A new fintech startup for small businesses

"Several former employees of stock-trading platform Robinhood Markets Inc. are building a new fintech startup for small businesses.

San Francisco-based Parafin Inc., which is also backed by some of Robinhood's early venture investors, is reaching small businesses via partners to offer online cash advances, a type of financing that is repaid as a percentage of a business's daily sales. Parafin is an early-stage alternative to the likes of Square Inc.'s Square Capital, Stripe Inc.'s Stripe Capital, and other providers of financing for small businesses.

Parafin's Chief Executive Sahill Poddar, who was Robinhood's head of machine learning, teamed up to launch Parafin with Ralph Furman, president of the startup and one-time data scientist at Robinhood, and Vineet Goel, the new company's chief product officer, who served as head of risk and fraud engineering at the online market.

The founders saw an opportunity to build on their fintech-infrastructure development experience at Robinhood, they said, and apply it to small businesses that have seen a dwindling supply of capital during the pandemic.

"It was so obvious that small businesses are struggling," Mr. Furman said. Parafin also plans to expand to offer other financial products like bank accounts and insurance to small-business clients.

One of Parafin's first clients is Mindbody Inc., a software provider to fitness and other small businesses. It will use Parafin to power its Mindbody Capital financing arm, according to a spokesperson. Mindbody's small-business clients will be offered customizable financing options within their Mindbody software dashboards.

Mindbody chose Parafin as its capital supplier because of its strong technical offering, low financing rates for small businesses and ability to move fast, the spokesperson said.

Mr. Poddar said Mindbody customers will be charged fees of between 6% to 15% on their Parafin financing.

Parafin turned to early Robinhood backers for their own venture capital. The startup raised a $30 million Series A round led by Joshua Kushner's Thrive Capital this month, which followed a $4 million seed round in October of last year led by Ribbit Capital.

Other investors in Parafin include Index Ventures and SV Angel, as well as individuals, including Robinhood's chief executive, Vlad Tenev, and the co-founder, Baiju Bhatt.

Parafin is in the process of closing a warehouse debt facility of up to $150 million from Atalaya Capital Management and Jefferies Funding, on which it will draw to offer capital to businesses, Mr. Furman said." [1]

1. Banking & Finance: Ex-Robinhood Employees Start Fintech Venture
Chernova, Yuliya.  Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 30 Sep 2021: B.10.