9 ms·

Varo Bank could run out of funds by year-end

58 points by aruanavekar 4y ago

wumpus 4y ago
> "It’s a key moment in our journey" Next time he'll be calling it their "incredible journey".
sumy23 4y ago
Wow, they raised 500 million at a 2.5 billion valuation, but now has their value estimated by some analysts at 450 million. And that's with a not-too-shabby quarterly revenue of 22 million. This highlights what a terrible position unprofitable companies that rely on funding are in right now in this market.
- wumpus 4y ago
  There are many ways to value a company. The 450 million valuation comes from just considering revenue. Every fast-growing company looks terrible by that measure.
  - JumpCrisscross 4y ago
    > 450 million valuation comes from just considering revenue. Every fast-growing company looks terrible by that measure. Looking at only revenue is usually criticized for being too generous. What other factors should be considered in this case? (That said, a 10x multiple is more conventional for fintech. That clocks them around $900mm.)
  - deleted 4y ago
    [deleted]
SoftTalker 4y ago
It's never been clear to me what advantage these totally virtual banks have over an account at a local bank or credit union with a real local brick and mortar presence and real people who can help you face-to-face with any issues.
- JumpCrisscross 4y ago
  > what advantage these totally virtual banks have over an account at a local bank or credit union with a real local brick and mortar presence and real people who can help you face-to-face with any issues From what I can tell, neobanks are the Robinhoods of banking. They target users willing to trade off real features for a cute interface. I don't get it, because I like money and competence. But I suppose I see the niche. There are domains of my life in which I too will pay a premium for aesthetics, even at the expense of functionality. (I bank with Fidelity. They're great. I've never been into their physical locations, though I suppose they exist.)
  - dsr_ 4y ago
    There is a physical Fidelity location next to the Kendall/MIT T stop in Cambridge. I've been there; the person I dealt with was competent and pleasant.
  - latchkey 4y ago
    As a long time customer, I was invited into the Backblaze IPO. Fidelity was the broker I had to go with. They made me physically come into a branch and fill out paperwork in order to open an account.
  - max51 4y ago
    They offer better rates and lower fees, that's why they are popular. Their cost of operation is lower than a traditional bank (no physical locations) and they normally pass a big portion of that saving on the costumers. In my region web-only banks are the only ones who can offer accounts with 0 fees, no transaction limits and their saving account interest rates are always higher (irrelevant these days).
    - JumpCrisscross 4y ago
      > offer better rates and lower fees, that's why they are popular Sorry for being unclear, I was comparing neobanks with other online banks. The advantage over those with brick-and-mortar locations is clear. Apart from the subprime market, which American neobanks have targeted and who may have trouble accessing higher-aiming online banks, I don't see the pitch.
JumpCrisscross 4y ago
> “We remain very well capitalized and have sufficient capital to reach profitability, without having to raise additional capital,” Walsh said. Fun aside: when I was a trader following the financial crisis, we'd play a parlor game counting the number of times a bank said "capital" in press release and on earnings calls. The more times, the more fucked. This sentence would have been a winner.
- SnowHill9902 4y ago
  Same with “strategic” on slides at a hedge fund.
- W-Stool 4y ago
  In the immortal words of the character Mark Baum (based on Steve Eisman) in "The Big Short": "That's hilarious". I am referencing the scene when he meets the CDO manager, and he said this with the utmost sarcasm. A great scene, based on true events, in a great movie.
qubex 4y ago
Averaging the number of employees at the end of the first quarter and those at the end of the current quarter and applying the salaries reported paid I arrive at a quarterly salary expense of 40,000$ a quarter or $160k a year, which surprised me a bit.
rotexo 4y ago
So does anyone have a sense of what this means if you have an account with Varo? I mean, they are FDIC insured, so if they go under, is it just a matter of time until one gets their funds back?
- snotrockets 4y ago
  FDIC reopens the bank after a day or two, but the bank gets sold or closed after, which usually means the people banked there would have to open new accounts somewhere else.
  - rotexo 4y ago
    Thanks!
olliej 4y ago
I was unfamiliar with the bank, but figured I should be based on it appearing in HN front page. It looks to be a branchless/online-only American bank (despite living here for many years, I don’t know if branchless is common/uncommon here?)
aruanavekar 4y ago
wonder if there is a possibility that the traditional banks brought them out and if that is a win-win vs what might the risks be

58 points by aruanavekar 4y ago

> "It’s a key moment in our journey" Next time he'll be calling it their "incredible journey".

Wow, they raised 500 million at a 2.5 billion valuation, but now has their value estimated by some analysts at 450 million. And that's with a not-too-shabby quarterly revenue of 22 million. This highlights what a terrible position unprofitable companies that rely on funding are in right now in this market.

wumpus 4y ago
There are many ways to value a company. The 450 million valuation comes from just considering revenue. Every fast-growing company looks terrible by that measure.
- JumpCrisscross 4y ago
  > 450 million valuation comes from just considering revenue. Every fast-growing company looks terrible by that measure. Looking at only revenue is usually criticized for being too generous. What other factors should be considered in this case? (That said, a 10x multiple is more conventional for fintech. That clocks them around $900mm.)
- deleted 4y ago
  [deleted]

SoftTalker 4y ago

It's never been clear to me what advantage these totally virtual banks have over an account at a local bank or credit union with a real local brick and mortar presence and real people who can help you face-to-face with any issues.

JumpCrisscross 4y ago
> what advantage these totally virtual banks have over an account at a local bank or credit union with a real local brick and mortar presence and real people who can help you face-to-face with any issues From what I can tell, neobanks are the Robinhoods of banking. They target users willing to trade off real features for a cute interface. I don't get it, because I like money and competence. But I suppose I see the niche. There are domains of my life in which I too will pay a premium for aesthetics, even at the expense of functionality. (I bank with Fidelity. They're great. I've never been into their physical locations, though I suppose they exist.)
- dsr_ 4y ago
  There is a physical Fidelity location next to the Kendall/MIT T stop in Cambridge. I've been there; the person I dealt with was competent and pleasant.
- latchkey 4y ago
  As a long time customer, I was invited into the Backblaze IPO. Fidelity was the broker I had to go with. They made me physically come into a branch and fill out paperwork in order to open an account.
- max51 4y ago
  They offer better rates and lower fees, that's why they are popular. Their cost of operation is lower than a traditional bank (no physical locations) and they normally pass a big portion of that saving on the costumers. In my region web-only banks are the only ones who can offer accounts with 0 fees, no transaction limits and their saving account interest rates are always higher (irrelevant these days).
  - JumpCrisscross 4y ago
    > offer better rates and lower fees, that's why they are popular Sorry for being unclear, I was comparing neobanks with other online banks. The advantage over those with brick-and-mortar locations is clear. Apart from the subprime market, which American neobanks have targeted and who may have trouble accessing higher-aiming online banks, I don't see the pitch.

JumpCrisscross 4y ago

> “We remain very well capitalized and have sufficient capital to reach profitability, without having to raise additional capital,” Walsh said. Fun aside: when I was a trader following the financial crisis, we'd play a parlor game counting the number of times a bank said "capital" in press release and on earnings calls. The more times, the more fucked. This sentence would have been a winner.

SnowHill9902 4y ago
Same with “strategic” on slides at a hedge fund.
W-Stool 4y ago
In the immortal words of the character Mark Baum (based on Steve Eisman) in "The Big Short": "That's hilarious". I am referencing the scene when he meets the CDO manager, and he said this with the utmost sarcasm. A great scene, based on true events, in a great movie.

qubex 4y ago

Averaging the number of employees at the end of the first quarter and those at the end of the current quarter and applying the salaries reported paid I arrive at a quarterly salary expense of 40,000$ a quarter or $160k a year, which surprised me a bit.

rotexo 4y ago

So does anyone have a sense of what this means if you have an account with Varo? I mean, they are FDIC insured, so if they go under, is it just a matter of time until one gets their funds back?

snotrockets 4y ago
FDIC reopens the bank after a day or two, but the bank gets sold or closed after, which usually means the people banked there would have to open new accounts somewhere else.
- rotexo 4y ago
  Thanks!

olliej 4y ago

I was unfamiliar with the bank, but figured I should be based on it appearing in HN front page. It looks to be a branchless/online-only American bank (despite living here for many years, I don’t know if branchless is common/uncommon here?)

aruanavekar 4y ago

wonder if there is a possibility that the traditional banks brought them out and if that is a win-win vs what might the risks be