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Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

For this week’s deep dive, the Equity team brought on Gumroad CEO Sahil Lavingia and Hustle Fund General Partner Elizabeth Yin to talk about equity crowdfunding. It’s been about a week since the SEC increased the equity crowdfunding cap from $1.07 million to $5 million, creating the perfect opportunity to go beyond the dollar amount and understand how the change impacts founders, venture capitalists, retail investors, and future fund managers.

Here’s a brief rundown of the show:

• We talk about the basics of this new SEC regulation, and understand which platforms might be leading the pack for these bootstrapped campaigns. Indiegogo’s founder wrote an op-ed grading the new regulations on the site.
• Some banter on Gumroad’s 12-hour campaign that led to a successfully crowdsourced $5 million for the company. Lavingia talks about his decision to crowdfund a round in his company, why it made sense for the company, and what it will take to make this raise mainstream.
• Of course, Yin shared a ton of helpful nuggets around crowdfunding, providing a venture capital perspective that was still bullish on growing the amount of check-writers in the ecosystem. Some recent equity crowdfunding campaigns have shown that there are thousands of individuals willing to fund the enterprises they want to see succeed. Juked.gg is one such example.
• There are also notes on the Testing the Waters dynamic that could usher some wiggle room to early-stage founders thinking about this.
• Will equity crowdfunding supplant venture capital, or will it merely augment it? Our discussion leads us to ponder both possibilities. What seems clear is that equity crowdfunding could widen the band of companies that are “backable,” if not the band of companies that traditional venture capital players find enticing.
• And we end with a whole bunch of meta debates, from the role of the platform in vetting campaigns. As with every innovation, including crowdfunding itself, there will be fraud and failure. But if there will be enough bad news to limit consumer interest is far from certain.

This is one of those nerdy topics that gets us really excited about the future of dollar allocation and startup creation. We hope you love the show and leave with a better understanding of what’s ahead.

Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday morning at 7:00 a.m. PST, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

WhatsApp’s planned policy changes aren’t sailing smoothly in India, the instant messaging service’s biggest market. Indian antitrust body Competition Commission of India on Wednesday ordered (PDF) an investigation into WhatsApp’s privacy policy changes, alleging that Facebook-owned service contravened competition law provisions through “exploitative and exclusionary” conduct in “garb of policy update.”

WhatsApp didn’t immediately respond to a request for comment.

This is a developing story. More to follow…

As the Ubers of the world continue to scale, a smaller on-demand transportation startup has raised some funding in Germany, underscoring the opportunities that remain for startups in the space targeting specific service niches. Blacklane — the Berlin startup that provides on-demand black-car chauffeur services in Berlin, London, Dubai, Los Angeles, New York, Paris, Singapore and 16 other cities — has closed a round of €22 million ($26 million at current rates). After taking a majority stake in Havn, the Jaguar-hatched electric car service in London, in February, Blacklen said that it will be using this latest round of funding to continue expanding sustainable travel initiatives, and to continue expanding its existing business with more flexible options for riding.

The funding, which is being made at an upround valuation, is a sign of how the company is showing signs of growth after a year in which monthly revenues dropped 99% in the wake of the Covid-19 pandemic and the resulting drop in travel, and specifically people willing to be in small spaces that are shared with others.

“The global travel and mobility industries have suffered, with several players struggling between drastic cuts, hibernation or ceasing operations. Blacklane has taken the opportunity to cater to travelers’ emerging needs,” said Dr. Jens Wohltorf, CEO and co-founder of Blacklane, in a statement. “Thanks to this financing, we will continue to fast-track our innovation, with zero layoffs.”

The company said that the investment is coming from existing investors German automotive giant Daimler, the UAE’s ALFAHIM Group and btov Partners. And while it is coming at an upround, Blacklane is not disclosing any figures, nor has it ever disclosed valuation. Previous backers of the company also include the strategic investment arm of Recruit Holdings, the Japanese HR giant, and it has raised around $100 million to date, including a round of about $45 million in 2018.

The funding is coming after what has been an extremely rough year for travel and transportation startups due to the Covid-19 pandemic, with Blacklane itself seeing monthly revenues drop 99% after the pandemic hit last year, the company tells me.

Some others in the space that diversified into other areas like food delivery or other kinds of transport (eg, bikes or scooters) were able to offset declines in their more core ride-hailing services, which in the meantime were repositioned as a safer alternative to public transportation. Blacklane, however, had never positioned itself as a ride for “everyman” — its core use case were higher-end rides and airport trips (which had also died a death) — so when movement shut down, so Blacklane’s business nosedived.

It was particularly bad timing for Blacklane, considering that in the lead up to the pandemic, it looked to be on course to turn a profit on its focused model. (While financials for 2020 will take a while to be posted, the most recent results for the company showed a net loss of about $18 million in 2018.)

The reason that Blacklane has managed to raise at an upround tells another side of the story, however.

As companies in transport and travel gingerly started to show the smaller signs of recovery last summer, so too did Blacklane. It coupled that with the first steps of diversification itself.

Earlier this month, it added “chauffeur hailing” in 22 cities, an on-demand service that reduced the lead time for an order to under 30 minutes (its previous service was based on more advanced bookings). It also changed its pricing structure to get more competitive on shorter distances, since so many of the airport rides that were the basis of its revenues have yet to return.

In addition to that, Blacklane took a majority stake in Havn, an electric-based car service hatched by Jaguar, for an undisclosed sum, to spearhead a move into more sustainable travel options alongside the fleet of Teslas already operated by Blacklane.

“Worldwide travel restrictions give us a one-time chance to reset our expectations for safe and sustainable trips,” said Wohltorf in a statement. “Blacklane will recover responsibly and continue to grow while caring for both people and the planet.”

Neighbor, which operates a self-storage marketplace, announced Wednesday that it has raised $53 million in a Series B round of funding.

Fifth Wall led the financing, which notably also included participation from returning backer Andreessen Horowitz (a16z) and new investors DoorDash CEO Tony Xu and StockX CEO Scott Cutler. Xu and Cutler will join former Uber CEO Ryan Graves as investors and advisors to the Lehi, Utah-based startup. A16z led Neighbor’s $10 million Series A in January of 2020.

At a time when the commercial real estate world is struggling, self-storage is an asset class that continues to perform extremely well. Neighbor’s unique model aims to repurpose under-utilized or vacant space — whether it be a person’s basement or the empty floor of an office building — and turn it into storage.

Colton Gardner, Joseph Woodbury and Preston Alder co-founded Neighbor.com in 2017 with the mission of giving people a more accessible and personal alternative to store their belongings. 

Image Credits: Neighbor

The $40 billion self-storage industry is ripe for a shake-up, considering that most people are used to renting space out of buildings located in not necessarily convenient locations. 

Neighbor has developed a unique peer-to-peer model, connecting “renters” in need of storage space with “hosts” in their neighborhood who are willing to lease storage space in their home, garage or even driveway. The company says it has hosts on the platform making more than $50,000 a year in passive income.

“We really grew into a national business over the last year and now have active renters in more states than Public Storage, which is a $43 billion publicly traded company,” CEO Woodbury said.

Neighbor makes money by charging a service fee (a sliding-scale percentage) of each rent. Its algorithms provide suggested rental fees for hosts.

COVID has only accelerated Neighbor’s business, with revenue growing “5x” and organic reservations increasing “7x” year over year.

“If you think about it, fundamentally on the demand side, everyone’s moving out of these major metro areas like New York and San Francisco, and are moving to these more rural locations. All that moving activity has created a lot more storage demand,” Woodbury told TechCrunch. “In addition to that, people are just spending more time at home and cleaning out their homes more. And they no doubt need storage as a result of that.”

 It also doesn’t hurt that the company claims the self-storage offered on its marketplace on average is priced about 40% to 50% less than traditional storage facilities.

Neighbor also partners with commercial real estate operators to turn their under-utilized or vacant retail, multifamily or office space into self-storage. This provides new revenue streams to landlords hurting from the pandemic keeping so many people at home. And that increased demand led to Neighbor’s commercial real estate footprint growing 10x in 2020. 

With its new capital, the company plans to expand its nationwide network of hosts and renters as well as continue to spread awareness of its marketplace.

“We have tens of millions of square feet of self storage on the platform,” Woodbury said. “The beauty of that square footage is that it’s in every single state. But we want to continue to expand nationally and as we grow and mature, we’ll turn our eyes globally as well.”

Interestingly, before leading the round for Neighbor, Fifth Wall approached the company about business development opportunities. Partner Dan Wenhold said he offered to introduce the concept to the real estate venture firm’s LPs, which include more than 65 of the world’s largest owners and operators of real estate from 15 countries. For example, Fifth Wall partners Acadia Realty Trust and Jamestown are already onboarding properties onto Neighbor’s platform. 

“We are sort of the bridge between the largest owners and operators of physical real estate assets and the most disruptive technologies that are impacting those property managers and landlords, Wenhold said. “And Neighbor fits perfectly into that thesis for us.”

After introducing Neighbor to a short list of Fifth Wall’s strategic LP partners, the feedback the firm got “was fantastic,” Wenhold said. 

“A lot of owners in retail, office and even multi-family expressed interest in working with Neighbor to help monetize space,” he added.

The company’s mission also has a sustainable component considering that creating self-storage space out of existing property can help minimize the amount of new construction that takes place.

Fifth Wall, Wenhold added, is aware of the waste and the emissions that come from the construction process to build new space and admires Neighbor’s role in minimizing that.

“Our firm ardently pursued the opportunity to invest in a transformative proptech business like Neighbor,” he said.

Nigeria remains a largely cash-dominated country. There are over 100 million adult Nigerians, of which more than half have little or no access to financial services. 

Today, Bankly, a Nigerian fintech startup digitizing cash for the unbanked, announced that it has closed a $2 million seed round. Founded by Tomilola Adejana and Fredrick Adams in 2018, Bankly is digitizing the informal thrift collections system known with different names such as esusu or ajo in Nigeria.

In the absence of a banking system nearby or a disregard for one, the unbanked resort to these traditional systems because they work completely offline. The system allows them to collate and save cash with a thrift collector responsible for disbursing funds when due.

However, there are issues around this system. First is the security issues that arise when the thrift collector goes missing with the money or is feared dead, leaving no clue where the savings are kept. There’s also limited access where members cannot consistently save if absent from a particular location. The third is the lack of customer data since most don’t have an online banking presence.

What Bankly has done is to digitize their whole process of collating money and allow these unbanked people to save using online and offline methods.

Over the past 18 months, the company has been building out its distribution and agent networks. Here, customers can deposit and withdraw cash with a Bankly agent anytime. This solves the issue of access as there are thousands of agents in these cash-dependent communities.

When the information of this new set of customers is collected and saved on its platform, Bankly starts to build engaging communities where these people can collectively save their income with the agents. Slowly, an online banking presence is built for them.

With most of their money in a bank and little or no cash to buy airtime or make payments, they would frequently opt to access these services online via their mobile phones.

Image Credits: Bankly

Onboarding these new set of customers means they get to save and transact more over time. This opens up access to credit and with more value created, there’s a new set of banked people, which leads to financial inclusion in the long run. 

“The first phase is building agent networks which is good but that’s not the goal,” CEO Adejana said to TechCrunch. “Just in the same way mobile inclusion happened, you need to then focus on acquiring customers who, after transferring cash to their mobile accounts, use it to buy airtime or make payments. We call that the three-phase process. The distribution first, then focusing on the consumer, after that full digitization. This is how we reach financial inclusion.”

With its insights into customer behaviour and transactions, Bankly also provides “data-as-a-service” to other service providers to offer tailored products and services to Nigeria’s informal sector. 

Bankly operates like a traditional bank but with fewer assets, revenue, customers and operational costs. But because it doesn’t spend a lot in acquiring customers and building physical presences, it can pass on those cost savings to customers as interests and still make decent margins.

Agents on the platform also take commissions for any transaction a customer makes through them. This time last year, the company had a little over 2,000 agents across the country. Now, that number has grown to 15,000.

The company still plans to add more agents with the new investment received. To increase its 35,000 customer base in cash-dependent communities, Bankly will also provide direct-to-consumer products in the coming months.

L-R: Fredrick Adams (CPO) and Tomilola Adejana (CEO)

In Bankly’s three years of operation, Adejana cites finding the right partners, talent, and most importantly, the right investors as challenges that the company has faced. Due to the nature of Bankly’s business, Adejana didn’t accept some of the investments offered to the company and only let in investors who aligned with the company’s plans for the unbanked.

“We’ve had to be patient to make sure that we were talking to people who deeply understand the problem and are passionate about solving it and are not about getting returns as soon as possible,” she said.

These investors include co-leads Vault, the holding company of VANSO, a fintech that was sold to Interswitch in 2016; and African payments company Flutterwave. While both companies have pioneered the technology the banked enjoy by building payment rails, they’ve done little to move the needle for the unbanked. With Bankly, there’s a chance to do so.

“Given our over twenty years experience in Nigeria’s fintech industry and previous exits, we strongly believe that Bankly understands the nuanced needs of this market — not to mention the team, strategy, and technology — to succeed in bringing affordable financial services to the unbanked. We are delighted to participate in this financing round as Bankly moves into its next growth stage,” Idris Alubankudi Saliu, partner at Vault said.

For Flutterwave, this marks its first disclosed investment into another company. When it raised a $170 million Series C last month, CEO Olugbenga Agboola mentioned to TechCrunch that Flutterwave might explore some partnerships with smaller companies and potential acquisitions in the coming years. So while the investment comes as a surprise, it’s not rare to see startups invest in other startups, particularly in the ones they hope to acquire in the future—case in point, Stripe and Paystack.

Other investors who took part in the round include Plug and Play Ventures, Rising Tide Africa and Chrysalis Capital.

Bankly aims to grow its customer base to 2 million unbanked Nigerians over the next three years. The goal is to support the Central Bank of Nigeria’s National Financial Inclusion Strategy of increasing the number of banked Nigerians from 60% to 80% by 2020. A year on, that strategy is yet to be actualized. But Adejana says Bankly is working with these regulators towards a more realistic target of 2025.

“We’re thrilled to have closed this milestone fundraise and to have such seasoned fintech investors who understand the market join us on this journey to bank Nigeria’s unbanked. Now we have built the agent network and are poised to serve customers directly via offline and online channels. Partnerships, collaboration, and a deep understanding of the needs of the unbanked will be vital to our success,” said Adejana.

Before Bankly, the CEO was an investment banker but it was during her masters’ program in Sydney she got into the world of fintech. After returning to Nigeria, Adejana worked on a product that offered loans to small businesses, then later joined Accion Venture Lab, a program focused on products that foster financial inclusivity. It was there Bankly started.

The product has caught on well. And while there are lots of fintech products in the Nigerian market pitching to reach the unbanked, Bankly remains one of the very few that can boldly stake a claim to that.

To truly attain financial inclusion in Nigeria, Adejana believes the onus lies with the fintechs to have long-term views just as the telcos and fast-moving customer goods did in the past. This increases the pie of customers fintechs can serve instead of taking a slice of an existing one. “For financial services to reach the last mile, it has to be distributed the same way fast-moving consumer goods are distributed,” she added.