It was an eventful week in fintech startup land, and we did our best to capture the highlights. We covered some raises, new product lines, at least one M&A deal and more. Oh, and if you want to receive this in your inbox in the future, sign up here.

Lula tightens its belt and raises $35.5M at a 5x valuation

One of the coolest things about covering startups is covering them in their earlier stages and then watching them grow and raise more money over time. During the 2021 funding boom, it was very common for companies that I had previously covered to raise another round at a higher valuation. During this quieter funding season in 2023, it’s far less so.

But last week, I did get to report on Lula, a startup that aims to be the “Stripe for insurance.” Twin brothers Michael and Matthew Vega-Sanz started the company at the age of 24 in early 2020 and went on to raise an $18 million Series A (which I covered here) in 2021. This past week, they announced a $35.5 million Series B co-led by NextView Ventures and Khosla Ventures. Unfortunately, they did not disclose valuation, noting only that it was up “5x” compared to two years ago. With so many flat and down rounds taking place, though, such a big spike is certainly impressive.

I was curious as to how the company managed this feat in this current funding environment. In an interview, Michael told me that he and his brother/partner could feel that the market was about to take a turn in late 2021/early 2022. And while they didn’t need to yet raise more money, they sensed that it might be harder to do so when the time came. So they did something that was counter to a lot of other fintechs during that time: They tightened their belts. They adopted a more frugal mindset internally and when making new hires.

“In the last 12 months it certainly has been challenging trying to get the entire company to buy into this frugal, cost-conscious mentality,” Michael told me during an interview. “But we did, and I think that was the reason why the Series B process went smoothly for us. And to be honest with you, we expected it to be really, really, really difficult. We braced ourselves, and said, ‘Let’s go ahead and prepare like this is going to be a race that takes six to eight months. Let’s go ahead and prepare like this is going to be a race that none of our internal investors want to step up. Let’s just go ahead and brace for the worst.’”

The strategy seems to have worked. Revenue is up over 20x compared to last year and while at first it was hard, hiring quality employees actually ended up being not too difficult when candidates saw the value of a company that was focused on reducing cash burn and avoiding down rounds and layoffs.

“I think the fact that we just stuck to the core principles of building a really strong fundamentally sound business and being able to sustain that for the last two years — even in this crazy market — I think that primed us really well. And, we went from a few $100,000 in monthly recurring revenue in the first quarter of last year,” Michael said. “Today we’re doing a few million dollars in monthly revenue. And I think it’s important to call out that this is not gross written premium — this is actual revenue recurring revenue.”

Early investor NextView Ventures tripled (quadrupled?) down on its investment in the company, co-leading Lula’s latest round. Lee Hower — managing partner at NextView, co-founder of LinkedIn and early PayPal employee — actually first met the Vega-Sanz brothers at the end of 2018 when the pair was more focused on trying to build a ride-sharing network business. He kept in touch with them and took notice when they pivoted to focus directly on building an API for insurance needs. In 2020, his firm made a pre-seed investment in the company, which went on to participate in his firm’s virtual accelerator program that was launched that summer. “The Lula team took this from an idea to live with paying customers in their first market segment within about 5 months. They quickly ramped to seven-figure recurring revenue just a few months after that.”

Now Lula is targeting to reach $100 million in annual recurring revenue sometime over the next three to four quarters — and profitability even sooner. It’s come a long way from the days that co-founder Matthew says he remembers “photo shopping techcrunch headlines in my dorm room and hanging it on our walls hoping to one day get a story.”

It’s a type of growth story we’re not used to hearing as much these days. — Mary Ann

Get ’em while they’re young

As the parent of two teenagers, I’d like to know that I am setting them up to handle whatever financial things they may face in their adulthood. However, sometimes you need help. I’m not that savvy with investments — I leave that up to the experts that I pay to monitor my retirement portfolio (something my parents, in turn, taught me to set up out of college) — which is why I was eager to write about Bloom this week.

The venture-backed company was started by Allan Maman and Sam Yang a few years ago and offers a zero-commission stock investing tool for teenage investors that includes a brokerage account and teaches those aged 13 and older how to build wealth through interactive lessons on investing, stocks and finance.

Maman and Yang didn’t want to provide any old content, either. They developed an Instagram-like structure to their educational material, and when a user aces one of the quizzes, they get rewarded with points to spend within the app.

Bloom just passed 1 million downloads and over 10 million games played in the app. For those of you who are cash-conscious, it costs $15 a month or $120 for a year to utilize the app, and there are no minimums for the account balance.</