Robinhood introduced on Thursday that it was buying X1, a no-fee bank card startup, for $95 million in money.
X1, which affords an income-based bank card with rewards, raised a complete of $62 million in venture-backed funding from traders like Soma Capital, FPV, Craft Ventures and Spark Capital since its 2020 inception. The corporate introduced its most recent raise of $15 million in December, when it additionally touted a 50% increase in its valuation.
On the one hand, whereas X1’s valuation is just not identified, it seems like Robinhood is getting take care of $95 million. In the event you check out latest raises by different bank card firms, you may say that X1 elevating $62 million ought to yield a excessive valuation within the a whole bunch of tens of millions. So, the acquisition worth might replicate the dip in fintech valuations we’ve seen prior to now six months.
For instance, Petal raised $140 million in 2022 at an $800 million valuation. Granted, Petal has been round longer and raised extra. A greater instance could be Yonder, a U.Ok.-based bank card startup that raised $15.4 million in April at an $89 million post-money valuation, transformed in right this moment’s U.S. greenback from the pound.
However, Robinhood famous in its announcement that this transfer is “an vital step in our journey towards broadening our product choices and deepening our relationship with current prospects.” Not solely has crypto trading slowed down, however its core trading business overall saw declines in May, almost certainly prompting that need to diversify its enterprise.
Certainly, the acquisition of X1 will get Robinhood into the bank card enterprise with the interchange payment income that comes with it. Robinhood presently earns interchange charges from its debit card. The startup first made headlines for its unique model, which permits it to underwrite prospects based mostly on their revenue somewhat than their credit score scores. (Since then, different gamers have emerged with related fashions — akin to Tomo Credit, which affords credit score based mostly on money move somewhat than credit score). X1 doesn’t cost an annual payment for its chrome steel Visa card, has no late or overseas transaction charges and rewards customers with “factors.” The corporate additionally claims that its card is “good” in that it has constructed software program options that work with the bank card.
X1 co-founders Deepak Rao and Siddharth Batra will oversee the brand new enterprise for Robinhood, and Rao will function common supervisor of bank cards.
Robinhood stated it expects the deal to shut within the third quarter of this 12 months.
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