Finance

Dawn Capital, one of Europe’s biggest backers of business software companies, raised $700 million in two new funds, defying the odds as venture capital investment in tech startups has slumped.
The London-based VC firm is one of the most prominent tech investors in Europe, with a portfolio that includes the likes of PayPal-owned payment firm iZettle and Visa-owned open banking startup Tink.
The $700 million will be invested from two funds: a $620 million early-stage fund and an $80 million “opportunities” fund for growth-stage firms in Dawn Capital’s existing portfolio.

Malte Mueller | Fstop | Getty Images

Dawn Capital, one of Europe’s biggest backers of business-to-business software companies, raised $700 million in two new funds — doubling down on its bid to find technology champions in the region at a time when venture capital funding for tech startups has dwindled.
The London-based VC firm is one of the most prominent tech investors in the continent, with a portfolio that includes the likes of Swedish online payments firm iZettle, which was acquired by PayPal for $2.2 billion in 2018, and Swedish open banking company Tink, which Visa acquired for 1.8 billion euros ($1.9 billion) in 2022.

Hannah Gubbins, a newly promoted partner at Dawn Capital, said raising the new funds in a time when private startup company valuations have tanked and investor sentiment toward technology has soured was far from easy — but that it came down to deep relationships with institutional investors built up over years.
“For us, the LP [limited partner] side, even those that weren’t building programs in venture where lots of people felt historically, 18 months ago, they ought to be allocating a lot more to venture,” Gubbins told CNBC in an interview.
“Suddenly with everything with the markets and the denominator effect, their private book was overallocated even if technically by their own benchmarks they weren’t. That meant a lot of funds could only reup with existing managers or those with high convictions.”
“It’s the same as in those cycles where there is still capital out there, there are still investors investing. Investors are excited to be investing in this market,” Gubbins added. “There’s some of the best companies, some of the best vintages have come out of the dotcom [bubble], out of the global financial crisis. They know that, they sit on the data.”
Dawn Capital plans to invest in 20 companies with the new funds, which is the firm’s fifth to date. Dawn V will be split into two distinct funds: a $620 million early-stage fund for Series A and Series B investments, and an $80 million “opportunities” fund aimed at backing winners in Dawn Capital’s portfolio that may go on to exit through an initial public offering or takeover later in their business lifecycle.

Dwindling VC funding

Venture capital investment has fallen off a cliff as investors reevaluate their allocations amid higher interest rates and rising inflation.
With rates at multi-year highs, innovative, growth-oriented companies that are making losses and that take longer to make a return on their investments have become less attractive. Stodgy, profitable firms with more stable revenue streams, on the other hand, are seeing greater interest.
Investors have been watching the initial public offerings of firms like U.K. chip designer Arm and U.S. grocery delivery firm Instacart for signs of a comeback in tech.
Tech boomed in 2020 and 2021 as the Covid-19 pandemic led to a surge in the use of online platforms for just about everything from shopping to remote work. Ultra-low interest rates from central banks aimed at propping up the economy also worked to ensure it was much easier to raise money. But all that has changed dramatically in the past year or so.
Gubbins said she doesn’t have a crystal ball for when the IPO market will officially open up again. However, she said, Dawn Capital is following the debuts of Arm and Instacart closely as it searches for signs of when the dust will settle on the public listings front.
Gubbins stressed that an IPO isn’t the only exit path available to founders. She highlighted the acquisition of LeanIX, an enterprise architecture management software company in Dawn’s portfolio, by German software titan SAP as an example of European technology firms seeing successes when it comes to exits.

Artificial intelligence

One area defying the declines in tech is artificial intelligence — where investment is booming. AI has had billions of dollars’ worth of investments flowing into companies, particularly firms working on so-called “foundational models” capable of generating new content from written prompts, such as OpenAI, Anthropic and Cohere.
Gubbins said that AI has proven a standout part of conversations with limited partners. However, the focus for Dawn Capital, she said, remains investing in a broad range of business-to-business software companies in fields ranging from fintech to security and infrastructure.
“We’re doubling down on what we’ve always done,” she said. “AI is absolutely one of the areas we’re looking at. Both investing in AI companies but also as something that’s disrupting every sector and company.” More

A visitor views a titanium hybrid 2020 Ford Escape FWD small SUV at the Canadian International Auto Show in Toronto, Ontario, in Canada, Feb. 18, 2020.
Chris Helgren | Reuters

Check out the companies making headlines in midday trading.
Ford — Shares popped about 2% in midday trading after a CNBC report said both Ford and the United Auto Workers union are making headway on negotiations as the strike continues.

Squarespace — The website builder popped 4.2% after UBS initiated coverage of the stock at a buy. UBS said the company has a solid product suite and growing brand awareness.
Scholastic — The publishing and media company stock plummeted 13.2% after reporting an earnings miss on the top and bottom line. Scholastic reported an adjusted loss of $2.20 per share on $228.5 million in revenue, while analysts polled by FactSet forecast a loss of $1.35 per share and $268.79 million in revenue.
Arm Holdings — The recently listed chip design stock lost 1.6% during Friday’s trading session after Susquehanna initiated a neutral rating on the company in a Friday note. Shares popped nearly 25% during its Nasdaq debut Sept. 14 but are now trading just above the stock’s $51 initial public offering price.
Seagen — Shares of the biotech firm rose 3.5% after the company reported positive results from a clinical trial for patients with previously untreated bladder cancer. The results showed the treatment improved both overall survival and progression-free survival, compared with chemotherapy.
Deere — Shares of the farming equipment manufacturer fell 1.7% after Canaccord Genuity downgraded shares to hold from buy. The firm mentioned headwinds including slowing growth for large agricultural equipment and normalizing dealer inventories.

Chinese e-commerce stocks — U.S. shares of both PDD and Alibaba added roughly 4% and 5%, respectively, while JD.com stock climbed 2%. A report from Bloomberg said earlier Friday that the Chinese government is considering loosening foreign investment cap rules in publicly traded domestic companies.
Activision Blizzard — Shares of the video gaming firm added about 2% after U.K. regulators said a new deal proposal from Microsoft cleared major antitrust worries.
— CNBC’s Pia Singh, Alex Harring, Hakyung Kim and Samantha Subin contributed reporting. More

Boston Fed President Susan Collins expressed support Friday for keeping interest rates elevated as the battle against too-high inflation continues.
A voting member this year of the Fed’s rate-setting group, Collins said “further tightening is certainly not off the table.”

Susan Collins, president of the Federal Reserve Bank of Boston, speaks during the National Association for Business Economics’ Economic Policy Conference in Washington, D.C., March 30, 2023.
Ting Shen | Bloomberg | Getty Images

Two Federal Reserve policymakers expressed support Friday for keeping interest rates elevated as the battle against too-high inflation continues.
In separate speeches, Governor Michelle Bowman and Boston Fed President Susan Collins said there’s still the possibility that the Fed will have to raise rates further if economic data doesn’t cooperate.

Bowman’s remarks were more pointed as she indicated that progress has not been sufficient in bringing inflation down to the Fed’s 2% target.
“I continue to expect that further rate hikes will likely be needed to return inflation to 2% in a timely way,” she said in prepared remarks to a bankers group in Vail, Colorado.
With the majority of the Federal Open Market Committee expecting inflation to remain above target through at least 2025, and her own expectation that progress in the battle will be slow, it “suggests that further policy tightening will be needed to bring inflation down in a sustainable and timely manner,” Bowman said.
For her part, Collins said the recent inflation data has been encouraging though it’s “too soon” to declare victory while core inflation excluding shelter costs remains elevated.
“I expect rates may have to stay higher, and for longer, than previous projections had suggested, and further tightening is certainly not off the table,” Collins said in prepared remarks for a banking group in Maine. “Policymakers will stay the course to achieve the Fed’s mandate.”

The commentary comes two days after the rate-setting FOMC decided not to raise rates following its two-day meeting. Both said they supported the decision.
Both Bowman and Collins are FOMC voting members this year. The federal funds rate is currently targeted in a range between 5.25% and 5.5%.
While choosing not to raise rates, officials indicated they still see one more increase coming this year, then potentially two cuts in 2024, assuming moves of 0.25 percentage points at a time.
“There are some promising signs that inflation is moderating and the economy rebalancing,” Collins said. “But progress has not been linear and is not evenly distributed across sectors.”
She also noted that the effect of monetary policy moves, which have included 11 interest rate increases and a more than $800 billion decrease in the Fed’s bond holdings, may be taking longer to make their way through the economy due to the strong cash positions of consumers and businesses.
However, she said the path to a soft landing for the economy “has widened” and said Fed policy is “well positioned” to achieve a decrease in inflation while not sending the economy into a recession. More

Americans applied for U.S. passports in record volume in 2023 and passport processing delays are lengthy as a result.
The State Department recommends applying for a passport at least six months ahead of travel or passport expiration.
A routine passport now takes 10 to 13 weeks to process, plus another month for mailing.
There are some ways to get your passport faster, however.

Fatcamera | E+ | Getty Images

Passport applications are at an all-time high

More Americans planned trips abroad this year as their pandemic-era health fears waned and countries largely reopened their borders to visitors.
The State Department issued a record 22 million passports in fiscal 2022. It’s on track to break that record again in fiscal 2023, which ends Sept. 30, a spokesperson said.
Secretary of State Antony Blinken testified to Congress in March that the volume of passport applications has been “unprecedented.” Applications typically ebb and flow with the seasons, peaking from March to late summer, but “basically it’s full time now,” Blinken said.

The State Department also had to restaff positions that were reassigned or eliminated when passport demand cratered in 2020 at the beginning of the Covid-19 pandemic.

How to get your passport faster

Thomas Barwick | Digitalvision | Getty Images

The State Department’s six-month recommendation takes into account longer processing times, as well as padding for things such as mailing on both ends of the process.
Americans should review current processing times before making any definite or nonrefundable travel plans, a State Department spokesperson said.
A routine passport application currently takes 10 to 13 weeks to process, according to the State Department. A traditional passport — a passport book — costs $130. First-time applicants must pay an additional $35 acceptance fee.
Travelers can pay more for faster service. Expedited passport processing costs an extra $60. Expedited passports currently take seven to nine weeks.
For comparison, before the pandemic, it took two to three weeks for expedited passports and six to eight weeks for routine passport processing, the State Department said. It hopes to return to that cadence by year’s end.
The time estimates for expedited and routine passports haven’t changed since March 24.

Processing estimates don’t include mailing times. That may take an additional month — up to two weeks for applications to arrive at a passport agency or center, and another two weeks to receive a printed passport.
Travelers can buy expedited delivery of a new passport book by mail — for delivery in one to two days — for an extra $19.53.
They can also send an application more quickly by purchasing Priority Mail Express service from the United States Postal Service. The price varies depending on the area of the country, according to the State Department.
In some circumstances, travelers may be able to speed up the process further.
Life-or-Death Emergency Service is available for people with a qualified emergency who are traveling abroad in the next three business days. Urgent Travel Service is for those traveling abroad within 14 calendar days for those who haven’t yet applied for a passport, or five days for those who have already applied.
Whether you’ve opted for routine processing or some form of expedited help, you can check your application status online and sign up for email updates.

A soon-to-expire passport may still cost you

Jose A. Bernat Bacete | Moment | Getty Images

U.S. passports are generally valid for 10 years. They’re valid for five years if issued before age 16.
In some cases, Americans may not be allowed to travel even if their passport hasn’t yet expired. Some countries disallow entry if a passport’s expiration falls just a few months after a trip’s end date.
For example, the Schengen Area, which encompasses 27 countries in the European Union, requires a U.S. passport be valid for at least 90 days beyond your date of departure from your home country.
Many countries in the Asia-Pacific and Middle East require at least six months of validity for permission to enter. Other areas, such as Hong Kong and Macau, require one month.
“Even if you don’t have a trip on the books yet, but your passport is going to expire sometime in the first half of 2024, I’d absolutely just renew it now,” Sally French, a travel expert at NerdWallet, previously told CNBC.
You may also need to apply for a separate visa to enter certain nations, a process that requires additional time and planning. The State Department has information about passport and visa requirements for specific countries. More

A shopper for Instacart navigates through the aisles as she shops for a customer.
Cyrus McCrimmon | Denver Post | Getty Images

The Great IPO Reopening may be on hold: rising rates and lower stocks are an IPO killer. 
A combination of still-high valuations, a mediocre reception for the latest crop of IPOs and poor market conditions may force The Great IPO Reopening to be put on hold. 

Instacart on Thursday broke below its initial price of $30 before closing at $30.65. Arm Holdings yesterday broke below its initial price of $51 before closing at $52. Klaviyo hit $31.30 when it opened on Thursday, barely above its initial price of $30, before closing at almost $34. 
And what about the earlier crop of IPOs? Not so good. 
Restaurant chain Cava was the first IPO to get everyone excited, way back in June. It priced at $22, opened at $42, and went to $55 shortly after. It’s now at $30, still above its initial price the victim of massive selling the past two weeks. 
Kenvue, the Johnson & Johnson spinoff, went public in May at $22, traded in the high $20s for a couple months, and has now broken below its initial price of $22. 
Cosmetics firm Oddity Tech priced at $35 in July, opened around $49, and is now $28, well below its $32 initial price. 

Throw in the seasonal weakness and macroeconomic worries, particularly higher interest rates, and it’s likely many executives of IPO hopefuls who are looking to go public in October or November are chewing their fingernails.
Unfortunately, the alternatives are not very appealing. 
Bad news now outweighs the good 
The good news: deals are getting done. 
The bad news: these early companies are the strong ones, and their mediocre reception, even with tiny floats, does not bode well for the hundreds of tech IPO hopefuls, most of whom are not profitable and would still like to avoid taking the massive haircuts that would be necessary to successfully float them in the public markets. 
I noted earlier in the week that there was broad agreement that a successful IPO candidate needed to: 1) be profitable or on a very clear path to profitability, and 2) have a lower valuation. 
The bad news is, some of these tech unicorns will likely pass on taking a huge public haircut. I spoke earlier this week with Nizar Tarhuni, vice president of research at Pitchbook, who estimated there are roughly 800 or so tech unicorns that on average haven’t raised capital in more than 17 months. 
“They’re going to need to raise soon and the pricing dynamics don’t look great,” he told me. 
This leaves those unicorns with three choices: 1) raise additional capital in the private markets, 2) merge or be bought out; or 3) move into the public markets. 
Tarhuni noted that venture capital firms still have dry powder, but that they will be focusing on helping the companies with the highest probability of success. In this environment, that means companies that are already turning an operating profit.
What about the rest? Those that cannot or will not meet the criteria to successfully go public and cannot keep raising private capital will be forced to merge or be bought. That means lots of potential business for distressed M&A firms. 
Finally, a smaller percentage will take their medicine and move into the public markets (a few may take the SPAC route), but will have to accept a lower valuation. 
The macro outlook is the real IPO killer 
This month, the 10-year yield has gone to 4.48% from 4.10%, a rise of almost 40 basis points. (A basis point is 0.01%). The S&P 500 is down 2.7% in September. 
That combination — rapidly rising rates plus a down stock market — is the classic IPO killer. 
This is happening just as the next crop of IPO hopefuls is looking to go public in mid-October. 
Hopefully, by then interest rates will calm down, and stocks will get past the seasonal weakness of September and October. 
But if instead the 10-year yield is up another 40 basis points (near 5%), and the S&P 500 is down another 2.5%-5% or more, a lot of those IPO hopefuls are going to be postponing that decision.  More

A paramedic prepares doses of AstraZeneca vaccine for patients at a walk-in COVID-19 clinic inside a Buddhist temple in the Smithfield suburb of Sydney on August 4, 2021.
Saeed Khan | AFP | Getty Images

Check out the companies making headlines in early trading.
AstraZeneca — Shares of the British pharmaceutical company gained more than 2.7% in premarket trading after the company reported positive results for its drug Dato-DXd in a trial for treating a common type of breast cancer.

Wayfair — Shares gained more than 2% after Bernstein upgraded home merchandiser to market perform from underperform. The firm cited improving revenue growth and margin commentary.
Chinese e-commerce stocks  —  U.S. listed shares of Alibaba and PDD Holdings added nearly 4% in premarket trading, while JD.com rose 3.3%. Bloomberg reported that China is considering easing rules that cap foreign investment in domestic publicly traded companies.  
Seagen — Shares of the biotech firm rose nearly 4% in premarket trading after the company reported positive topline results from a clinical trial of treatment for patients with previously untreated bladder cancer. The results showed the treatment improved both overall survival and progression-free survival, compared with chemotherapy.
Deere — The tractor manufacturer fell around 1% after Canaccord Genuity downgraded shares to hold from buy, citing slowing growth for large agricultural equipment and normalizing dealer inventories.  
Arm Holdings — Shares of the chip designer added 1.3% during premarket trading. The stock jumped nearly 25% during its public trading debut but is now trading just above its $51 IPO price. Susquehanna initiated a neutral rating on the company in a Friday note.

Charter Communications – Shares gained about 2% after Wells Fargo upgraded Charter Communications to an overweight rating, saying that its mobile roll-to-pay offering and rural growth should contribute to accelerating EBITDA and free cash flows.
Ralph Lauren — The clothing brand’s shares ticked up nearly 1% after Raymond James initiated an overweight rating in a note Thursday evening. Analyst Rick Patel forecasts 20% upside potential from where shares closed on Thursday. 
Yeti — Shares fell about 0.4% premarket. Jefferies on Friday called Yeti a “best-in-class” favorite in drinkware, even as the market expands to new entrants.
— CNBC’s Pia Singh, Sarah Min, Samantha Subin, Tanaya Macheel, Brian Evans and Michelle Fox contributed reporting More

People flocked to a flagship Apple store in downtown Beijing on Friday morning to pick up the iPhone 15.
As of 10 a.m. Beijing time on Friday, iPhone 15 sales via JD’s Dada one-hour delivery app surged by 253% versus that of the iPhone 14 last year, Dada said.
Counterpoint Research’s most optimistic outlook for Apple in China predicts a 4% year-on-year decline in Apple shipments in the fourth quarter.

Hundreds of people lined up at a flagship Apple store in Beijing to pick up the new iPhone 15 when deliveries began on Friday.
CNBC | Evelyn Cheng

BEIJING — People flocked to a flagship Apple store in downtown Beijing on Friday morning to pick up the latest iPhone, despite market worries that nationalistic fervor would dampen the U.S. company’s sales in China.
Many also ordered the phone for delivery. As of 10 a.m. Beijing time on Friday, iPhone 15 sales via JD’s Dada one-hour delivery app surged by 253% versus that of the iPhone 14 last year, Dada said.

In the first 10 minutes after deliveries began at 8 a.m., the company said 25,000 phones were on their way to customers. Dada said this year it is working with 4,600 authorized Apple retailers in China — up from 500 in 2020.

Apple started delivering the iPhone 15 on Friday after pre-orders began on Sept. 15. This year’s release comes as the smartphone giant faces economic and political headwinds in its third-largest market.
About two weeks prior to Apple’s launch event this month, Chinese telecommunications giant Huawei quietly released its Mate 60 Pro in China with a reportedly 5G-capable chip from SMIC. That’s despite U.S. sanctions since 2019 which have almost wiped out Huawei’s smartphone business.

However, for people waiting in line at the Apple store, there was a general ambivalence about the phone brand.
One man, surnamed Zhao, said he’d wanted to buy Huawei’s new phone, but it sold out the moment he tried to buy it online. “Since I couldn’t get the Mate 60 I decided to get the new iPhone instead,” he said in Mandarin, translated by CNBC. “I don’t think there’s too much of a difference.”

I don’t feel it’s patriotic to get one brand or another. Don’t Huawei and Apple both pay taxes to China?

iPhone buyer in China

Zhao declined to share his first name due to the sensitivity of the matter. He was 10th in line at the Apple store in Sanlitun, Beijing, and said he arrived at 6:30 a.m. The first person in line, who also requested anonymity, said he’d arrived at 1 a.m.
Huawei’s phone might slow down in about two to three years, while Apple’s system might last a bit longer — maybe four to five years, according to Zhao. “But I’m going to change to a new phone in two to three years anyway, so it’s about the same to me.”
“I don’t feel it’s patriotic to get one brand or another. Don’t Huawei and Apple both pay taxes to China? Apple probably pays more,” he said. Zhao said he was planning to upgrade from his Huawei device to buy the iPhone 15 Pro Max, which has a list price of 9,999 yuan ($1,370).

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In early September, The Wall Street Journal reported, citing sources familiar with the matter, that central government employees were ordered not to bring iPhones to the office or use them for work. It was not clear how new or wide-reaching any such order was. Bloomberg, citing sources familiar with the situation, also reported a ban on iPhones at work could spread to other state-affiliated agencies.
China’s Ministry of Foreign Affairs said the country hadn’t issued bans on the purchase or use of Apple iPhones.

Based on the current pre-ordering results, we do see that Apple will still be resilient in its sales, though it faces challenges…

senior researcher at IDC

Apple did not immediately respond to a CNBC request for comment on the reports or its iPhone 15 sales in China.
Shares of Apple, the largest U.S. stock by market capitalization, are down by about 7% so far this month.

Strong iPhone 15 pre-sales

Apples’ iPhone 15 pre-sales in China pointed to robust demand. Earlier this week, CNBC checks of online shopping sites JD.com and Alibaba’s Tmall showed the more expensive iPhone 15 Pro and Pro Max were essentially sold out, with delivery wait times of about a month or more.
“Based on the current pre-ordering results, we do see that Apple will still be resilient in its sales, though it faces challenges like Huawei’s new products and the absence of the usual buzz on China’s social media,” said Will Wong, senior researcher at IDC, a market research firm.
“We are expecting a 5%-6% YoY growth for Apple’s overall shipments” in China in the second half of this year, he said. However, he noted pre-order results don’t necessarily represent the final sales number and that last year, China was still dealing with Covid-19.

Consumers living outside big cities such as Beijing, Shanghai and Hangzhou also wanted to buy the new iPhone. Orders from less developed cities surged by six times versus last year, according to Dada.

Apple’s China headwinds

China accounts for nearly 20% of Apple’s revenue. The company’s Greater China net sales rose by nearly 8% year-on-year to $15.76 billion in the second quarter, versus a 5.6% decline in the Americas market to $35.38 billion.
That’s despite economic data that’s pointed to a broader slowdown. China’s retail sales rose by 4.6% in August from a year ago, following 2.5% growth in July.
On top of slowing growth in China, the market is highly competitive.
Huawei is set to hold a product launch on Monday. Foldables, a category Apple has yet to enter, have also grown popular in China.

Read more about China from CNBC Pro

Counterpoint Research’s most optimistic outlook for Apple in China predicts a 4% year-on-year decline in Apple iPhone shipments in the fourth quarter.
The firm’s worst-case scenario predicts a 15% year-on-year decline.
“We must acknowledge the existence of initial supply constraints, particularly for the Pro series. This has manifested in longer delivery times for pre-orders over the past two days,” Tarun Pathak, research director at Counterpoint Technology Market Research, said in an email Wednesday.
“If these supply issues persist without a prompt resolution, it would necessitate us leaning towards the bearish case.”

Pathak noted that Huawei’s decline allowed the iPhone to “attract a massive number of consumers” in the $600-plus price category, and said iPhone 11 and iPhone 12 users would likely want to upgrade to the iPhone 15.
The firm said iPhone 15 pre-sales on JD.com exceeded 3 million units.
JD.com did not immediately respond to a CNBC request for comment.
However, Shanghai-based CINNO Research had a more pessimistic outlook as of Wednesday: A 22% drop in overall iPhone 15 unit sales versus that of the iPhone 14 in China.
That’s still about 10 million iPhone 15s, for an expected total of 45.5 million iPhones sold in China this year, a 2% decline from a year ago, CINNO Research said.
CINNO blamed this on the “economic downturn” and impact of Huawei’s new Mate 60 Pro. Indeed, there has been a lot of focus on Huawei’s latest device. At its height, the Chinese technology giant was Apple’s closest competitor in China’s high-end smartphone market. Any kind of serious bid from Huawei to regain a foothold in China could add pressure on China.
“There’s no doubt that the new Mate 60 series will be a challenge to the iPhone this year,” Counterpoint Research’s Pathak said.
— CNBC’s Eunice Yoon contributed to this report. More

Singapore-headquartered Silent Eight wants to be “IPO ready” by the end of 2025 with a view to listing on the tech-heavy Nasdaq in the U.S, its CEO Martin Markiewicz told CNBC.
Silent Eight uses artificial intelligence (AI) to help financial institutions fight money laundering and other financial crimes.
Markiewicz told CNBC that he forecasts revenue to grow more than three-and-a-half times in 2023 versus last year.

The co-founders of Silent Eight, from left to right: Michael Wilkowski, Julia Markiewicz and Martin Markiewicz.
Silent Eight

WARSAW — When it comes to financial crime, banks can often be “one decision away from a huge mess,” Martin Markiewicz, CEO of Silent Eight told CNBC.
That’s because the risk of fines and reputational damage is high if financial firms don’t do enough to stamp out crimes like money laundering and terrorist financing. But it takes huge amount of time and resources to investigate and prevent such activities.

Markiewicz’s company uses artificial intelligence (AI) to help financial institutions fight these issues in a bid to cut the amount of resources it takes to tackle crime, keeping banks in the good books of regulators.
“So our grand idea for a product … (is that) AI should be doing this job, not necessarily humans,” Markiewicz said in an interview on Thursday at a conference hosted by OTB Ventures. “So you should have a capacity of a million people and do millions of these investigations … without having this limitation of just like how big my team is.”
With Silent Eight’s revenue set to see threefold growth this year and hit profitability for the first time, Markiewicz wants to get his company in position to go public in the U.S.

How AI can catch criminals

Silent Eight’s software is based on generative AI, the same technology that underpins the viral ChatGPT chatbot. But it is not trained in the same way.
ChatGPT is trained on a so-called large language model, or LLM. This is a single set of huge amounts of data, allowing prompt ChatGPT and receive a response.

Silent Eight’s model is trained on several smaller models that are specific to a task. For example, one AI model looks at how names are translated across different languages. This could flag a person who is potentially opening accounts with different spellings of names across the world.
These smaller models combine to form Silent Eight’s software that some of the largest banks in the world, from Standard Chartered to HSBC, are using to fight financial crime.
Markiewicz said Silent Eight’s AI models were actually trained on the processes that human investigators were carrying out within financial institutions. In 2017, Standard Chartered became the first bank to start using the company’s software. But Silent Eight’s software required buy-in from Standard Chartered so the start-up could get access to the risk management data in the bank to build up its AI.
“That’s why our strategy was so risky,” Markiewicz said.
“So we just knew that we will have to start with some big financial institutions first, for the other ones to know that there is no risk and follow.”
As Silent Eight has onboarded more banks as customers, its AI has been able to get more advanced.
Markiewicz added that for financial institutions buying the software, it is “orders of magnitude” cheaper than paying all the humans that would be required to do the same process.
Silent Eight’s headquarters is in Singapore with offices in New York, London, and Warsaw, Poland.

IPO ahead

Markiewicz told CNBC that he forecasts revenue to grow more than three-and-a-half times in 2023 versus last year, but declined to disclose a figure. He added that Silent Eight will be profitable this year with more and more financial institutions coming on board.
HSBC, Standard Chartered and First Abu Dhabi Bank are among Silent Eight’s dozen or so customers.
The CEO also said the company is not planning to raise money following a $40 million funding round last year, that was led by TYH Ventures and welcomed HSBC Ventures, as well as existing investors which include OTB Ventures and Standard Chartered’s investment arm.
But he said Silent Eight is getting “IPO ready” by the end of 2025 with a view to listing on the tech-heavy Nasdaq in the U.S. However, this doesn’t mean Silent Eight will go public in 2025. Markiewicz said he wants the company to be in a good position to go public, which means reporting finances like a public company, for example.
“It’s an option that I want to have, not that there’s some obligation or some investor agreement that I have,” Markiewicz said. More