- TechTO Newsletter
- Posts
- May 30, 2024: Crossing the finish line 🏃♂️
May 30, 2024: Crossing the finish line 🏃♂️
What we can learn from recent news in the ecosystem
QUICK TAKE
![Tracee Ellis Ross Yes GIF by ABC Network](https://media1.giphy.com/media/2BtJrO7gTZrF2FShhg/giphy-downsized.gif?cid=2450ec30rbxd01azsvi1wgq1j6k811y8rasfps7vrjctw2i7&ep=v1_gifs_search&rid=giphy-downsized.gif&ct=g)
Gif by abcnetwork on Giphy
Crossing the finish line
A recent raise and what we can learn from Relay’s approach to revenue and differentiating themselves amongst the FinTech competition.
When we say ‘crossing the finish line’ we mean that as a pun on our company headline. No company is ever truly “across” the finish line when it comes to growth, but in this case - we thought it was witty (just got with it).
Today’s new episode of Quick Takes, we highlight a majority of topics and headlines from across the ecosystem, but one in particular, we know we can all learn from.
Relay Secures $32.2 Million Series B Funding to Fuel Growth
Relay, a Toronto-based fintech company, recently announced a successful Series B funding round, raising $32.2 million USD. The funding was led by Bain Capital Ventures, a previous investor, and included participation from several other investors.
This significant influx of capital is set to propel Relay's expansion efforts, allowing the company to develop more products and attract additional customers.
The Relay Journey and Mission
Relay is a neobank focusing on serving small and medium-sized businesses (SMBs) in the United States.
Unlike many competitors that cater to startups or individual contractors, Relay has carved out a niche by addressing the banking needs of traditional SMBs. These businesses typically have between two to fifty employees and generate monthly revenues ranging from $20,000 to $200,000.
The company's mission is to provide these businesses with essential banking services while helping them better understand and manage their cash flow.
Unique Value Proposition
Relay differentiates itself by offering a comprehensive solution for SMBs that goes beyond basic banking.
The company identified a critical issue: most SMBs only have about 27 days of cash on hand and often struggle with cash flow management. To address this, Relay developed a product that not only meets their banking needs but also provides tools to enhance their cash flow understanding and management.
This focus on a specific market segment has allowed Relay to become best in class in their niche, setting them apart from other neobanks like Mercury.
Revenue Streams and Business Model
Relay generates revenue through multiple channels:
1. Interest Spread: Relay earns a spread on the interest made from deposits versus what it pays out.
2. Card Interchange Fees: Every time a customer uses a Relay-issued credit card, the company earns a small fee from the merchant.
3. Premium Services: Relay offers a premium account with additional features, such as same-day payments, for a monthly fee of $30.
This diversified revenue model ensures a stable and scalable income stream, contributing to the company's financial health and growth potential.
Market Dynamics and Future Prospects
The fintech sector has been relatively quiet in terms of new funding announcements, making Relay's Series B round particularly noteworthy. There could be a variety of reasons for this trend, including a general decrease in funding activity or companies choosing not to announce their funding rounds immediately. However, Relay's ability to secure a substantial round indicates strong performance and investor confidence.
Relay's journey has been marked by steady growth and strategic development. Founded by Yoseph West, who has a solid background in fintech, the company launched in 2018 and has since built a robust product for a well-defined customer base. With revenues reportedly tripling in 2022 and growing nearly sixfold in 2023, Relay is on track to reach a $100 million run rate by the end of 2025.
This growth trajectory, coupled with a customer base of over 100,000 businesses, demonstrates the company's ability to scale efficiently.
Implications for the Fintech Sector
Relay's success story may signal a broader trend in the fintech industry, where late-stage funding rounds are increasingly reserved for companies with proven business models and solid growth metrics. This shift towards more realistic and sustainable growth is likely to shape future investment strategies, with investors seeking businesses that can efficiently deploy capital to expand their products and customer base.
In conclusion, Relay's $32.2 million Series B funding round not only highlights the company's impressive growth and market differentiation but also reflects broader trends in the fintech sector. As Relay continues to expand, it sets a strong example for other fintech companies aiming to achieve sustainable and scalable growth.
Subscribe to Quick Takes
With new episodes dropping every other week - the TechTO team returns to bring you more of the insight and analysis you love from across the Canadian Tech Ecosystem.
From the perspective of an active investor in the market, and tech marketer, we break down the questions, concerns, and discussions from Canadian tech.
PARTNER CONTENT
Join the live session: automate compliance & streamline security reviews
Whether you’re starting or scaling your company’s security program, demonstrating top-notch security practices and establishing trust is more important than ever.
Vanta automates compliance for SOC 2, ISO 27001, and more, saving you time and money — while helping you build customer trust.
And, you can streamline security reviews by automating questionnaires and demonstrating your security posture with a customer-facing Trust Center, all powered by Vanta AI.
*this is sponsored content
READS & OPPORTUNITIES
Why this Canadian city leads the ecosystem (at least for now)
Meta’s new AI strategy has a Canadian lead
New tech is here to combat medical error
Police in Canada might now be using facial recognition tech for ‘backup’
In Q2, here are some new tech trend predictions for the rest of the year
Share your Reads & Opportunities with us for a future edition
PARTNER WITH US
![Cowboy Partner GIF](https://media0.giphy.com/media/fuJZMrysviCxuCBKfC/giphy.gif?cid=2450ec30toffw33onf9q4grghj0lkjq5kehj0fuodhtni5ld&ep=v1_gifs_search&rid=giphy.gif&ct=g)
Gif by TheLonelyCowboysBallad on Giphy
Want to showcase your company, events, and opportunities to thousands of tech leaders, professionals, and investors across the country?
Contact us about potential partnership and advertising opportunities
Reply