CapWay, a Y Combinator-backed fintech that sought to bring financial services to people living in so-called banking deserts, has been shut down, according to its founder Sheena Allen.
Allen wrote about this on LinkedIn and confirmed to TechCrunch.
“I am proud of the work we were able to accomplish, but honestly disappointed that we were not able to complete the mission,” she wrote. “I believe there is still much work to be done in the area of financial inclusion, so this won’t be the last time you hear from me when it comes to the fight for economic equality.
Allen told TechCrunch that the company began shutting down last year and waited this long to announce it after a potential acquisition fell through.
Banking deserts are residents of communities, often rural, who do not have a physical bank branch nearby to obtain a current account. The term is also extended to people who have difficulty getting to the bank, such as low-income people, the elderly or disabled people.
Allen (pictured above) launched CapWay in 2016 after realizing the impact that not having a bank account has on certain communities, such as relying on high-interest payday loans or high money check services, as reported by CNN.
CapWay’s company planned to address this population by teaching financial literacy and offering online banking solutions. PitchBook shows the company has raised just under $800,000 from investors including Backstage Capital, Fearless Fund, and Khosla Ventures. He was part of YC’s summer 2020 cohort, as TechCrunch reported at the time.
Allen told us she closed the business for several reasons. She cited the fact that the reputation of the fintech sector was significantly tarnished after the hack of Developing banking and trust and the collapse of Synapse, the latter I saw hundreds of millions of dollars frozen consumer funds.
After that, many banks that sought to partner with fintechs required fintechs to hold a certain amount of money in the bank.
“It takes money to play in a highly regulated industry because you can’t control the changes,” Allen said. “You just need to have enough money and time to survive the adjustments. »
CapWay had to find a new banking partner during this time, but had to raise more money to meet potential partners’ liquidity needs, which it struggled to do. Some investors turned it off, saying the company was too far behind its competitor.
But she also highlighted the challenge that faced many Black founders last year.
“Fundraising itself has been down for everyone, but it has been and is extremely down for Black founders,” she said. Crunchbase found that black founders raised only 0.3% of the $79 billion which was awarded to US-based startups in the first half of the year.
Allen often felt like he was competing with other Black-founded fintechs for that small piece of the pie. She wrote in her post that some investors turned her down, telling her they had already invested in another debit card fintech founded by Black.
“Some investors like to lump all black fintech companies into one box, (even) when we don’t all do the same thing or have the same target audience,” she told us. “It’s unfortunate, but it’s been a factor in why we’ve been told no multiple times.”
Allen thanked his team and some of his investors in his LinkedIn post, noting that there were investors who “always called and checked on not only the company and me as a founder, but me as a human.” . She also thanked her fellow founders who “listened to me rant and called me to just check in on my mental state going through this process.”
But a failed startup—almost a badge of honor in the startup world—didn’t deter her from her love of building businesses. She still wants to work in the financial inclusion space and is thinking about her next startup idea. She is currently exploring some potential resident entrepreneur opportunities at venture capital firms.
“It’s a tough time to end your business,” she said. “But I learned that there is beauty in travel, even on cloudy days, when things seem bleak.”