$20m funding for super app provider Douugh to scale-up global fintech opps

Banking super app provider Douugh (ASX: DOU) expects today’s announced $20m equity funding facility with New York investment fund Long State to ramp-up the scale needed to compete in the fast-growing global fintech market.

Funding is being earmarked specifically to help the microcap fintech (market cap $20m) scale-up its exposure to the US market, launch into Australia late in 2022, fund ongoing R&D and capitalise on emerging global B2B opportunities.

To the uninitiated, Douugh (formerly ZipTel Ltd) utilises propriety software technology to deliver a software service through a software-as-a Service (SaaS) operating model.

Transition

Douugh founder & CEO Andy Taylor expects the $20m funding deal to aid the further development of the company’s banking super app – designed to help Americans better grow and manage their money – and transition into Crypto and DeFi services and achieve economies of scale.

Taylor believes the pending launch of Crypto and Single Stock trading services will help to reposition the banking super app in the eyes of consumers, and in so doing increase the subscription value, increase interchange revenue and the number of customers using Douugh as their main financial institution.

“Our goal is to unlock the platform revenue opportunity prior to dialling up paid marketing channels, as we work to accelerate our path to unit profitability,” said Taylor.

Local markets

Closer to home, Taylor expects today’s announcement to give the company the capital backing to pursue its international expansion, beginning in Australia in partnership with international banking-as-a-service (BaaS) provider Railsbank.

Taylor also expects the equity funding to help the company capitalise on emerging B2B enterprise licensing opportunities, allowing potential partners to white-label Douugh’s technology for their own customers’ use.

Overhang

Revelations last Monday (21 March) that Taylor had lost a court battle against two former business partners - and consequently ordered to pay more than $2m in damages – may explain why today’s good news failed to nudge the share price forward.

Douugh’s share price increased four-fold from around 10 cents only weeks after initial public offering (IPO) in 2020. But lingering doubts over the company’s business model, plus an inactive partnership with Humm Group (ASX: HUM) saw the company shed 90% of its November 2020 high.

Taylor’s court issues aside, there are also question marks over the seeming discrepancy between reported exceptional customer-base growth and revenue.

For example, while the company claims to have grown its US customer base by some 1839% to 27,560 year-on-year over the December 2021 quarter, the company's customer receipts for the six months to the end of December 2021 barely exceeded for the same previous period.

The share price was down -2.78% just before noon today.

Douugh's share price has significantly underperformed against the IT Index over the last 12 months.