Roy and Bertrand Sosa are planning another IPO for Netspend, the groundbreaking fintech they founded nearly 25 years ago. The Sosas attended the Money 20/20 conference in Las Vegas in late October and spoke to Coins2Day on the sidelines of the fintech event.
Last year, the Sosa brothers partnered with Searchlight Capital Partners, a private equity firm, to buy back the Netspend consumer business from Global Payments. The all-cash deal was valued at $1 billion. The brothers, who did the acquisition through their latest company, Rêv Worldwide, closed the Netspend acquisition in May.
The Sosas are happy to have regained control of Netspend. “We’re looking to do this for the next 25 years. We have no plans to exit,” said Roy Sosa who is chairman and CEO of Ouro. Ouro is the parent of Netspend and Rêv Worldwide.
In 1999, the Sosa brothers, both Mexican immigrants, launched Netspend from their one-bedroom apartment in Austin, Texas with just $750. Netspend offered reloadable prepaid debit cards for the “underbanked” market, which refers to U.S. Consumers who don’t have a checking, savings or money market account. Netspend’s prepaid cards allow people without banking relationships to enjoy the benefits of plastic, the executives said. “We were fintech before there were fintechs,” said Bertrand, who is president and chief brand officer of Ouro.
In 2010, Netspend went public raising $203.5 million. The Sosa brothers owned small stakes in the company at that time and cashed out after the IPO. Three years later, payment processor Total System Services, or TSYS, acquired Netspend for about $1.4 billion in 2013.
Netspend got caught up in the wave of consolidation that hit large payments providers. In 2019, Fiserv bought First Data for $22 billion, while Fidelity National Information Services, or FIS, scooped up WorldPay in a $35 billion deal, and Global Payments bought TSYS for $21.5 billion.
The big deals have generated divestitures. FIS in July agreed to sell a majority stake in WorldPay to GTCR, a Chicago buyout shop, in a deal valued at $18.5 billion. In 2022, Global Payments, which focuses on B2B clients, put the consumer side of Netspend up for sale. “Global Payments is an amazing company. Not only did they sell the company back to the founders, but they kept us as partner,” said Roy.
Netspend currently employs 650 people. The company has been profitable since 2001 and currently has “millions of customers,” the brothers said. (They would not disclose an exact number.)
The typical Netspend client makes $100,000 or less, and lives paycheck to paycheck, said Roy Sosa. There are many single mothers, he said. “These are everyday Americans whose dollar is stretched.”
Netspend’s technology enables other companies, including PayPal, Western Union and Dollar General, to launch prepaid debit cards.
Over the last decade, Netspend has generated over $2 billion of profit and paid federal taxes in excess of $600 million, Bertrand said. It currently offers prepaid debit cards and debit cards both with high yield savings. The company is looking to expand into credit and insurance next year, he said.
The Sosa brothers plan to grow Netspend’s revenue by 20% to 30% year-over-year until they take the company public again, likely in the next four to five years, Roy said. “There are no plans to exit. The plan is to grow the company and make it the leader in the industry that it should’ve been,” Roy said.
See you tomorrow,
Luisa Beltran
Twitter: @LuisaRBeltran
Email: [email protected]
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Joe Abrams curated the deals section of today’s newsletter.
VENTURE DEALS
- Aleph Alpha, a Heidelberg, Germany-based company that researches, develops, and operationalizes AI models, raised $500 million in Series B funding. Innovation Park Artificial Intelligence, Schwarz Group, and Bosch Ventures led the round and was joined by others.
- Gynesonics, a Redwood City, Calif.-based developer of treatments for uterine fibroids, raised $42.5 million in funding from Amzak Health, Endeavour Vision, Kaiser Permanente Ventures, Runway Growth Capital, Bain Capital, and MVM Partners.
- Talus Renewables, an Austin, Texas-based renewable energy infrastructure company, raised $22 million in Series A funding. Material Impact and Xora Innovation led the round and was joined by Cavallo Ventures and Rice Investment Group.
- Zelig, a Los Angeles, Calif.-based developer of virtual try-on and styling technology, raised $15 million in Series A funding. Hilco Global led the round and was joined by Bezikian Zareh.
- Risk Ledger, a London, U.K.-based cybersecurity provider for supply chains, raised £6.3 million ($7.8 million) in Series A funding. Mercia Ventures led the round and was joined by Seedcamp, Firstminute Capital, Episode 1, Village Global, and Finnish VC Lifeline Ventures.
- Superhog, a Stockbridge, U.K.-based risk management platform for short-term rentals, raised £5.5 million ($6.8 million) in Series A funding from 6 Degrees Capital, Hambro Perks, and Solano Partners led the round.
- Polimorphic, a New York City-based startup designed to digitize paperwork for local governments and their constituents through the use of AI, raised $5.6 million in funding. M13 led the round and was joined by Shine Capital and Pear VC.
- Coperniq, a San Francisco-based workflow software designed for solar and energy contractors, raised $4 million in seed funding. Initialized Capital led the round and was joined by others.
- Due, a London, U.K.-based platform designed to make international payments faster, more affordable, and more accessible, raised $3.3 million. Semantic and Fabric Ventures and was joined by BlockTower, Speedinvest, Polymorphic Capital, Discovery Ventures, and others.
- Daytona, a New York City-based platform for managing development environments where coders can develop software, raised $2 million in pre-seed funding. 500 led the round and was joined by Tiny.vc, Silicon Gardens, Darkmode VC, Firestreak Ventures, and angel investors.
PRIVATE EQUITY
- G. Scott Capital Partners recapitalized Bison, a Milford, Ind.-based horse trailer manufacturer. Financial terms were not disclosed.
- IntelliBridge, backed by Enlightenment Capital, acquired Wyoming Corporate Services, a Cheyenne, Wyo.-based business incorporator. Financial terms were not disclosed.
- MediaRadar, a portfolio company of Thompson Street Capital Partners and Endicott Capital, acquired Vivvix, a New York City and Ontario, Canada-based ad intelligence provider. Financial terms were not disclosed.
- Signia Aerospace, a portfolio company of Arcline Investment Management, acquired Meeker Aviation and Airfilm Camera Systems, a British Columbia, Canada-based designer and manufacturer of laser scanners, searchlights, camera systems, payload amounts, and other aircraft tools. Financial terms were not disclosed.
- Tube Bending Technology, a portfolio company of Washington Equity Partners, acquired Creative Pathways, a Torrance, Calif.-based manufacturer of aerospace tube and duct assemblies. Financial terms were not disclosed.
EXITS
- Bain Capital Private Equity agreed to acquire Guidehouse, a McLean Virginia-based consulting services provider, from Veritas Capital for $5.3 billion.
- Central Garden & Pet acquired TDBBS, a Richmond, Va.-based dog treat provider, from Bregal Partners. Financial terms were not disclosed.
- Hubbell Incorporated agreed to acquire Systems Control, an Iron Mountain, Mich.-based manufacturer of substation control and relay panels for the electric transmission and distribution industry, from Comvest Partners. Financial terms were not disclosed.
- Sunny Sky Products, a portfolio company of TJC, acquired Bevolution Group, a Chicago, Ill.-based manufacturer of frozen beverages and cocktail mixes, from Highlander Partners. Financial terms were not disclosed.
IPOS
- CARGO Therapeutics, a San Mateo, Calif.-based biotechnology company developing cell therapies for cancer, plans to raise up to $320 million in an offering of 18.8 million shares priced between $15 and $17. Samsara BioCapital, Red Tree Venture Capital, Perceptive Advisors, Third Rock Ventures, Nextech Invest, and James Henderson Investors back the company.
FUNDS + FUNDS OF FUNDS
- KKR, a New York City-based private equity fund, raised $2.8 billion for its second fund focused on companies whose products and services contribute toward the United States Sustainable Development Goals.
- Bison Ventures, a Seattle, Wash.-based venture capital firm, raised $135 million in its first fund focused on science and deep technology companies providing solutions in climate and sustainability, drug discovery, and other fields.
- GFR Fund, a San Francisco-based venture capital firm, raised $53.5 million in its third fund focused on gaming, entertainment, and consumer tech companies.
PEOPLE
- Forerunner Ventures, a San Francisco-based venture capital firm, promoted Jason Bornstein to partner and head of research. Formerly, he was with Bonobos.
- LRVHealth, a Boston, Mass.-based venture capital firm, promoted Ellen Herlacher to partner. Formerly, she was with Tufts Health Ventures.
- NexPhase Capital, a New York City-based private equity firm, hired John King as operating partner. Formerly, he was with OmniSYS.
Correction, Nov. 7, 2023: A previous version of this newsletter misspelled Ellen Herlacher.
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