VPC Impact Acquisition Holdings III (VIH III) [VPCC], a special purpose acquisition company (SPAC) launched by Victory Park Capital, is set to acquire Dave, the banking app backed by celebrity investor Mark Cuban, according to a 7 June announcement.
Cuban’s involvement dates back to a “relentless” email campaign by Dave’s founder, Jason Wilk, who in 2011 persuaded the Shark Tank star to pump $300,000 into his first startup, AllScreen. In return, Cuban acquired a 20% stake in the company, which sold four years later for $85m.
In April 2017, Cuban backed Wilk’s next venture, personal finance app Dave. Cuban invested $3m in the startup, a move which looks set to bear fruit.
The agreement with VPC Impact Acquisition Holdings III values Dave at $4bn, a big increase on an August 2019 valuation of $1bn. Victory Park Capital, which issued the SPAC, is a long-time fintech investor and has also backed Dave for some time, most recently with a $100m debt financing round in January. A $50m Series B funding round led by Norwest Venture Partners was completed in September 2019.
While VIH III is listed on the NYSE, Dave is yet to indicate its stock exchange of choice (SPAC-merged companies have the ability to change their exchange when they list).
The deal will also include $210m PIPE financing from institutional investors including Wellington Management, Corbin Capital Partners and Tiger Global Management.
VIH III is the third blank-cheque company launched by Victory Park Capital. Its first venture, VPC Impact Acquisition Holdings [VIHAU], entered a definitive agreement to merge with digital marketplace Bakkt Holdings on 11 January, while its second, VCP Impact Acquisition Holdings II (VIH II), is still seeking a target business “in the fintech industry with operations predominantly outside of the United States.”
Brendan Carroll, co-CEO of VPC Impact Acquisition Holdings and senior partner and co-founder of VPC, said of the Dave merger: “Dave’s growth and expansion over the last few years have been significant, and we believe that the company has only scratched the surface of what it can achieve.”
"We believe that [Dave] has only scratched the surface of what it can achieve" - Brendan Carroll, VPC
He added that Dave was well-positioned for future growth and believed it could “continue to disrupt the legacy financial system.”
Taking on the giants
Dave is named after the diminutive hero of the David versus Goliath story. Wilk started the business in 2016 to tackle some of the most unpopular characteristics of traditional banks, starting with overdraft fees.
“We believe the legacy financial system has failed to deliver and today, more than 150 million people need our help to build financial stability,” he said during the deal announcement.
Dave’s users pay $1 monthly to access checking accounts with up to $100 interest- and fee-free overdraft protection, as well as the ability to boost credit scores through rent and utility payments
Dave reported revenue of $122m in 2020, with an operating income of $5m (though its audit hasn’t yet been completed). Dave projects $530m revenue and $29m EBITDA for 2023.
Dave and the Dow Jones
Cuban bought into the company’s mission early on. “I invested in Dave because I got crushed by overdraft fees in my 20s,” he said after backing the company in 2017.
“For anyone who wants to be successful, I always advise to cut down on useless expenses and save money. Overdraft fees are the definition of useless,” reported Yahoo Finance.
"Overdraft fees are the definition of useless" - Mark Cuban
Since then, Dave estimates it has saved $1bn for its 10 million users. Wilk still believes there is extensive room to grow these numbers as demand for the app’s offering persists.
SPACs were all the rage in 2020 and look set to continue their run during 2021, with $105bn raised by 330 companies so far this year. However, the mania seems to have cooled in recent weeks, leaving the CNBC SPAC 50 Index falling 3.8% in the year to date, while the Dow Jones Index has gained 11.2% (as of 16 June’s close).
Against this backdrop of increased wariness over SPAC deals, VIH III’s share price fell 0.1% on the day the deal was announced but has since gained 0.5% (through 16 June).