For all the excitement of the so-called Web3 space pulsing through the so-called Web3 space over the past year, the heartiest sums of investor dollars are finding their way toward products that touch users in the United States, but a growing number of startups are seeing growth in developing countries. Capture opportunities where existing centralized financial systems have struggled to meet the needs of their users.
gold coin is a crypto startup that builds a decentralized lending protocol that allows organizations to obtain crypto loans without already owning large amounts of crypto. Today, most lending platforms rely on the end user’s existing crypto collateral to determine whether they are a safe bet for a loan. The need to stake crypto assets that are worth more than the value of the loan provides secured loans, but also alienates many potential loan recipients who do not have large crypto holdings.
The Bay Area startup is looking to take a more mixed solution to crypto lending with its protocol, building up a capital pool and showing fintech organizations outside the US making its case for lenders working on the protocol and showing off non-crypto collateral. Wants to allow access to funds. ,
The startup told Nerdshala that it has closed $25 million in funding from the crypto arm of Andreessen Horowitz. Other supporters include Coinbase Ventures, SV Angel, Blocktower, Bill Ackman and Heli-Cap. Founders Mike Sall and Blake West worked together at Coinbase before launching Goldfinch in July 2020. The firm raised $11 million in funding last June.
“We see a lot of potential to increase access to capital and build this bridge for borrowers in the real world,” Sal tells Nerdshala.
Investing in this way outside securities guidelines isn’t a kosher state, so Goldfinch is ignoring the U.S. market for now and tapping into a network of investors elsewhere that focus investments largely on developing countries. where obtaining credit has historically been a challenging prospect. Kenya, Nigeria, Uganda and the Philippines are the countries with the highest debt through the protocol.
One firm that has been financed by those backing up on the protocol is Toogende, an East Africa-based startup that lends motorcycle taxis to borrowers who set up a payment plan to purchase bikes over time. Backers have also financed Greenway, an India-based company that manufactures and loans our clean cook stoves to low-income households.
The team has put a lot of effort into balancing the right incentives in their platform, allowing backers to take on different levels of risk and direct participation in the platform. An overall pool of capital divided into “junior” and “senior” divisions allows lenders to balance their risk. While junior investors can bet directly on which organizations they wish to support, the senior pool automatically diversifies the portfolio bets of junior pool investors. Senior pool is a less active, more conservative bet because they are paid out first, but lenders in that pool leave a larger percentage of interest for riskier junior pool backers who take on more risk with a greater potential upside.
The company says they have $39 million in active loans deployed to a handful of fintech firms that have reached more than 230,00 end borrowers.