A wave of organizations -- propelled by global COVID-19 pandemic circumstances -- are moving their commercial and financial interactions online, and today one of the big players helping to enable that shift is announcing a significant round of growth funding to expand the tools and services that it provides to them.
Rapyd, which provides an API-based "fintech-as-a-service" platform covering payments, banking services, fraud protection and more, has raised $300 million, funding that CEO and co-founder Arik Shtilman said in an interview will be used to expand its team, build out more technology (next up: expanded fraud ID services and a wider marketplace) and make selected acquisitions.
Rapyd's customer base now numbers about 5,000 businesses, which includes marketplaces (labor marketplaces and marketplaces for goods), e-commerce businesses, other kinds of lenders and any business that might want to incorporate transactions or new financial services into their wider offerings. Shtilman said that at the moment, Rapyd is seeing its strongest growth yet, onboarding about 500 new customers each week.
The funding is coming at a $2.5 billion post-money valuation, Shtilman confirmed. (For some context on that, Rapyd was last valued at $1.2 billion in December 2019.)
The round is a Series D and is being led by prolific growth-round VC Coatue, with Spark Capital, Avid Ventures, FJ Labs and Latitude (all new backers), as well as General Catalyst, Oak HC/FT, Tiger Global, Target Global, Durable Capital, Tal Capital and Entrée Capital (all previous backers) also participating. Other past investors, notably, include another major player in the world of API-based financial services, Stripe.
As with other companies in categories that have seen a huge surge of demand in the last year, financial services -- and in particular those providing services to be able to carry out transactions online via the internet or phone -- have proven to be some of the most mandatory and most used. (And no wonder, since bills still need paying, food and other items still need to be purchased, loans very much still need to be made and so on.)
This was what many would call an "opportunistic" raise, made not to keep the lights on or to extend runway, but because the money was being offered to Rapyd at good terms, and there were smart places where it could be put to use to grow the business.
"We didn’t plan to raise money when we raised this round, but when the pandemic came in our business started to boom," Shtilman said. "We were approached by existing investors to scale beyond our original business plans after we completed our 2021 growth plans in three months in 2020. So we thought the timing was probably right for world domination."
Shtilman was partly (only partly) joking -- he has a sort of deadpan delivery that I can't quite capture here -- but it's a far cry from the startup's early days, when "no one wanted to invest because everyone thought it would be too hard to execute. Even our early investors advised us to focus on a smaller concept. But we thought building globally doesn’t work. To start small is against the idea. Over the last several years, the need to explain what we do [has] almost vanished."
The challenge (and opportunity) that Rapyd identified back in 2017 when it first opened for business (having been hatched in Israel originally) is that the global commerce and financial markets are very highly fragmented. Consumers and businesses in individual markets have their own preferred payment methods and demands, regulations differ and the key companies involved vary from country to country.
Meanwhile, APIs have long been a great instrument for integration and connection: Using a few lines of code -- and presuming your own services are built on code too -- you can knit together services, and bring in commoditized functionality that would take ages to build from the ground up, cutting down the effort and work needed, to focus on making your core business more unique.
While companies like Stripe, Twilio and many others had identified the opportunity of leveraging APIs to scale out a world of functionality to a wider set of would-be customers, what Rapyd really identified and built out was the idea of loading not just one, two or three services, but hundreds (even thousands) of features into that proposition. In fintech, where those services are complex, there is a big array of them from which to choose what to build, and also a big pool of would-be customers to use them, if you are aiming wide.
The idea is smart and, as Shtilman noted, very much in keeping with the economies of scale that exist in e-commerce and fintech: Individual transactions are at the end of the day very incremental, so services that bring many together can finally start to conceive of interesting returns.
That, of course, is not just something Rapyd has identified and run with. That is to say, the company has a number of competitors now in the market.
Just last week, Germany-based Mambu, which also provides an API-based suite of services (7,000 at last count) under the idea of "banking as a service," raised $135 million at a valuation of over $2 billion. Stripe, a backer of Rapyd, also has continued to expand and add a number of services well beyond payments. Thought Machine also raised a big round last year; Temenos and Italy’s Edera are also strong players here.
And the field has so much opportunity that it's even attracting a lot of newer entrants: witness Unit, another interesting player that came out of stealth in the U.S. in December with an interesting list of backers of its own.
"To build financial infrastructure, it doesn’t matter whether you are a small mom and pop or something bigger, you need many things, and if you want to sell in more than one jurisdiction you need a lot of those services," Shtilman noted about the need for scale and breadth in a fintech platform proposition. He's also very sanguine about competition.
"They have emerged like mushrooms after the rain," he said. "But if you don’t have competition it means you don’t have a business, so this is good. It means there is a lot of demand. But for now we are the market leader. We think we will become the AWS of this space."
That's where investors like Coatue are also landing for now.
“The payment landscape varies dramatically across countries. A company doing business globally might need to accept hundreds of local payment methods. Rapyd’s API, which abstracts away this complexity, is currently powering what we think are many of the world’s most exciting companies,” said Kris Fredrickson, managing partner at Coatue, in a statement. “We are honored to partner with Arik and team for the next phase of the Rapyd journey.”