Investing in Sardine
I am excited to announce our investment in Sardine – aptly named for the “fishy” behavior this company will prevent. Sardine provides instant, risk-free ACH & card settlement to fintech and crypto companies enabling them to stop payment fraud and increase conversion rates. The onboarding struggle Every company with a payments component faces the same problem: the momentum-killing wait time between when the customer transfers money to your platform and when they can actually use that money on your service to transact. This funding delay is a pervasive frustration for many companies. You succeed in doing the hard work to attract a new user to your company (a task that is getting increasingly expensive). This new customer wants to use your product. They sign up with a username and password, link their bank account, and transfer their money into your wallet (a neobank, a crypto wallet, an NFT platform, etc.) so they can make a purchase on your platform. Your new user is ready to go! …but you are not. Due to the time it takes for funds to clear — often three days or longer – you might have lost all momentum with your new customer. And given all this, maybe they don’t even bother initiating the transfer at all. Payment risks As a company accepting payments, this payment acceptance delay has long been a necessary trade-off to mitigate common risks.
Risk 1: Non-sufficient funds (NSF). When your user transfers $200 to your wallet, you could do a balance check to see if there are sufficient funds at that moment, but by the time your ACH pull request goes through — hours or even a day later — there may not be sufficient funds. You are potentially out $200!
Risk 2: Fraud. Your user transfers $200 to your wallet. Here the malicious vectors are many: The user may not be who they claim they are (identity fraud); the user may have taken over the account of a real user (account takeover); or the user may be using a stolen card or bank account. When discovered, the real user or bank/cardholder can call their bank, rightly dispute the charges, and you are again out $200.
The complexity of issues speaks to why most companies *still* make users wait until funds clear before letting them transact, even at the risk of a poor user experience or worse, customer attrition. Sardine’s solution Sardine provides risk-free, instant settlement for ACH and cards. Unlike other point solutions, Sardine’s comprehensive KYC, fraud, and compliance platform provides a holistic view of the user, from onboarding through to transaction monitoring. The founders of Sardine are uniquely suited to take on this growing opportunity. Sardine’s CEO Soups Ranjan has spent his career in risk and fraud: He ran data science and risk at Coinbase as it grew transaction volumes by 1,000X. Along the way he deepened his network and expertise by founding Risk Salon, a think tank for people working in risk, trust and safety, and compliance. He then moved to Revolut where he met his cofounders, Zahid Shaikh and Aditya Goel. Zahid led product for Revolut’s crypto efforts (and also brings deep expertise in fraud from his time at Uber and PayPal), while Aditya managed Revolut’s expansion into North America. We are thrilled to partner with Sardine on their mission to stamp out payment fraud for fintech and crypto companies. *** The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; a16z has not reviewed such advertisements and does not endorse any advertising content contained therein. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments for which the issuer has not provided permission for a16z to disclose publicly as well as unannounced investments in publicly traded digital assets) is available at https://a16z.com/investments/. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.