to great tools and financial services and the TAM of financial services is the part of fintech that excites me the most.

Of course low interest rates and global money printing do not hurt. As I like to tweet monthly, ‘a special thanks to the green toner guy/gal at the FED’.

I hope this helps explain the huge opportunities Social Leverage continues to be excited about.