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Kate Hiscox is having a moment. Her company, Sivo, founded eight months ago, has already raised $5 million from investors at a post-money valuation of $100 million, and she is in active talks with others who would like her to consider accepting Series A funding from them.

Partly, the attention owes to the fact that Hiscox is part of the newest graduating class of the popular accelerator Y Combinator, along with roughly 350 other companies, and if there’s anything venture capitalists like, it’s freshly minted YC grads.

They also like what Sivo aims to do, which is to strike deals with debt providers for gigantic credit lines that it will then, through its API, work with many companies, big and small, to disburse via their own lending products. Yes, Sivo is making interest off money that it is simply divvying up into smaller amounts. But the real magic, says Hiscox, is in the risk management that Sivo provides. It doesn’t just parcel out debt; it helps its customers that don’t have their own risk management practices figure out who is worthy of a loan and how much.

Hiscox — who has founded a number over the years, one of which she took public on the Toronto Stock Exchange in 2018 — calls it a Stripe for debt. But one question is how Stripe itself might feel about Sivo. Stripe was also once a YC company, it also lends debt to its customers, and it seemingly doesn’t like when its investors fund potential rivals. Another question is how a company like Sivo fares when interest rates rise and the debt it borrows is no longer cheap.

Hiscox suggests she’s not worried about either scenario right now. We talked with her on Friday about the company in a conversation that follows, edited lightly for length and clarity.

TC: You’re building what you describe as Stripe for debt. But isn’t Stripe’s loan business competitive with yours?

KH: No. Sivo is the first YC company that’s building debt as a service.

The reason why [we are] is that it’s very difficult for fintechs and neobanks and gig platforms to be able to raise that capital to be able to lend money to their users at scale; that generally takes a couple of years. What we’re building out is essentially Stripe for debt, which gets these companies access to debt capital on day one. Our team has decades of experience with risk and raising debt and building enterprise tech at companies like Goldman Sachs and NASA and Revolut and Citigroup.

TC: Give me a use case.

KH: So we have more than 100 companies now in our customer pipeline, including Uber. In the case of Uber, they want to be able to offer financial products to their drivers. Maybe it’s to fund a vehicle or provide a payday advance. But Uber really can’t do that because it doesn’t want to look like an employer, and it also doesn’t want to necessarily deal with risk modeling, meaning who in their big driver base has the right risk profile [to rationalize a loan]. You plug in Sivo, and we will cycle through the Uber driver base to figure out to whom it makes sense to make a loan offer, and we do it all this through API.

TC: But Uber is not yet a paying customer?

KH: No, we go live next month; that’s an example of how Uber would use us. There are also a lot of neobanks that are three to five years old and want to start lending and really don’t know have that risk experience they need to get access to debt capital in order to have the money to be able to lend to their customers. So with something like Sivo, they’re able to integrate our service through our API, and we’re able to pretty much tell them who they should be lending to, how much they should lend, and then we offer the debt funding.

TC: Do have any debt deals in place?

KH: We signed a debt deal last week for $100 million and we’re working on another debt deal for close to $1 billion that will be announced next month.

TC: Who is your debt partner and how have you convinced them to lend so much to such a young outfit?

KH: I’m not sure I can say publicly yet who we’re working with, but we source our capital through all the usual suspects — mutual funds, pension funds, banks — and we’re able to do because as soon as we announced that we were going to start doing this as a product, we had tons of customers come and say, ‘I want this. [Trying to do this ourselves] is long and complex and painful, and we want just want to be able to do it in a simple way, like we would use Stripe for payments.’

I also have a lot of experience because I’d taken a company public and have lots of connections in the capital markets, and so does our CFO.

And there are actually a lot of banks that would love more exposure to fintechs and to a basket of YC-backed fintechs in particular because they can get yield, but the check sizes are too small for a bank. There’s also concern that the fintechs don’t really have a lot of risk experience. Meanwhile, our team has a lot of gray hair as far as risk is concerned.

TC: What kind of economic agreement do you have with that debt lender and what percentage of each loan will you charge your customers?

KH: I really can’t tell you, including because it’s going to vary from fintech to fintech; some have more complicated user models, some have bigger user bases, some operate in different regions around the world. What I can say is that it’s an incredible time for us to access debt capital from institutions because interest rates are so low and even negative in some parts of Europe. You just have to have the right team to know where to go and get it.

TC You’re also raised $5 million in seed equity funding already at a post-money valuation of $100 million, including from Andre Charoo of Maple VC, who says he’s written you his biggest check yet. Are you done raising equity funding for now? That’s already a very high valuation.

KH: We’re trying to decide now if we’re going direct to a Series A. This is our first raise, but everybody ‘gets’ our business model, so we’ve had an avalanche of investors, and some very big VCs now have reached out.

TC: Obviously, interest rates will go up. What then?

KH: When interest rates go up, all lending gets more expensive. I mean, there’s a pandemic right now and a lot of cash in the system, and there’s some talk about inflation, but we don’t really see interest rates going up for a few years.

Of course they will eventually rise, but when that happens, everybody’s rates will go up, whether you borrow on a credit card or from a traditional bank or a fintech.

Energy consumption has become the latest flashpoint for cryptocurrency. Critics decry it as an energy hog while proponents hail it for being less intensive than the current global economy. 

One such critic, DigiEconomist founder Alex de Vries, said he’s “never seen anything that is as inefficient as bitcoin.” 

On the other side of the debate, research by ARK Investment Management found the Bitcoin ecosystem consumes less than 10% of the energy required for the traditional banking system. While it’s true the banking system serves far more people, cryptocurrency is still maturing and, like any industry, the early infrastructure stage is particularly intensive.

The cryptocurrency mining industry, which garnered almost $1.4 billion in February 2021 alone, is not yet unusually terrible for the environment compared to other aspects of modern life in an industrialized society. Even de Vries told TechCrunch that if eco-conscious regulators “took all possible actions against Bitcoin, it’s unlikely you’d get all governments to go along with that” mining regulation.

“Ideally, change comes from within,” de Vries said, adding he hopes Bitcoin Core developers will alter the software to require less computational energy. “I think Bitcoin consumes half as much energy as all the world’s data centers at the moment.”    

According to the University of Cambridge’s bitcoin electricity consumption index, bitcoin miners are expected to consume roughly 130 Terawatt-hours of energy (TWh), which is roughly 0.6% of global electricity consumption. This puts the bitcoin economy on par with the carbon dioxide emissions of a small, developing nation like Sri Lanka or Jordan. Jordan, in particular, is home to 10 million people. It’s impossible to say how many people use bitcoin every month, and they certainly use it less often than residents in Amman use Jordanian dinars. But CoinMetrics data indicates more than 1 million bitcoin addresses are active, daily, out of up to 106 million accounts active in the past decade, as tallied by the exchange Crypto.com. 

“We get the total population of unique bitcoin (BTC) and ether (ETH) users by counting the total number of addresses from listed exchanges, subtracting addresses owned by the same users on multiple exchanges,” said a Crypto.com spokesperson. “We then further reduce this number by accounting for users who own both ETH and BTC.”

That’s a lot of people using these financial networks. Plus, many bitcoin mining businesses rely on environmentally friendly energy sources like hydropower and capturing natural gas leaks from oil fields. A mining industry veteran, Compass Mining COO Thomas Heller, said Chinese hydropower mines in Sichuan and Yunnan get cheaper electricity during the wet season. They continue to use hydropower all year, he added, although it’s less profitable during the annual dry season. 

“The electricity price outside of May to October [wet season] is much more expensive,” Heller said. “However, some farms do have water supply in other parts of the year.”

Basically, cryptocurrency mining doesn’t inherently produce extra carbon emissions because computers can use power from any source. In 2019, the digital asset investing firm CoinShares released a study estimating up to 73% of bitcoin miners use at least some renewable energy as part of their power supply, including hydropower from China’s massive dams. All of the top five bitcoin mining pools, consortiums for miners to cooperate for better profit margins, rely heavily on hydropower. This statistic doesn’t impress de Vries, who pointed out that Cambridge researchers found renewable energy makes up 39% of miners’ total energy consumption. 

“I put one solar panel on my power plant, I also have a mixture of renewable energy,” de Vries said. 

In terms of geographic distribution, Cambridge data indicates Chinese bitcoin mining operations represent around 65% of the network’s power, called hashrate. In some regions, like China’s Xinjiang province, bitcoin miners also burn coal for electricity. Beyond cryptocurrency mining, this province is known for human rights abuses against the Uighur population, which China is violently suppressing as part of a broader struggle to capitalize on the region’s natural resources. When critics sound the alarm about cryptocurrency mining and energy consumption, this is often the dynamic they’re concerned about. 

On the other hand, North American miners make up roughly 8% of the global hashrate, followed closely by miners in Russia, Kazakhstan, Malaysia and Iran. Iranian President Hassan Rouhani called for the creation of a national bitcoin mining strategy in 2020, aiming to grow the Islamic nation’s influence over this financial system despite banking sanctions imposed by the United States. 

Wherever nations and organizations offer the most profitable mining regulations, those are the places where bitcoin mining will proliferate. Chinese dominance, to date, can be at least partially attributed to government subsidies for the mining industry. As such, nations like China and Norway offer subsidies that incentivize bitcoin miners to use local hydropower sources. 

As the Seetee research report by Aker ASA, a $6 billion public company based in Norway, said: “The financiers of min­ing op­er­a­tions will in­sist on us­ing the cheap­est en­er­gy and so by de­f­i­n­i­tion it will be elec­tric­i­ty that has no bet­ter eco­nom­ic use.”

The best way to make cryptocurrency mining more eco-friendly is to support lawmakers that want to encourage mining in regions that already have underutilized energy sources. 

When it comes to North America, Blockstream CEO Adam Back says his company’s mining facilities, with 300 megawatts in mining capacity, rely on a mix of industrial power sources like hydropower. He added Blockstream is exploring solar-powered bitcoin mining options as a sort of “retirement home” for outdated machines. 

“With solar energy, if you’re only online 50% of the time, that’s something to consider in terms of the cost analysis,” Back said. “That’s a better option for older machines, after you’ve already recouped the costs of the equipment.”

Due to surging cryptocurrency prices, there’s now a global shortage of bitcoin mining equipment, Back added, with demand outpacing supply and production taking up to six months per machine. Emma Todd, founder of the consultancy MMH Blockchain Group, said the shortage is driving up the price of mining machines. 

“For example, a Bitmain Antminer S9 mining machine that used to cost $35 – $55 in July 2020 on the secondary market, now costs about $275 – $300,” Todd said. “This means that most, if not all mining companies looking to purchase new or secondary equipment, are all experiencing the same challenges. As a result of the global chip shortage, most new mining equipment that is scheduled to come out in the next few months, will almost certainly be delayed.”

Critics like de Vries point out that, due to market forces, industrial miners are unlikely to reduce their power consumption with new machines, which are more efficient. 

“If you have more efficient machines but earn the same money, then people just run two machines instead of one,” de Vries said. 

And yet, because cryptocurrency prices are rising faster than new miners can be constructed, Back said “retiring” old machines with renewable energy sources becomes more profitable than simply abandoning them for new equipment. In addition, Back said, robust bitcoin mining infrastructure can support communities rather than draining resources. This is because bitcoin miners can help store and arbitrage energy flows. 

“You can turn miners on and off if you get to a surge prices situation, you can use the power for people to heat their homes if that’s more urgent or more profitable,” Back said. “Bitcoin could actually support power grids.” 

Meanwhile, just north of the Canadian border, Upstream Data president Steve Barbour said a growing number of traditional oil and gas companies are quietly ramping up their own bitcoin mining operations. 

“Right now it’s hydro and coal. That’s the majority of the big industrial mining. But on the global scale, that’s going to shift more toward any cheap power, including natural gas,” Barbour said. “Oil fields already have cheap energy with the venting flares, the waste gas, there’s potential for approximately 160 gigawatts [of mining power] this year.”

Upstream Data helps oil companies set up and operate bitcoin miners in a way that captures waste and low quality gas, which they couldn’t sell before, totaling 100 deployments across North America. These companies rarely go public with their bitcoin mining operations, Barbour said, because they’re concerned about attracting negative press from Bitcoin critics. 

“They are definitely concerned about reputational risk, but I think that’s going to change soon because you have big, credible companies like Tesla involved with Bitcoin,” Barbour said. 

Even within the cryptocurrency industry, there are many people who dislike how power-intensive bitcoin mining is and are experimenting with different mining methods. For example, the Ethereum community is trying to switch to a “proof-of-stake” (PoS) mining model, powering the network with locked up coins instead of Bitcoin’s intensive “proof-of-work” (PoW) model. 

As the name might suggest, PoW requires a lot of computational “work.” That’s what miners do, lots and lots of math problems that are so difficult the computers require a lot of electricity. With regards to Ethereum, which currently runs on PoW but will theoretically run on PoS in a few years, there are hundreds of thousands of daily active addresses, sometimes half as many as Bitcoin. Like Bitcoin, a few industrial mining projects with facilities in China generate more than half of the Ethereum network’s power. Each Ethereum transaction requires nearly as much energy as two American households use per day. 

“What I like about the Ethereum community is at least they are thinking about how to solve the problem,” de Vries said. “What I don’t like is they’ve been talking about it for a few years and haven’t been able to actually do it.”

The Ethereum ecosystem uses enough energy every year to power the nation of Panama. Like Bitcoin, each Ethereum transaction costs enough for electricity costs that the money could also buy a nice lunch. Both of these networks require enough power to fuel small countries, although Ethereum usually has less than half of the million daily users that Bitcoin has. It’s clear cryptocurrency transactions require more power than Visa transactions. However, a cryptocurrency isn’t just a payments company. It is a whole currency system. 

If the bitcoin market cap were ranked as a country, by the value of the money supply, Bitcoin would come in fifth place behind Japan. And that’s not even considering adjacent ecosystems like Ethereum. In short, power consumption in the global Bitcoin economy is comparable to that of some other industrialized financial systems. It is inefficient, as de Vries points out, as are many of the systems used in emerging economies. Out of millions of users, thousands of people around the world rely on cryptocurrency for income. They are generally optimistic about the cryptocurrency ecosystem, believing it will become more efficient as the technology matures. 

“I see Bitcoin mining increasingly playing a role in the transition to a clean, modern and more decentralized energy system,” said one such Canadian business consultant, Magdalena Gronowska. “Miners can provide grid balancing and flexible demand-response services and improve renewables integration.”  

Welcome back to The TechCrunch Exchange, a weekly startups-and-markets newsletter. It’s broadly based on the daily column that appears on Extra Crunch, but free, and made for your weekend reading. Want it in your inbox every Saturday morning? Sign up here.

Earnings season is coming to a close, with public tech companies wrapping up their Q4 and 2020 disclosures. We don’t care too much about the bigger players’ results here at TechCrunch, but smaller tech companies we knew when they were wee startups can provide startup-related data points worth digesting. So, each quarter The Exchange spends time chatting with a host of CEOs and CFOs, trying to figure what’s going on so that we can relay the information to private companies.

Sometimes it’s useful, as our chat with recent fintech IPO Upstart proved after we got to noodle with the company about rising acceptance of AI in the conservative banking industry.

This week we caught up with Yext CEO Howard Lerman and Smartsheet CEO Mark Mader. Yext builds data products for small businesses, and is betting its future on search products. Smartsheet is a software company that works in the collaboration, no-code and future-of-work spaces.

They are pretty different companies, really. But what they did share this time ’round the earnings cycle were macro notes, or details regarding their forward financial guidance and what economic conditions they anticipate. As a macro-nerd, it piqued my interest.

Yext cited a number of macroeconomic headwinds when it reported its Q4 results. And tying its future results somewhat to an uncertain macro picture, the company said that it is “basing [its] guidance on the business conditions [it sees for itself] and [its] customers currently, with the macro economy, which remains sluggish, and customers who remain cautious,” per a transcript.

Lerman told The Exchange that it was not clear when the world would open — something that matters for Yext’s location-focused products — so the company was guiding for the year as if nothing would change. Wall Street didn’t love it, but if the economy improves Yext won’t have high hurdles to jump over. This is one tack that a company can take when it talks guidance.

Smartsheet took a slightly different approach, saying in its earnings call that its “fiscal year ’22 guidance contemplates a gradual improvement in the macro environment in the second half of the year.” Mader said in an interview that his company wasn’t hiring economists, but was instead simply listening to what others were saying.

He also said that the macro climate matters more in saturated markets, which he doesn’t think that Smartsheet is in; so, its results should be more impacted by things more like “the secular shift to the cloud and digital transformation,” to quote its earnings call.

What the economy will do this year matters quite a lot for startups. An improving economy could boost interest rates, making money a bit more expensive and bonds more attractive. Valuations could see modest downward pressure in that case. And venture capital could slow fractionally. But with Yext forecasting as if it was facing a flat road and Smartsheet only expecting things to pick up pace from Q3 on, it’s likely that what we have now is mostly what we’ll get.

And things are pretty damn good for startups and late-stage liquidity at the moment. So, smooth sailing ahead for startup-land? At least as far as our current perspective can discern.

We still have a grip of notes from Splunk CEO Douglas Merritt on how to take an old-school software company and turn it into a cloud-first company, and Jamf CEO Dean Hager about packaging discrete software products. More to come from them in fits.

Various and sundry

There were rounds big and small this week. Companies like Squarespace raised $300 million, while Airtable raised $277 million. On the smaller-end of the spectrum, my favorite round of the week was a modest $2.9 million raise from Copy.ai.

But there were other rounds that TechCrunch didn’t get to that are still worth our time. So, here are a few more for you to dig into this weekend:

• A so-called pre-Series A round for Lilli, a U.K.-based startup that uses sensors and other tech to track the well-being of folks who might need help to live on their own. Using tech to take care of folks is always good by me. The deal was worth £4.5 million, per UKTN.
• An IPO for Tuya, a Chinese software company that raised $915 million in its American debut. Chinese IPOs on American indices were once a big deal. They are less frequent now. Surprised that I missed this one, but, hey, there’s been a lot going on.
• And the Republic round, worth $36 million, that is banking on the recently-expanded American crowdfunding regulations. Some startups have seen success with the approach, including Juked.gg.

Upcoming attractions

Next week is Y Combinator Demo Day week, so expect a lot of early-stage coverage on the blog. Here’s a preview. From The Exchange we’re looking back into insurtech (with data from WeFox and Insurify), and talking about Austin-based software startup AlertMedia’s decision to sell itself to private-equity instead of raising more traditional capital.

And to leave you with some reading material, make sure you’ve picked through our look at the valuations of free-trading apps, the issues with dual-class shares, the recent IPO win for the New York scene and how unequal the global venture capital market really is.

Closing, this BigTechnology piece was good, as was this Not Boring essay. Hugs, and have a lovely respite,

Alex

A proposed witness list filed by Apple for its upcoming trial against game-maker Epic reads like a who’s who of executives from the two companies. The drawn out battle could well prove a watershed moment from mobile app payments.

The two sides came to loggerheads when the Fortnite maker was kicked out of the App Store in August of last year after adding an in-game payment system designed to bypass Apple’s – along with Apple’s cut of the profiles.

Epic has accused Apple of monopolist practices pertaining to mobile payment. Apple, meanwhile, has argued that Epic broke the App Store agreement in order to increase its revenue.

Filed late last night by the hardware giant, the document includes top executives from bot sides. For Apple, the list includes CEO Tim Cook, Software Engineering SVP Craig Federighi and Apple Fellow, Phil Schiller. On team Epic, it’s Tim Sweeney and VP Mark Rein. Executives from Microsoft, Facebook and NVIDIA are also included, for good measure.

In a statement provided to TechCrunch, Apple notes,

Our senior executives look forward to sharing with the court the very positive impact the App Store has had on innovation, economies across the world and the customer experience over the last 12 years. We feel confident the case will prove that Epic purposefully breached its agreement solely to increase its revenues, which is what resulted in their removal from the App Store. By doing that, Epic circumvented the security features of the App Store in a way that would lead to reduced competition and put consumers’ privacy and data security at tremendous risk.

The trial is expected to kick off May 3. We’ve reached out to Epic for additional comment.

In an Extra Crunch Live this past week, Cleo Capital founding partner Sarah Kunst broke down what founders can learn from Supreme, a sought-after streetwear brand. She argued that founders, similar to Supreme, should build a brand around themselves that is so well-respected and has clout that whenever they start something new, investors will line up.

“A Supreme shirt that costs $100 bucks in the store will cost $1,000 online so, as an investor, I am just a kid on the street corner flipping sportswear,” Kunst mentioned. “Who do I think is going to be an investment with such velocity that getting in early is going to be more than worth it as they grow.”

I think this is the best framing I’ve seen about how to drum up excitement for a startup as a founder. FOMO isn’t a strategy, it’s a tactic. What really works, as Kunst alluded to, is when founders can point to key insights they’ve had throughout their career beyond the context of a fundraising process. In other words, anyone can create a nice t-shirt and slap a logo on it. Which founder in this sector is going to give it meaning? It might be the one with the big former exit, the one that was the first Black woman to ever build a unicorn, or the one that was on the ground facing the pain point they now want to solve.

We get into how to build a fundraising process, the concept of soft-circling an investor and what Kunst says is one of her biggest pet-peeves in a pitch deck on the site, but I wanted to give you that sneak peek for now.

• Pregame Y Combinator Demo Day with Equity
• The lightning-fast Series A (that was 3 years in the making)
• Hear how Poshmark went from Series A to the public markets with Manish Chandra and Mayfield’s Navin Chaddha

Saying ‘yes, please’ to no code

This week, Airtable was valued at $5.77 billion from a fresh Series E fundraise.

Here’s what to know: As we discussed on Equity, Airtable is far more than a savvy Excel sheet with bells and whistles. It is one of the leaders in the no-code movement, and founder Howie Liu recently opened up its API to promote developer innovation atop its platform.

• 3 steps to ease the transition to a no-code company
• Okay, the GPT-3 hype seems pretty reasonable
• AI fintech products are operating at scale and investor interest is maturing

Image Credits: Cadalpe (opens in a new window) / Getty Images

A seedy asset class

Per Climate Editor Jonathan Shieber, farmland could become the next big asset class modernized by marketplace startups.

Here’s what to know: One startup, AcreTrader, is trying to create a Robinhood for buying farmland, which I think is indicative of how lucrative some view a patch of land. CEO Carter Malloy thinks that while private equity often gets press for being in the land game, most land is owned by smaller ownership through families.

“Over the last few months, we’ve consistently seen our offering sizes grow while our funding windows shrink, showcasing the fast-growing desire surrounding this resilient asset class,” he said.

• Shell’s Gamechanger Accelerator selects three companies for its energy transition accelerator
• New markets emerge for carbon accounting businesses as cities like LA push proposals

More places for investors to throw their money reminds me of two other stories for you to check out:

• Gumroad wants to make equity crowdfunding mainstream
• Crowdfunding limits are poised to change next week, but most VCs aren’t paying attention — yet

A green row celery field in the Salinas Valley, California USA. Image Credits: Pgiam (opens in a new window)/ Getty Images

Around TechCrunch

Consider these upcoming notes as the coupon section for your early-stage founder and investor dreams.

First up, I’m tossing you a discount code to our TechCrunch Early Stage conference, our two-day virtual event for founders, investors and operators. Use code “TCARTICLE” to get 20% off your ticket so you can attend super cool events like how to bootstrap with Calendly’s Tope Awotona and OpenView’s Blake Bartlett, how to pitch your Series A fundraise with Kleiner Perkins’ Bucky Moore, and finance for founders with Alexa von Tobel.

Secondly, we are already well into planning TechCrunch Disrupt 2021! Grab super early-bird passes for less than $100, to attend our all-virtual event.

Thirdly, thank you for all the support. DM me any questions you might have, and I really hope to see your lovely faces there.

Across the week

Seen on TC

Uber under pressure over facial recognition checks for drivers

5 trends in the boardrooms of high-growth private companies 

Forget medicine, in the future you might get prescribed apps

Tech companies should oppose the new wave of anti-LGBTQ legislation

Seen on EC 

Social+ payments: Why fintechs need social features

Snowflake gave up its dual-class shares, should you?

MaaS transit: The business of mobility as a service

Survey: Share feedback on Extra Crunch

Talk next week,

N