Payments infrastructure firm Stronghold has launched a venture capital arm to put $100 million of its balance sheet capital into startups and funds across three core strategies — underrepresented founders, fintech and web3, CEO Tammy Camp told TechCrunch in an interview.
Stronghold offers a range of fintech and blockchain APIs and services, including embedded payments, clearing and settlement, according to its website. Founded in 2017, the startup teamed up with IBM to create a blockchain-based stablecoin for instant payment processing. It has raised $3.3 million in funding so far through the 2018 seeding round, which was led by Dave Samuel of Freestyle Capital and which involved a large number of venture capital and fintech investors.
The new VC arm, called Stronghold Capital, has already invested in companies including Sam Bankman-Fried’s Alameda Research and funds including Precursor Ventures and Backstage Capital, both of which have a track record of supporting underrepresented founders. Stronghold Capital made the investment in Alameda Research through a syndicated DeFi (decentralized financing) loan on blockchain-based institutional financing platform Maple Finance, the company said.
The fund aims to invest in companies that can provide “bidirectional value” with Stronghold’s business, Camp said. She added that by investing directly in fund managers, Stronghold will have access to a buying pipeline for companies it may also want to support.
75 percent of Stronghold Capital’s current investments are in underrepresented or overlooked founders, Camp said. The venture capital fund plans to expand its team this year and plans to hire investors who are experts in each of its three specific focus areas, she added.
Stronghold launched its own token called SHx in 2018, which is now listed on crypto exchanges, including KuCoin, and has a market cap of more than $1.5 billion, the company says. Companies using Stronghold’s payment rails are rewarded with KuCoin, which they can use to offset their fees. They can also use the token to make DeFi loans to other companies and to manage internal governance processes, Camp said.
The token’s traction among businesses fueled growth at Stronghold in 2021 — the company says the company grew “fivefold over most measures” last year. Camp said this traction served as a catalyst for the fund’s launch, an initiative Stronghold execs had long considered.
“I think payments and financial services are a big space and it will take a lot of players to fulfill their mission because there are so many payment rails these days,” said Camp. “The opportunity to partner with other companies or fund managers to fulfill that vision is something we’re super excited about.”