How Fast Can A Non-Bank Startup Burn $50 MM?

Ann Rutledge
November 25, 2022

Texas-based GloriFi was a financial technology startup that aspired to be the anti-woke banking alternative for conservatives to “put their money where their values are.”

Founder Toby Neugebauer went public with his concept in summer of 2022, just as trillions of investment dollars had begun flowing out of the fossil fuel industry towards greener borrowers. He and his wife raised $50 MM from 84 conservative backers, including billionaires Peter Thiel, Ken Griffin and Vivek Ramaswamy. Talk show host of The Daily Wire, Candace Owens, was a co-founder; Nick Ayers, consultant to Mike Pence, a senior business partner.

GloriFi was due to go public in Spring 2023 through a merger with DHC Acquisition Corp., a SPAC whose senior executives have military and defense backgrounds, who characterize their business culture as “Special Ops.” But just months after the public announcement, GloriFi folded.

In communications officer Cathy Landtroop’s email to employees, the closing was said to be due to “financial challenges related to startup mistakes, the failing economy, reputational attacks, and multiple negative stories.” Many details alluded to were highlighted in an early October Wall Street Journal exposé of operational malfeasances, financial missteps and CEO excesses.

Wait, what? A “failed” economy in the span of just four months? For a disruptive niche, shouldn’t adverse media attention have been anticipated? Maybe celebrated, as free advertising? And $50 MM in startup cash. Stop right there. $50 MM is more than a tidy sum to absorb a startup’s teething problems. It’s a bonanza. Just for context, Crunchbase, the 15-year-old online market intelligence platform, raised $50 MM when it went for a D round around the same time this year.

To be clear, the problem wasn’t with GloriFi’s target niche, either. The market for Americans underserved or failed by traditional banks is sizeable, even if not “hundreds of millions” as claimed by Neugebauer. In 2021, an FDIC study showed that 6 MM Americans are without banking services; and whereas some don’t have the money to open an account, an equal number simply don’t trust banks or value their privacy above banking convenience. Moreover, a well-designed fintech can without a doubt widen capital access and also seriously challenge establishment banks by making basic credit operations more efficient.

The reason why GloriFi failed is because it had no credit culture.

The giveaway was inconsistent messaging. On the one hand, GloriFi boasted (without offering any evidence) that its tech stack was superior to large bank legacy systems. On the other, it's branding was like an affinity card—a marketing tactic banks use to increase acceptance rates on their credit card offers. These pitches are vastly different.

In its promises of products and services to match member lifestyles and values, GloriFi brought the affinity concept to a whole new level of brand imagination. Credit cards would be manufactured out of bullet shell casings. Responsible gun owners would receive homeowners insurance discounts. GloriFi would cover the legal expenses of members who shot someone in self-defense.

But a theme park is more than a theme, it is a park. An affinity credit card is more than a club, it is consumer credit. An audaciously-themed nonbank still needs to act like a bank. To stay in business, GloriFi would need to raise debt capital—lots of it—because equity is expensive and nonbanks lack access to the cheapest debt funding, deposits. GloriFi had access to some client deposits under an agreement with TransPecos Banks, but raise the requisite amount of debt capital to make it as a bank on its own steam, it would need to demonstrate a capacity to generate net earnings on its services and a positive margin on its products, for that is how banks make money.

The initial raise was not chump change; it was large enough to offer basic services and products on a small scale, and build up to greatness. GloriFi’s case for bridge financing through the IPO date would then have been much more convincing. By the way, where did the $50 MM go? Drinking, carousing, paying consultants…one can imagine $50,000 or $500,000 gone, but orders of magnitude more?

The open-and-shut case of GloriFi leaves behind this one wormhole: Animo Mortgage Company LLC (TX), doing business as GloriFi, in existence since September 23, 2021, has a chain of 44 similarly named mortgage companies that opened after it in different states. They are still operational, according to the online database Open Corporates. Will there be a GloriFi2?