Hey — It’s Nico.

Today’s issue takes 5 minutes to read.

If you only have one, here are the five main things:

• Synapse has shut down, affecting hundreds of other fintech startups (read why below).

• Lucid Motors and Silo lay off big parts of their teams.

• Work from home setups are getting wild.

• Flipkart, Praktika and Forward closed big funding rounds.

• xAI raised $6B and became the second most valuable AI company (read about it below).

Let’s get into it.

You’ll notice today’s newsletter has a slightly different format.

It has three sections (instead of the usual two), with less content each and more bullet points.

The goal is to make readability easier and increase options of content.

This Week In Startups

🔗 Resources

Beehiiv’s founder shares lessons on how to announce a fundraise.

How Mailchimps’ founder bootstrapped to a $12B exit.

Andrew Chen discusses the challenges of data-driven decisions in startups.

7 lessons from growing an agribusiness startup.

Seven strategies to prevent churn for B2B AI startups.

📰 News

Harlem Capital is raising a $150M fund to invest in early-stage startups and diverse founders.

Peter Thiel-founded Valar Ventures raises $300M to invest in Fintech startups.

Autonomous vehicle startup Lucid Motors slashes 400 jobs. 

Techstars CEO Maëlle Gavet steps down due to health reasons.

Food supply chain software maker Silo lays off 30% of its employees.

💸 Fundraising

Google to invest $350M in Indian e-commerce platform Flipkart.

Praktika raises $35.5M to personalize language learning with AI-powered avatar tutors.

Forward raises a $16M seed round to compete with Stripe on integrated payments.

Iyris raises a $16M Series A round to help growers increase crop yield, reduce input costs and extend growing seasons.

Rows secures €8 million to enhance its spreadsheet capabilities and expand into new markets.

Fail(St)ory

A Fintech Meltdown?

This week, the BaaS Startup Synapse announced it is shutting down.

Why It Matters:

• Hundreds of startups that used Synapse for banking services are being severely affected.

• Mainvest, a fintech startup that utilized Synapse services, has been so impacted that it has decided to shut down entirely.

• Over 200,000 people have had their accounts frozen and cannot access their money.

• This could make investors more cautious about investing in BaaS in the future.

What Was Synapse: Synapse was a Banking as a Service startup. They partnered with traditional banks and developed technology so other companies could easily integrate banking services into their platforms.

Synapse handled things like:

• Loans, cards, and bank accounts.

• Compliance.

• Identity management and know-your-customer (KYC) requirements.

The Numbers:

• Funded in 2014, it was one of the first BaaS providers.

• Raised over $50M in venture capital.

• In 2019, raised $33M in Series B funding.

• Had over 100 fintech clients with a total of 10M end customers.

Reasons For Failure:

• Lack of Compliance Standards: Fintechs are less regulated than traditional banks. The investment rush in 2020 and 2021 pushed many fintechs to move quickly, often neglecting compliance. Many of the early BaaS startups, like Synapse, were trying to disrupt the banking system without much care for the risks involved.

• Regulators Do Not Like BaaS: Banking regulators are not fans of BaaS providers. They want banks to be in control of all their third parties and do not like the idea of unregulated entities being in charge of critical stuff like risk management, customer operations, or identity management.

• Fallen Partnership: Synapse was an intermediary between Evolve Bank & Trust and the banking startup Mercury. This partnership ended in October 2023 when Mercury and Evolve decided to work directly together, causing Synapse to lose an important client.

Going Forward: Fintech VC investment has dropped slightly from last quarter and is far below the peak of 2021.

The failure of Synapse may make investors more cautious about investing in new BaaS or fintech startups, potentially decreasing VC investment further.

Additionally, banks are now under more scrutiny for their relationships with fintechs and BaaS providers, which may lead to banks being more hesitant to use fintechs as intermediaries.

Go Deeper

• Andreessen Horowitz was one of Synapse's biggest investors and referred to Synapse as “the AWS of banking.”

• Is Synapse failure the FTX moment for Fintech?

Miscellaneous

Work Setups

One positive thing the pandemic has left us: amazing work from home setups.

If you’re like me and feel inspired when seeing this kind of pictures, make sure to check this thread 😉.

Trend

Elon’s $6B

xAI, Elon Musk's AI startup, raised $6B in a new funding round this week.

Why it Matters:

• Elon is trying to compete against OpenAI, Microsoft, Google, and Meta in the AI race.

• This funding values xAI at $24 billion, which is less than OpenAI’s $86 billion but more than Anthropic's $18 billion.

• This funding comes only two months after the company presented its new multimodal model, Grok-1.5V.

Why Is xAI a Thing: Elon Musk has been one of the biggest investors or OpenAI However, he stopped supporting the company, claiming they betrayed their mission to share AI technology with the public and instead took billions from Microsoft, turning into a for-profit venture. 

After leaving OpenAI in 2018, Elon decided to build AGI within his own company. Last year, he founded xAI, which has been making rapid progress. Only a few months after being funded, they released their first model, Grok.

Grok: Grok is xAI’s language model. 

• The first version, Grok 1.0, was released last November.

• It was trained on a massive dataset, including posts from Twitter.

• It is available to use to all premium X users.

• It has real-time access to data from X.

• It is sarcastic and has a sense of humor.

• It is now open-source. Anyone can access the weights and network architecture (but not the training data).

• In April, xAI announced Grok 1.5, their first multimodal model.

• It can understand images, although it doesn’t have the real-time video analyzing capabilities of GPT-4o.

• This new version has not yet been released to the public.

The Future:

• xAI is still far behind OpenAI in the AI race, but they are advancing rapidly. With this new funding, they have plenty of resources to keep developing Grok.

• Musk has mentioned plans to build the “Gigafactory of Compute”, which could be a destination for some of the funding.

• xAI will likely seek partnerships to introduce Grok to users that do not use X. Competitors like Google and Meta have massive platforms to reach users, while X is still relatively small. Therefore, Elon will probably look for other ways to expand Grok's user base.

Go Deeper:

• OpenAI’s position on the Sam Altman vs Elon Musk feud (it has all the emails the two founders sent each other).

Help Me Improve Failory

That's all of this edition.

Cheers,

Nico