Fintech Focus: Sydecar
We're showcasing fintech companies that are breaking new ground in the embedded finance industry, and how they're using API banking to make an impact.
This month we are profiling Sydecar, an investment platform that streamlines the deal execution process for venture capitalists and other deal sponsors. The platform automates essential back-office functions for investment vehicles such as banking, compliance controls, contract management, tax handling, and reporting. Read about how Sydecar is using automation and embedded banking to make private investing more efficient, streamlining the investor onboarding process, and democratizing access to early-stage investing opportunities.
Key embedded finance data
Sydecar launched with embedded banking software provider Treasury Prime and Grasshopper Bank in May 2023. Since then they have seen millions of dollars in transactions on its platform from its banking as a service integration. In the first six months of the partnership, approximately $131.9 million has flowed through Sydecar’s platform, with contributions coming from around 3,500 investors.
BaaS innovative edge
For early-stage investors, launching and executing investment deals has traditionally been a complex, tedious, and costly process. Sydecar steps in to alleviate this challenge, enabling deal sponsors to easily establish an investment vehicle complete with an integrated bank account within hours. Sydecar’s investor onboarding process is also streamlined through technology, allowing capital commitments to be made with just a few clicks.
Sydecar places a strong emphasis on building software to automate various facets of the investment journey. From opening bank accounts and generating legal documents to preparing tax returns and financial reports, automation is woven throughout the platform's operations. This significantly reduces the time, cost, and operational burden traditionally associated with fund management.
“Our product integration with Treasury Prime allows us to reduce investor transaction fees while maintaining healthy margins,” says Sydecar’s Head of Product Will Kessler.
The lower transaction fees and accelerated processes make it possible for emerging VCs to facilitate smaller investment rounds, thereby enabling them to invest in companies that might have otherwise gone unfunded.
“The fact that we can accelerate the entire funding process is a competitive advantage for us at scale,” Kessler says.
Using embedded finance for real-time fund tracking
Sydecar and Grasshopper Bank are integrated through Treasury Prime’s embedded banking software and also have a direct line of communication to each other. This tri-party collaboration is the driving force behind new financial product offerings.
As soon as an investor commits to an investment vehicle on Sydecar, they receive wire instructions and can receive funds from both domestic and international investors, which accelerates the whole process.
“That’s definitely an improvement,” says Kessler. ‘Previously, we had to provide a different set of wire instructions for international investors and complete some manual reconciliation on the back end. Now, we have a unified front so that the funding process is streamlined for investors no matter where they are located.”
Sydecar leverages Treasury Prime’s banking API to allow a deal sponsor or fund manager to closely monitor money movement in real time. This feature provides immediate visibility into the arrival of wire transfers from investors and enables hassle-free capital calls. The simplified process reduces the need for extensive follow-ups with investors, ultimately saving time for fund managers and resulting in more investments made.
“With more transparency and less operational burdens, we are seeing deal sponsors launching more investments than they otherwise would have,” says Kessler.