Fintech startups around the world raised a total of USD 121.6 Billion in 2021, including a range of companies from payment providers to digital banks to corporate services entities.
This was not an unusual development, but what was, is a traditional bank raising millions from Venture Capitalists. Cross River Bank successfully raised USD 620 million in funding at a valuation higher than USD 3 Billion. The 14-year-old company powers payments and lending for the likes of Affirm, Coinbase and Stripe, and was an early player to embrace new crypto powered payment systems.
However, Cross River Bank is not just a traditional bank. The bank, based in New Jersey, is also a technology infrastructure provider that acts as a backbone for lending and payments for many fintechs that are VC-backed. In tandem with the explosion of fintechs in the last two years, Cross River Bank has also expanded its business and courted investor interest.
The funding was co-led by private equity firms Eldridge and Andreessen Horowitz, and also saw participation by T.Rowe Price Investment Management, Hanaco Ventures and Whale Rock, amongst others.
This round of funding was a massive step up from the first round of funding in 2016, which saw the bank raise USD 30 million from Battery Ventures, Ribbit Capital and Andreessen Horowitz. In 2016, the move by investors in fintech startups was rare, but it was less so in the financing of Cross River Bank in 2022, on which a number of players from fintech depend for embedded payments, lending, cards and crypto solutions.
This round of funding was the third time that Andreessen Horowitz has invested in Cross River Bank.
Cross River’s stellar performance
In a statement, the bank said that in 2016, it had originated more than USD 2.4 billion in loans to companies that included Upstart and Affirm, and now that figure has multiplied ten times to USD 24 billion.
David George, General Partner of Growth Fund at Andreessen Horowitz, said that the technology and banking systems of Cross River enables any company to be a fintech company and that is why his firm committed to Cross River right from the early days.
He went on to say that his firm saw the bank in action years ago with one of its portfolio companies, Coinbase. Coinbase was one of the first clients of the bank from the crypto sector.
He said that when fintechs like Coinbase were looking for a partner bank, many traditional banks declined the offer due to a blanket policy against cryptos. Cross River, on the other hand, supported Coinbase, creating a satisfied partner to this day, he added.
Todd Boehly, co-founder and CEO of Eldridge, said in a written statement that Cross River was a tech company with the established expertise of a bank.
Apart from Coinbase, the organization has almost 80 clients in the tech and fintech space, and includes many industry leaders in the respective sectors.
Founder, President and CEO of Cross River bank, Gilles Gade, describes the bank as the epicenter of the fintech ecosystem.
Cross River relies heavily on all its partners to develop their own front end, but as the company continues to progress in embedded finance, some front-end applications will be offered as white label solutions for its partners that the bank would like to acquire and potentially develop by itself, he added.
The long-term focus of the bank will be on Web 3 and crypto, said Gade.
Gade also said that crypto has been the darling of the bank for over eight years, which started with its partnership with Coinbase.
Its goal is to offer its partners a regulatory-compliant and approved framework to increase their crypto offerings and expand their reach.