Payments infrastructure company Stronghold has launched a venture capital arm to deploy $100 million of its balance sheet capital in startups and funds in three core strategies — underrepresented founders, fintech, and web3, CEO Tammy Camp told TechCrunch in an interview.
Stronghold offers a suite of fintech and blockchain APIs and services, including embedded payments, clearing and settlement, according to its website. The startup, founded in 2017, partnered with IBM to create a blockchain-based stablecoin for instant payment processing. It has raised $3.3 million in funding to date through its 2018 seed round, which was led by Freestyle Capital’s Dave Samuel and featured participation from a host of angel investors in venture and fintech.
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 backing underrepresented founders. Stronghold Capital made the investment in Alameda Research through a syndicated DeFi (decentralized finance) loan on the blockchain-based institutional funding platform Maple Finance, according to the company.
The fund seeks to invest in companies that can provide “bidirectional value” with Stronghold’s lines of business, Camp said. She added that by investing in fund managers directly, Stronghold will have access to a sourcing pipeline for companies it may want to back, too.
75 percent of Stronghold Capital’s current investments are in underrepresented or overlooked founders, Camp said. The venture fund plans to build out its team this year and intends to hire investors who are experts in each of the three specific areas of focus, 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 over $1.5 billion, the company says. Businesses 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 businesses and manage internal governance processes, according to Camp.
The token’s traction among businesses drove growth at Stronghold in 2021 — the company says business grew “fivefold across most measures” last year. Camp said this traction served as a catalyst for the fund launch, an initiative Stronghold execs had been considering for a long time.
“I think that payments and financial services are a big space and it’s going to take a lot of players to be able to fulfill their mission because there are so many payment rails these days,” Camp said. “Being able to partner with other companies or fund managers to fulfill that vision is something that we’re super excited about.”