CapWay, a fintech backed by Y Combinator, shuts down its operations.
Sheena Allen, the founder of the company, stated that CapWay was forced to close due to the inability to secure another round of funding.
CapWay, a fintech backed by Y Combinator that aimed to provide financial services to people in what are known as “banking deserts,” has closed its doors, according to its founder, Sheena Allen. In a LinkedIn post, Allen expressed her pride in the work accomplished despite her disappointment in not being able to complete the mission. She noted that there is still much to be done in the realm of financial inclusion and that this will not be the last time she is heard fighting for economic equality.
The company began its winding down process last year, waiting until now to make the announcement after a potential acquisition fell through. "Banking deserts" refers to communities, often rural, that do not have a nearby bank branch where residents can open an account. This term also extends to individuals who face difficulties accessing a bank, such as those with low incomes, the elderly, or people with disabilities.
Allen launched CapWay in 2016 upon realizing the negative impact that the lack of a bank account has on some communities, forcing their members to rely on high-interest loans or cash-checking services with steep fees. CapWay's intention was to address this issue through financial education and by offering online banking solutions. The company secured nearly $800,000 in funding from investors like Backstage Capital, Fearless Fund, and Khosla Ventures, and was part of Y Combinator's summer 2020 cohort.
Allen explained that the company's closure was due to several factors, including the negative impact on the fintech industry following the hacking of Evolve Bank & Trust and the collapse of Synapse, which led many banking entities to require fintechs to have a minimum available capital. CapWay found itself needing to secure a new banking partner and increase its capital to meet the requirements of potential partners but faced challenges in raising funds. Some investors rejected her, arguing that the company had fallen behind its competitors.
Additionally, Allen highlighted the difficulties that many Black founders have faced over the past year. According to Crunchbase, Black founders only received 0.3% of the $79 billion allocated to startups in the United States in the first half of the year. Allen felt she had to compete with other fintechs founded by Black individuals for a small percentage of funding, and some investors mentioned that they chose to invest in other similar projects.
In her post, she thanked her team and some of her investors, emphasizing that there were those who cared for her both in her role as founder and in her personal life. Despite this setback, she remains motivated to continue working in the field of financial inclusion and is already evaluating new startup ideas, considering opportunities as a resident entrepreneur at venture capital firms. "It’s a hard moment to close your company," she reflected, "but I have learned that there is beauty in the journey, even on dark days."