A lot has happened in the banking sector in the past year, including the collapse of Silicon Valley Bank, and this has allowed companies like ModernFi to intervene and provide other solutions.
The company provides community and regional banks with end-to-end deposit management capabilities, including a deposit network, so bank customers can grow, maintain and manage their deposit base by raising deposits, sweeping funds and providing additional security to depositors.
In fact, ModernFi, founded in 2022 by Paolo Bertolotti and Adam DeVita, raised $4.5 million in a seed round a month before the SVB news.
“After the SVB, after the Signature and after the First Republic, many of these institutions came together and said, ‘We need a better solution here. We don’t think regulators will make changes, and we don’t think current solutions or incumbents have moved fast enough to support it,” Paolo Bertolotti, co-founder and CEO of ModernFi, told TechCrunch. “Luckily, some of the people at Canapi Ventures were involved in these conversations and knew about us, so we started talking.”
This ongoing relationship ultimately led to a new funding round that ModernFi announced today with $18.7 million in Series A funding.
Canapi Ventures led the round and was joined by Andreessen Horowitz, Remarkable Ventures and a group of banks including Huntington National Bank, First Horizon and Regions. In total, the company has raised over $23 million in venture capital.
Bertolotti called 2022 and 2023 “unique and quite significant” years, citing rising interest rates that led to “some of the most aggressive deposit outflows in history,” along with the collapse of SVB and others.
“You’re left with a situation that has disproportionately affected small and medium-sized banks,” he said. “In this whole concept of deposit growth, conservation management has become the first, second and third priority for many institutions. We were very fortunate to be able to help depository networks and institutions weather this storm and continue their growth and trajectory.”
ModernFi makes money from base units based on deposits to the network, and Bertolotti said 2023 was “a very good year,” but declined to elaborate beyond that. Between the seed round and Series A, the company doubled its headcount and the number of institutions supported “has grown significantly.”
Meanwhile, the new capital will be invested in growth — the team and organizational structure. Bertolotti plans to grow in engineering, new product development, compliance and regulatory compliance, and business development. Some of this product development will involve more integrations and API development.
“We’re going to expand and double down on these initiatives, while also making sure our analytics suite is very fully functional,” Bertolotti said. “We’re also doing some work on passive asset management and deposit analysis at the account level, so there’s a huge range of functions and products we’ll be working on. The larger goal is to support the entire lifecycle and workflow for bank CFOs. It’s a huge undertaking, but it’s a path we’re very excited about.”
