Two startup firms that participated in the Venture Center’s 2018 Fintech Accelerator program have garnered significant early stage seed investments and international support to allow those companies to scale up their operations and customer bases.
Zurich-based Sonect and Gas Pos announced this week they have received substantial cash infusions after completing the Venture Center’s 12-week startup bootcamp and mentorship program in Little Rock in July.
Gas Pos on Wednesday (Nov. 14) announced a $1 million investment by Merus Capital, a Silicon Valley-based early-stage venture capital firm. Two weeks ago, the new fuel business technology platform made local waves after unveiling plans to relocate its headquarters to North Little Rock from Birmingham, Ala.
According to Gas Pos and Merus officials, the West Coast venture group’s investment in the newly relocated Arkansas startup will enable the firm to execute on a national roll-out plan to bring affordable gas pump upgrade solutions to independent retailers concerned over the migration of new chip car technology at the pump.
“Innovation is everywhere. Josh and his team, the Gas Pos market opportunity, and their disruptive solution checks all of our boxes: Strong team, large market, and a sustainable 10x advantage,“ said Peter Hsing, co-founding Managing Director of Merus Capital. “We welcome Gas Pos as our first investment in the southeastern U.S. and are excited to help them with their mission to change the basis of competition within the fuel payments industry.”
Gas Pos CEO Josh Smith first unveiled his startup’s new chip-reading technology during a 15-minute pitch at Fintech Accelerator’s Demo Day, which culminates the end of the 12-week business bootcamp by the 10 select startups selected out of a pool of nearly 300 global startups.
At that event, Smith gave a pitch of his company’s potential multi-billion dollar market with an “awe shucks” southern delivery before an audience that included Gov. Asa Hutchinson and dozens of potential investors, venture groups, financial services executives and business leaders.
“With the support of Merus Capital and others, we have this rare chance to assist the roughly 60,000 independent gas stations that don’t have another viable option,” said Smith. “Our passion is for our customers. We’re going to fix something that is wildly wrong in this industry.”
According to Smith and his executive team, Gas Pos has developed free point-of-sale solutions and low-cost EMV (Europay, MasterCard, Visa) card readers to increase payment security for American truck drivers and ensure financial security for gas station owners. The devices can be attached to existing gas pumps, avoiding the need to purchase new pumps, which can cost up to $17,000 each.
EMV is the global standard for chip-based debit and credit card transactions. Last year, those global payment networks delayed the liability shift for auto pump dispensers from October 2017 to October 2020.
As Gas Pos rapidly ramps up its team with 30 employees at the company’s new North Little Rock headquarters, Smith said the company has worked with industry officials to build a plug-in upgrade module for existing pumps that will help combat more than $400 million in fraud from rapidly increasing gas station skimming schemes.
“Our customers love us because we help them reduce fraud while saving them an average of $100,000 in immediate capital expenditures,” said Smith.
Sonect also announced this week it added global cash management giant, Loomis AB, as a key investor. According to the scant details of the arrangement, Loomis will help the Swiss fintech firm accelerate its “virtual ATM” concept.
“Loomis and Sonect truly complement each other. With its expertise and large customer base in the industry, Loomis can help accelerate our growth immensely,” said Sonect Founder and CEO Sandipan Chakraborty.
In late July, Loomis and Sonect first entered into a partnership in Europe to help the Swiss startup develop and expand its platform to allow consumers access to so-called “digital cash” at retail locations anywhere through an app.
“Sonect’s platform is the bridge between digital and physical cash,” said Loomis President and CEO Patrik Andersson. “We look forward to working with Sonect to develop this platform and make cash even more attractive and available for consumers across Europe and later on in other parts of the world.”
Known as the former armored car division of U.S. banking conglomerate Wells Fargo, Loomis was acquired by Swiss securities firm Securitas AB in 2006. Sonect executives did not respond to Talk Business & Politics inquiries about Loomis’ ground-floor investment in the Swiss fintech’s early stage development.
After completing the Venture Center’s FinTech Accelerator program this summer, Sonect received a monetary investment of $75,000 along with in-depth mentoring and feedback from the executive team of the main sponsor, Jacksonville, Fla.-based Fidelity Information Services Inc. (FIS).
Although Sonect has not taken up Gov. Hutchinson’s invitation to remain or open an office in Little Rock, the Zurich tech firm did have discussions with FIS and other local and national venture groups following the accelerator program. Sonect also said this week that global fintech venture fund SixThirty has selected the Swiss startup as one of its five portfolio companies that have a product and market traction and are starting to earn revenue.
Under SixThirty’s fall program, Sonect and four other startups will receive up to a $250,000 investment and get hands-on training and mentorship with the St. Louis-based venture group and its corporate partners, including Commerce Bank, Enterprise Bank & Trust, Bank of New York Mellon Pershing, and Ernst & Young. In exchange, SixThirty will get a negotiated percentage of equity and support Sonect’s efforts to launch its virtual ATM app in the U.S. Executives with the Swiss cash management startup did not respond to inquiries from Talk Business & Politics concerning its investment arrangements or plans for a possible Arkansas headquarters in the U.S.
Altogether, Sonect and Gas Pos have already garnered seed investments nearly equal to the average amount of capital raised by past graduates of the Venture Center’s accelerator program. From the past three cohorts that have completed the program, each alumnus has raised on average about $1.45 million. Startups completing the program over the past three years raised a combined $57 million in capital and created 637 jobs in the state, according to Wayne Miller, the Venture Center’s executive director.
Local serial entrepreneur Benito Lubazibwa said Sonect and Gas Pos have overcome one of the major hurdles to early startup success.
“Access to capital is a major barrier for start-ups. If our state wants to create a more equitable and inclusive entrepreneurial ecosystem, it must address the barriers limiting early-stage firms’ access to funds. At the same time, they must intentionally and strategically use capital to attract talent and promote entrepreneurship in Arkansas,” said Lubazibwa, CEO of Little Rock-based Remix Ideas, a local startup platform for urban and black professionals.
“In short, we need more programs like the Fintech Accelerator, especially in underserved communities.”