Oakland’s Launchpad Capital, Castle Creek Capital raise millions to back fintech startups

Oakland venture firm Launchpad Capital and Castle Creek Capital said Wednesday that they raised $90 million for their first fund focused on tech and fintech startups.

Despite this year’s rocky times in the stock market, the firms were able to raise the capital for Castle Creek Launchpad Fund I from 34 community banks in 18 states as well as banking executives and professionals. The fund’s investor base takes advantage of the relationships Castle Creek has built over 32 years of investing in community banks.

“We’re backing entrepreneurs who are rethinking and rebuilding financial services,” said Ryan Gilbert, a serial entrepreneur turned VC who founded Launchpad Capital last year. Gilbert will manage the new fund with Launchpad partner Jurgen van de Vyver. Castle Creek managing principals Tony Scavuzzo and David Volk are members of the investment committee.

“We’re very much focused on technologies and business models that continue to help banks be more relevant and more impactful in the broader financial services sector,” Gilbert told me. “Many community banks feel that they’ve been left behind when it comes to this progress, especially when you look at the larger financial institutions.”

The pandemic’s impact was a mixed bag for community banks. While the pandemic accelerated adoption of digital banking, federal Covid relief efforts such as the SBA’s Paycheck Protection Program underscored the value of business owners having established relationships with their community banks. Today, community banks are eager to maintain the personal touch that comes with those business relationships, while providing online banking and other tech-enabled services.

The idea for the new venture fund grew out of Castle Creek’s efforts to add fintech expertise to its advisory board last year. The firm interviewed several candidates and Gilbert was among those selected to join the advisory board, Scavuzzo told me.

“At our first meeting, it was clear that we should partner to bring access to fintech innovation, best practices and learnings to community banks through a new community bank-backed fund,” Gilbert said. Part of that effort includes the fund hiring Katherine Kane for its team. The former deputy editor and lead of the BankThink opinion section at the American Banker trade publication will be the new venture fund’s director of research and content creation.

Venture firms are increasingly becoming media organizations, given the amount of content they’re creating to leverage their industry expertise, Gilbert said. While profit and returns are the venture fund’s top priority, it also sees communicating with its community bank limited partners about industry trends and fintech innovations as essential to its strategy.

“Offering our portfolio companies and founders access to key influencers and decision makers in the banking sector presents a significant differentiator for early-stage founders seeking to launch and grow startups in this sector,” Scavuzzo said.

Community banks often turn to outside vendors for the technology-backed financial products and services their customers expect. Gilbert sees more community banks expanding their in-house tech teams, with recent layoffs in the tech sector possibly allowing the banks to do more hiring.

Gilbert, who serves on the board of Sacramento-based River City Bank, has worked on several fintech startups as an entrepreneur and venture investor. At Launchpad Capital, he has invested in more than 50 financial services startups from seed capital through Series B financings. Launchpad’s portfolio companies include San Francisco-based Vouch, which offers insurance to startups, and Berkeley-based Grabango, which allows shoppers to skip the checkout line by relying on computer vision and other technology to track their purchases in the store.

Gilbert and other partners in the new Castle Creek Launchpad fund will continue to invest their pre-existing independent funds while managing the new joint fund.

“We’ll benefit from an expanded partner base, additive insights and more partnership opportunities for our portfolio companies,” Gilbert said. “This will be a win-win.”