The Silicon Valley Bank failure and other financial events have allowed startups like ModernFi to provide alternatives.
The firm helps small and regional banks expand, maintain, and manage their deposit base by sourcing deposits, sweeping money, and providing depositor security through a deposit network.
ModernFi, formed in 2022 by Paolo Bertolotti and Adam DeVita, raised $4.5 million in a seed round a month before SVB’s announcement.
“After SVB, Signature, and First Republic, many institutions said, ‘We need a better solution here. Paolo Bertolotti, co-founder and CEO of ModernFi, told Eltrys, “We don’t think regulators will change, and we don’t think current solutions or incumbents have moved fast enough to support this.” “Fortunately, some Canapi Ventures people were in those discussions and knew about us, so we started talking.”
ModernFi announced $18.7 million in Series A fundraising today after that sustained partnership.
While Canapi Ventures led the investment, Andreessen Horowitz, Remarkable Ventures, Huntington National Bank, First Horizon, and Regions also participated. Venture funding has exceeded $23 million for the firm.
Bertolotti called 2022 and 2023 “unique and pretty substantial” due to rising interest rates and “some of the most aggressive deposit runoff in history,” with SVB and others losing money.
He stated, “You’re left with a situation that disproportionately impacted small and mid-sized banks.” “Many institutions prioritized retention management over deposit growth. We were lucky to help deposit networks and organizations endure that crisis and grow.”
ModernFi gets money from basis points on network deposits, and Bertolotti claimed 2023 was “a very good year,” but he didn’t elaborate. Between seed and Series A rounds, the firm quadrupled its personnel, and institutional backing “has grown very meaningfully.”
The staff and organizational structure will increase with the extra money. Bertolotti wants to grow in engineering, new product development, compliance, and commercial growth. API and integration development will be part of product development.
Bertolotti added, “We will expand and double down on those initiatives while also making sure our analytics suite is very fully functional. We’re also working on asset liability management and account-level deposit analytics, so we’ll be working on several features and products. Supporting bank CFOs throughout their lifetime and workflow is the aim. It’s a big project, but we’re enthused about it.”
