CapWay, a Y Combinator-backed fintech that sought to bring financial services to people in so-called “banking deserts,” has shut down, according to founder Sheena Allen.
Allen wrote about it on LinkedIn and confirmed it to TechCrunch.
“I am proud of the work we were able to accomplish, but I am honestly disappointed that we were not able to complete the mission,” she wrote. “I feel strongly that there is still much work to be done in the area of financial inclusion, so this will not be the last you hear about me in the fight for economic equality.”
Allen told TechCrunch that the company started winding down last year and waited this long to announce after a potential acquisition fell through.
Bank deserts are people who live in often rural communities without a physical bank branch nearby to obtain a checking account. This period also applies to people who have difficulty accessing banks, such as people with low incomes, the elderly, and people with disabilities.
As CNN reported, Allen (pictured above) recognized the impact unbankedness has on some communities, including reliance on high-interest payday loans and expensive cash check services. , launched CapWay in 2016.
CapWay's company planned to address this population by teaching them financial literacy and offering online banking solutions. According to Pitchbook, the company has raised just under $800,000 in funding from investors including Backstage Capital, Fearless Fund, and Khosla Ventures. As TechCrunch reported at the time, this was part of YC's Summer 2020 cohort.
Allen said there were several reasons for closing the company. She cited the fact that the fintech industry took a huge reputational hit with the Evolve Bank & Trust hack and the Synapse collapse, the latter of which saw hundreds of millions of dollars in consumer funds frozen.
After that, many banks considering partnering with fintechs required the fintechs to hold a certain amount of capital in the bank.
“It costs money to play in a highly regulated industry because you can't control change,” Allen said. “You just have to have enough money and time to get through the adjustment.”
During this time, CapWay needed to find a new banking partner, which was difficult as it needed to raise additional capital to meet the cash requirements of potential partners. Some investors turned against her, saying the company was lagging far behind competitors.
But she also pointed to the challenges that have plagued many Black founders over the past year.
“Fundraising itself was difficult for everyone, but it was and continues to be extremely difficult for Black founders,” she said. Just 0.3% of the $79 billion donated to U.S.-based startups in the first half of this year went to Black founders, according to Crunchbase research.
Allen often felt like she was competing with other Black-founded fintech companies for that small piece of the pie. She wrote in a post that some investors turned her down, saying they had already invested in another debit card fintech founded by a Black person.
“Some investors like to group all Black fintech companies into one box. [even] We don’t all do or operate the same thing or have the same target audience,” she told us. “Unfortunately, that was a factor in us being told no several times.”
In a LinkedIn post, Allen thanked his team and some of the investors for “still calling me and validating me as a person, not just the business and founder.” I pointed out that there was a house. She also thanked her fellow founders for “listening to my rants and calling me to check on my mental health throughout this process.”
But one startup failure, almost a badge of honor in the startup world, didn't deter her from her passion for building a company. She still wants to work in the financial inclusion field and is pondering her next startup idea. She is currently considering the possibility of an entrepreneurial residency at the venture.
“It’s a tough time to downsize a company,” she said. “But I learned that even on cloudy days when things look bleak, there is beauty in the journey.”