When I’m not writing over-engineered fintech, stratfin and unit economics threads and posts, I’ve got the lucky opportunity to advise and invest in great founders driving fintech forward through our angel investing operator syndicate, 2 Days Early. We’re a small but mighty operator syndicate that aims to be the highest value per dollar invested and Our members are early Chime employees turned entrepreneurs, investors, and operators. We have extensive backgrounds in growth, product, engineering, operations, finance, and more. Companies we invest in get access to our deep experience, our extensive network, and our desire to create and empower impactful companies with real lasting value.

As part of that effort, we’re going to be releasing our investment memos for our portfolio companies (with their approval). We’re trying to be as transparent as we can, while still ensuring we’re aligned to the founder’s desired messaging.

Onward!

The Memo

2 Days Early LPs - we are thrilled to co-syndicate with Dream Big Angels and DashAngels to bring you Juno, the FDIC-insured neobank with all-in-one crypto and fiat capabilities, who is raising their $18M Series A led by Parafi Capital (Consensys, Gemini, Solana, Figment) along with participation from existing investors. The co-founder, Varun Deshpande, specifically reached out to us because he knows that the Chime 2 Days Early syndicate has the operator experience to be value-add for his team as they continue to scale this crypto neobank.

Juno is the first simple all-in-one FDIC insured banking product for fiat and cryptocurrency. Juno’s product looks and feels like a typical banking account with all of the features you’d come to expect, but it has the added benefit of giving users easy access to cryptocurrency use cases. In < 12 months, Juno already has one of the lowest-cost exchanges on the market at only 1% (free if automatically converted from direct deposit) as well as direct integrations with external wallets. Juno has built a platform that allows users to (A) store all of their money securely on a banking platform with the ability to receive direct deposits (in fiat and/or crypto) (B) spend and save money with a debit card (C) send and receive crypto to and from external wallets in a compliant way and (D) buy and sell crypto assets instantly from their checking account.

The Juno founding team, Varun Deshpande, Ratnesh Ray and Siddharth Verma, are 2x previous co-founders with deep risk, compliance and crypto expertise and have worked together for over 5 years. They previously co-founded BeeWise, India’s largest credit analytics platform (acquired by PayU), and then developed the Nuo Protocol, one of the earliest and highest volume DeFi lending protocols. They’ve assembled a 40-person global team that is a key reason they have such an advanced product in less than a year, along with product partnerships with some of the biggest names in crypto products (Metamask, Argent, Ledger).

We’ve secured $250K allocation in Juno’s $18M Series A on a $XM post-money valuation led by Parafi Capital. The deal was announced in September but we get to invest at the Series A price set in January. Juno has previously raised seed financing of $7M in 2019 from Tier 1 venture capital and crypto-focused investment first including Sequoia, Polychain, Hashed, Dragonfly, Mithril, Greycroft as well as a number of other angel investors, many of whom will be participating in this round.

Highlights

Here’s why I’m particularly excited about this opportunity:

• Incredible founding team: The Juno team is made up of crypto experts who have worked together for 5+ years and have been on the forefront of developing differentiated crypto solutions that are risk-mitigating and compliance oriented. They’ve also assembled a rockstar team of 40 operators across every function that can build a full banking experience.

• Strong product development expertise: In <12 months, this team has developed a full featured neobank experience with all of the features you’d expect from a typical bank account alongside simple access to crypto use cases. They are among the only teams that have built a fully functioning FDIC insured bank account and debit card that’s available to the general public in a regulatorily compliant way.

• Massive market opportunity: Crypto is having its moment in 2021 with record-breaking new participation but despite increasing awareness and interest in crypto, few solutions exist that provide simple, easy to use access to crypto products in a safe and secure way. Juno is positioning itself as the banking option for emerging crypto natives allowing their users to store, spend, transfer, and exchange cryptocurrency in a seamless way and its partnership-oriented approach means it can quickly become the de facto way to enter the crypto ecosystem.

Problem

By all signs, there has been a massive increase in crypto participation in 2021. Nearly 90% of Americans now say they’re familiar with cryptocurrencies in 2021, a massive uptick since 2015 when <50% knew what Bitcoin was. According to the World Bank, the number of crypto users globally doubled in the first half of 2021 to over 200 million. And total crypto market capitalization at the end of Q3 2021 was up to $2T, more than 2X the end of 2020.

In addition, the development of cryptocurrency applications has advanced significantly from narrow and technical in scope to broadly applicable and easier for consumers to understand, which wasn’t always the case. Over the course of four product cycles, crypto pioneers have introduced four sets of financial primitives (building blocks) that underlie crypto applications.

For the first four years of cryptocurrency’s introduction to the masses, cryptocurrency’s first product cycle was primarily focused on mining, storing, sending and receiving cryptocurrency that was really only accessible to technologists and cryptocurrency-focused experts. From 2012 to 2016, the second product cycle for cryptocurrency involved developing products that helped users buy and sell cryptocurrency on trading exchanges as well as the development of fiat-backed stablecoins, but both product applications were still largely reserved for larger financial institutions and other crypto subject matter experts. The third product cycle extended these applications by introducing lending applications for crypto through collateralized lending and derivative products, but the target user was primarily institutional investors and hedge funds.

With the benefit of these initial product cycles, we’re now entering the fourth product cycle for cryptocurrency which has made cryptocurrency more accessible via mainstream applications like saving and earning cryptocurrency via applications like DeFi savings accounts and NFTs. Unlike the previous product cycles, earning cryptocurrency is a product application that is entirely accessible and understandable by the mainstream population. It’s also a natural on-ramp to additional use cases like buying, selling, saving and lending crypto. Today, mainstream consumers can now leverage DeFi savings accounts to earn higher yield while holding fiat-backed stablecoins, making crypto-native bank accounts increasingly attractive. Indeed nearly 1/3 of Millenials and more than 50% of Gen Z workers would welcome their paycheck in digital currency.

But while we’ve entered a new wave of digital adoption around cryptocurrency on the macro side and cryptocurrency applications have expanded in scope to include earning cryptocurrency, access to cryptocurrency is still difficult, expensive and often requires pre-existing knowledge of the crypto ecosystem to participate, for both employers and employees. Even when employers support payroll access in crypto, employees don’t often know how to accept crypto payments since bank accounts today don’t support standalone crypto asset access alongside dollar-based (“fiat”) earnings.

Solution

Juno is the first simple all-in-one FDIC insured banking product for fiat and cryptocurrency. Juno’s product looks and feels like a typical banking account with all of the features you’d come to expect, but it has the added benefit of giving users easy access to cryptocurrency use cases. Juno allows users to (A) store all of their money (fiat and crypto) securely on a banking platform with the ability to receive direct deposits (in fiat and/or crypto) (B) spend and save money with a debit card (C) send and receive crypto to and from external wallets in a compliant way and (D) buy and sell crypto assets instantly from their checking account.

(A) Banking Experience & Platform

Banking Experience

Juno provides all users with an FDIC-insured checking account powered by their sponsor bank, Evolve along with a Mastercard debit card and access to 85,000 ATMs powered by Allpoint and MoneyPass. Users can open a checking account through a simple sign-up flow on their website, subject to Juno’s bank-compliant KYC and AML monitoring and review. Users can access their bank account on desktop and mobile web (with Google SSO available) or via mobile access on iOS and Android. Funding via direct deposit (with numerous payroll aggregator integrations), P2P platforms like Venmo and Cash app (via Plaid integrations), and via international transfer (using Wise). Monthly account statements and annual tax filings are also available on the platform. Users can also access phone and chat support (including live chat) when issues arise (top rated app on TrustPilot, driven by customer service).

Crypto Paycheck 

Juno is the first of its kind to automate payroll direct deposit via cryptocurrency (“Get Paid in Crypto”). Users can choose whether they want to receive their direct deposit in Bitcoin (BTC), Ethereum (ETH) or US Dollars (USD) with any combination of distribution. Funds are deposited instantly at low fees with no minimums and without the user having to think about complicated web3 elements like gas fees and network fees (zero fees for movement to Juno’s native wallet, low fees for movement to partnership wallets).

In addition to the obvious benefit for employees, the crypto paycheck is a unique offering for employers. Employers can offer a distinct employee benefit without having to change existing processes, deal with complex compliance and labor laws or involve HR / Finance teams to enable crypto paychecks.

(B) Spending and Saving

Juno’s offering includes a full-featured Mastercard debit card that can be used at millions of merchants globally. Users also get access to a virtual card that can be used on Apple Pay and Google Pay, as well as a physical debit card upon request (with card shipment tracking available in-app). By default, users earn 5% cash-back on 5 brands of their choice for up to $500 in spend / month (can change brands every month).

High Yield Saving

All users who convert their fiat currency to USDC can also earn up to 3% yield on their deposits, with zero fees for conversions and instant withdrawals.

Metal Checking

When users set up recurring direct deposits of at least $250 / month, they receive a premium metal card, 5% cashback on up to $3000 of spend / month, and an additional 1.20% yield on their checking account.

(C) Sending & Receiving Crypto

Juno provides a partnerships-friendly crypto wallet experience for its users via its native crypto wallet as well as direct integrations with crypto digital wallets like Metamask, Argent, Shapeshift and Zengo as well as crypto physical wallets like Ledger. Juno offers unique features like recurring deposits alongside low overall fees and high transaction throughput.

(D) Buying / Selling Crypto

Juno makes it straightforward to buy and sell crypto for a flat 1% fee that significantly undercuts other pure crypto wallets as well as fintech apps with crypto wallets while staying competitive with more complicated cryptocurrency exchanges, as well as track your cryptocurrency portfolio in your account. Juno does not charge a fee to convert cash from your paycheck to crypto today.

Technology Platform

Under the hood, Juno has built banking infrastructure powered by Synapse’s Banking-as-a-Service platform and integrated with their sponsor bank. On the payroll side, Juno has built integrations with payroll aggregators like Atomic, Argyle and Pinwheel to make direct deposit switching instantaneous. For their fiat-to-crypto solutions including crypto paycheck, Evolve powers the receipt of direct deposits, while direct integrations into Synapse’s crypto wallet infrastructure and Wyre Capital’s liquidity provider infrastructure power the conversion from fiat into crypto. Meanwhile, Juno has built its own crypto wallet and also offers direct integrations with crypto digital wallets like Metamask, Argent, Shapeshift and Zengo as well as crypto physical wallets like Ledger.

Compliance-first Orientation

Unlike other competitors in the space, Juno’s team sees compliance as a core value and competitive differentiator. While Juno sees the massive potential for decentralized finance (DeFi) platforms, it is cognizant that there is more regulatory clarity needed before financial platforms can operate safely entirely via DeFi. Juno takes a hybrid approach that combines a centralized system (checking account via sponsor banks) with decentralized financial services (crypto wallets and stablecoin-based yield products).

Juno’s compliance orientation is driven by a two-pronged approach:

• Introduction of products based on regulatory clarity: Juno only offers products that have the highest level of regulatory clarity with existing precedents that have received high signal or explicit approvals from regulatory bodies. Juno’s crypto paycheck feature was built in keeping with labor law compliance. Juno only offers crypto assets that the SEC has explicitly sanctioned (BTC and ETH). They have also avoided lending products to date given the statewide resistance to such products as well as recent SEC hostility towards larger scale launches.

• Compliant access to DeFi protocols: Since Juno runs bank-level KYC and AML account evaluation, they provide FATF travel-rule compliant KYC-backed access to DeFi protocols. Juno also has a Client / Principal relationship with their banking infrastructure provider, Synapse, which means that Synapse’s compliance with SEC and FINRA regulations are passed on to Juno. Juno also prepares monthly transaction statements for users as well as annual tax filings for accurate and compliant reporting of cryptocurrency purchases and sales.

Product Roadmap

Juno also has an aggressive roadmap to further expand spending capabilities, high yield saving and crypto-backed credit opportunities including access to low interest rate loans (~3-4% APR) for up to 33% of the crypto assets stored on Juno.

While it is not a current part of their product roadmap, Juno is also uniquely positioned to offer uncollateralized loans to its users, because unlike DeFi lending protocols, Juno is able to individually KYC its users via their bank account onboarding, which means they have unique access to cash flow underwriting as well as account-based underwriting to more effectively analyze risk.

Team

The Juno management team and early employees are uniquely positioned to tackle the complex problem of designing a solution that appeals to crypto and mainstream audiences while offering the best of both worlds for centralized and decentralized financial products. Varun Deshpande, Ratnesh Ray and Siddharth Verma are 2x previous co-founders and have worked together for over 5 years. They previously co-founded BeeWise, India’s largest credit analytics platform (acquired by PayU), and then developed the Nuo Protocol in early 2019, one of the earliest DeFi lending protocols and among the top five in volume processed (proactively shut down the protocol in 2020 to address regulatory uncertainty). This team has a deep background in credit risk, analytics and compliance and cares deeply about developing products in a compliance-oriented and risk-mitigating way.

Equally impressive, the co-founding team has assembled a 40-person global team with a full complement of interdisciplinary expertise. The team’s diverse background and size is a big part of the reason that Juno is miles ahead of their competition in terms of overall product development, engineering capability and business partnerships.

Market opportunity

Interest in cryptocurrency and adoption of crypto has ballooned over the course of 2021 and it is clear that crypto familiarity and adoption is becoming synonymous with internet adoption globally.

In the U.S. the numbers are similarly astounding - ~94M+ adults (~63% of US adults) show a familiarity with and interest in crypto, more than 40M will plan to enter the market in the next 12 months, and roughly ~21M US adults own cryptocurrency today (~14% of the US population). Moreover, the demographics are starting to broaden with wide distribution among age and ethnicity for crypto holders. And while ~70% of crypto holders are male today, more than 50% of crypto interested people are women.

Among product offerings, the total opportunity size for Juno is similarly large, just in their current and near-term product offerings:

• Debit Purchases: US debit purchase volume alone was over $3.3T in 2020

• Exchange Trading: Centralized crypto exchange trading volume hit $14T in 2021 (up ~700%)

• DeFi Lending: Over $45B in total volume locked in DeFi lending, with $24B of outstanding loans

Economics / Business model

Business Model

Juno’s business model resembles a typical neobank’s business model - it generates the majority of revenue from debit interchange (~1-2%) charged to merchants when customers use their Juno debit card. Juno offers cashback rewards of up to 5% on select categories, which they self-fund today but could partner with merchants at scale. Juno also allows its users to earn high yield interest on their checking account (4% yield on checking account funds that are converted to USDC). Just like other neobanks, Juno’s primary focus is on driving a higher proportion of users shifting their primary banking relationship to Juno, thereby driving higher deposits, spend and retention.

In addition, Juno charges a competitive 1% trading fee for buying and selling crypto (cheaper than market names like Coinbase, Gemini, Cash App, Venmo, PayPal). Juno does not charge for cash-to-crypto conversion for crypto paychecks. Similarly to other neobanks, while fees are a portion of their revenue today, Juno plans to shift monetization from trading fees to lending, especially as trading fees will continue to compress over time.

Go-To-Market Strategy

Target Customer / User Personas

The overall vision for Juno's team is that anyone should be able to live their full financial life within the crypto ecosystem and be able to interact seamlessly with the traditional financial ecosystem. As part of that vision, the foundational building block (primitive) for Juno has been around building a banking experience that allows users to earn in crypto and then to spend and save in crypto.

As an initial target use case, they have focused early efforts on the middle income segment of the market ($75K - $125K income) and those who are holding a large percentage of their assets in crypto. These users are frustrated by high fees, slow transaction processing and tax complications and want to be able to use crypto for everyday use cases like spending, saving and bill payments.

Marketing Strategy

Juno’s go-to-market strategy will be built on three layers:

• Partnerships: Juno is partnering with many of the adjacent players in the ecosystem that are part of the flow of money to and from their bank account:

• (Today) Wallets (MetaMask, Ledger, Argent): Juno provides direct access to users with US dollars who may then transfer their money to these crypto wallets

• (Future) Crypto companies (Consensys, Galaxy): Juno can be the bank account partner for crypto companies that want to pay their employees in crypto

• (Future) Payroll providers (Rippling, Gusto): Juno can be a debit card funding solution for payroll providers to provide early access to paychecks in crypto

• (Future) Aggregators (Instadapp, Zerion): Aggregators help crypto users distribute assets between multiple cryptocurrency products at once. Juno can provide a unique bank account offering that increases engagement and retention through recurring crypto paychecks to these aggregators

• Direct marketing: Targeted growth marketing advertising, influencer marketing and affiliate referral marketing around viral hooks for crypto banking (“unbanking the banked”) and crypto paycheck (“get paid in crypto”)

• Community-building: Juno offers custom NFTs and will provide a community-based DAO structures that engage the crypto network and drive viral social growth

Competitive landscape

As interest in crypto has increased, the competitive landscape has exploded, but even with the rapid onrush of new entrants, there are few players that actually offer a (1) simple, (2) all-in-one (3) banking and direct deposit experience that serves both (4) crypto and US dollar use cases.

Crypto exchanges (Coinbase, Gemini, Kraken) are primarily designed to allow traders to buy and sell cryptocurrency as a speculative asset. Most exchanges don’t offer debit cards or bank accounts directly, and even those that do don’t usually let people receive direct deposits directly and instead rely on separate primary bank accounts as a deposit source. Recurring direct deposits that allow recurring cryptocurrency conversion / purchase are not available today.

Modern neobanks (Chime, Current, CashApp) have strong product-market fit with existing userbase, but the shift from focusing on a fiat-based banking experience to one that embraces both crypto and fiat banking will take time and concentrated effort. When firms do offer crypto products, they are largely one-off use cases like wallets or crypto trading because providing a full service banking experience is a large undertaking.

Crypto-only banks (Eco, Valora) simplify access to a crypto banking experience, but they crucially lack FDIC insurance and don’t allow users to easily direct deposit funds like paychecks or make cash withdrawals because they lack traditional financial elements like account numbers or routing numbers.

Payroll and invoicing providers (Bitwage, Request Network) make US dollar to crypto conversion for earning crypto paychecks easy, but lack the all-in-one banking experience that a full bank account offers. Further, crypto-related accounting standards and laws still lack clarity, so the ability of these providers to operate at scale will be more difficult than for existing payroll providers like Gusto, Rippling and others to introduce crypto paychecks via partnerships.

Traction

Juno’s team has primarily worked on building the underlying infrastructure and product to build a full featured fiat and crypto banking experience. Even still, since launching in December 2020, with little to no marketing expenses, Juno has scaled monthly actives and many have set up recurring direct deposits (a strong DD KPI given nascent growth marketing strategy development) with $XM+ in monthly recurring direct deposits. Average monthly card spend is trending to $X / month or about $XM / month in overall purchase volume.

Current round

Juno raised $18M for their Series A on a $XM post-money valuation led by Parafi Capital with participation from existing investors. The deal was announced in September but we get to invest at the Series A price set in January. Varun specifically reached out to us because he knows that the Chime 2 Days Early syndicate has the operator experience to be value-add for his team as they continue to scale this crypto neobank.

Juno has previously raised seed financing of $7M in 2019 from Tier 1 venture capital and crypto-focused investment firms including Sequoia, Polychain, Hashed, Dragonfly, Mithril, Greycroft as well as a number of other angel investors.

Use of funds

This round will be used to fuel several strategic outcomes:

• Increasing direct depositors: The Juno team wants to target > X direct depositors (crypto paycheckers) in the next 12 months

• Deploying marketing & acquisition strategies: The team will be deploying their hybrid partnerships GTM strategy and putting direct marketing dollars to work to increase traction and user growth

• Expanding US headcount: Juno’s team is primarily in India today but they will target adding at least 10 headcount in the US across marketing, business development, compliance and operations functions

Q&A

How are you able to handle the technical & regulatory complexity around building both in crypto and in real banking?

We've spent a lot of time working to understand the regulatory and compliance space and working closely with our banking and transaction processing partner to ensure we're launching this banking platform in a way that enables crypto applications while staying in compliance with traditional financial ecosystem regulation. As we know from experience, even after signing the relevant commercial and legal contracts, you're not able to launch products like ours on Day 1. It takes 6+ months before you can really launch anything at all in a compliant way.

We've been working with our banking partner (Evolve) and transaction processor (Synapse) for over 12 months now. We've built essential foundational knowledge not just about product compliance, but also key insights on how to build a capable fraud and chargebacks operational infrastructure, regulatory framework and all of the internal tooling and process to scale this within a banking platform.

We think the time we've spent on product and compliance builds a technical and regulatory moat that gives us at least a 9-12+ month head start on competitors in this space. We've seen that it's been hard for existing traditional fintechs to enter this space beyond simple buy/sell crypto use cases. We also believe that crypto native teams often underestimate the complexity of deploying products in a regulatory and compliant way. And even large-scale crypto platforms continue to have issues with launching products and have much more focus which means they can't move as quickly.

How supportive has your bank partner been?

We have worked closely with our banking partner (Evolve) on all of our product and feature deployments and they are actually incredibly supportive of all of our crypto use cases. They have become the market leader for supporting crypto use cases by fintechs, and they're actually providing custody for our USDC-based yield product to guarantee the yield, so that product is fully sanctioned by our bank partner. We're also working directly with Evolve to support our USDC-based spending capability on the Mastercard payment network (to be launched).

What kinds of transaction fees are involved with using your crypto banking products?

We've designed our business model in a way that should not have to rely on fees for the vast majority of our revenue and it's our hope to minimize or eliminate fees wherever possible or otherwise relay them in a transparent and fair way (e.g. for future lending products). We currently do not charge any fees for exchanging cash for crypto for spend and saving use cases, so there's no fees to get your paycheck in crypto or to convert your USD to USDC in order to get our higher 4% yields. We also have one of the largest ATM networks in the country with 85,000 ATMs (Allpoint + MoneyPass) and we cover 1-3 additional out-of-network ATM surcharges per month. For the crypto investing use case (buy / sell crypto) we charge among the lowest rates on the market at 1%, and we're actively adding liquidity providers so that the fee to the user will be replaced by a spread offered to the liquidity provider that we will aim to reduce over time.

What is your strategy to work with existing wallets versus creating your own? What is making a wallet defensible these days?

We're trying to provide ultimate flexibility and convenience to our users with our wallet strategy, because we want to be the de facto crypto on-ramp and off-ramp for our users. As we all know, today's crypto wallets are holding custody over billions of dollars of assets, and every user has different preferences for different wallets based on their features. While we've built our own wallet that provides simple, instant access to crypto assets on Juno, we've also got direct integrations with crypto digital wallets like Metamask, Argent, Shapeshift and Zengo as well as crypto physical wallets like Ledger, which allow users to instantly get their paycheck deposited to these wallets seamlessly.