Plenty of startups have had to pivot from their original business idea, but Slash may be the first one to do so because of Kanye West. Slash started out providing banking services to sneaker resellers, but after the rapper’s anti-Semitic rants tanked the market, cofounders Victor Cardenas and Kevin Bai decided to create bespoke banking lines for other industries instead. The pivot proved to be a success.
On Tuesday, Slash announced it has closed a $41 million Series B round at a $370 million valuation led by Goodwater Capital. The startup will use the funding, which comes two years after it raised $19 million in Series A and seed funding, to expand its business providing specialized financial services as a neo-bank. The neo-bank model means offering a limited array of banking services without the overhead of physical branches or a full-blown bank license..
The founders came up with Slash after playing around with different startup ideas while Cardenas studied at Stanford and Bai at the University of Waterloo, and learning about the vibrant community of sneaker resellers. Many of these resellers were generating substantial revenue but were unable to access key bank products, like virtual credit cards, because of their age or unincorporated status.
Many fintech startups with a similar offering—like Mercury, Brex, and Ramp—take a horizontal approach by selling to companies across different industries. Cardenas and Bai decided to instead operate with a vertical model by creating banking services tailored for sneaker resellers, with the idea of expanding to other sectors.
The strategy paid off, with Slash’s revenue exploding and the startup raising seed and Series A rounds from top investors, with both rounds led by NEA. But when Kanye West began spouting anti-Semitic tirades, Adidas ended its partnership with the rapper, gutting one of sneaker resellers’ most lucrative lines of business: Yeezys. Slash’s revenue went down by 80% almost overnight. “We had raised $19 million and hired all these people, but the market that was the bedrock of our company evaporated,” Cardenas told Fortune.
For the past 18 months, Slash reworked its existing infrastructure to target other sectors: namely, performance marketing agencies, crypto firms, and HVAC operators. The pivot worked, with the startup now processing around $300 million a month on its cards. “It’s pretty rare that you get to see a team and a company at the stage they were at facing such a big existential risk, work their way out of it, and just start to thrive,” said NEA partner Rick Yang, who backed Slash in all three of their funding rounds.