Should you invest in Dave stock? You might be saying to yourself, “Dave, who?”
For those who don’t follow the ins and outs of the fintech industry, Dave is a Los Angeles-based banking app created by Jason Wilk, Paras Chitrakar, and John Wolanin. Launched in 2016, CNBC included it on its 2020 CNBC Disruptor 50 list.
Dave is intended to make your financial life easier while also saving you money. In September, Norwest Venture Partners dumped $50 million into the company. As a result of the Series B capital raise, DAVE was valued at $1.2 billion.
One of the original investors is Mark Cuban, the Shark Tank panelist. He, along with some other investors, sank $3 million into Dave in April 2017. They’ve been along for the ride ever since.
Dave is Cuban’s third investment with Wilk. The owner of the Dallas Mavericks also invested $300,000 with Wilk’s first venture, AllScreen, in 2011. Four years later, AllScreen was acquired by Zealot Networks for $85 million. Cuban’s take in the neighborhood of $17 million. Not a bad return on investment. No wonder the billionaire’s been back two more times.
The appeal of Dave is that most young people are tired of the old school ways of the banking industry.
As a freelancer operating in Canada, I can relate to the nickel-and-diming that the big Canadian banks’ practice. God help you if you want to mobile deposit a check drawn on an American bank account. Can’t be done. You have to go to the branch, which isn’t so easy during the novel coronavirus.
You would think a cross-border bank like Toronto-Dominion Bank (NYSE:TD) would be technologically advanced to make that happen. Nope.
Originally started to help reduce overdraft fees, the Dave app’s gone on to add several different features, including Side Hustle, which helps users working in the gig economy find additional work. According to CNBC, something like 600,000 of Dave’s 5.5 million users have found work through Side Hustle, generating $51 million in revenue for those freelancers.
Not a million years could I see my bank trying to help me find more writing work. So, kudos to Wilk for thinking bigger picture.
Should You Invest in Dave Stock?
It’s a private company, so unless you have a friend who knows a friend who knows Mark Cuban, you’re probably not going to get a written invitation from Dave to invest your hard-earned dollars.
That said, there will come a time, possibly sooner than you think, when Dave goes public through a traditional IPO or combines with one of those newfangled special purpose acquisition companies (SPACs) to enter the public markets through a back-door merger.
Ok, so what do you get for your theoretical investment in Dave?
For starters, the Dave app’s original features, such as the overdraft protection, Side Hustle, etc., have more than seven million users. In May, the company rolled out Dave Banking, its digital bank account. It’s already got 100,000 users, with 1 million users expected by the end of the year.
“One million is a very conservative number for us to hit,” Wilk said recently in an interview. “We have 2 million of our core users signed up for Dave Banking, and every time we send a push notification to invite someone off that list, 1 out of every 2 people end up signing up for an account.”
The Bottom Line
According to Forbes, Dave had 2019 revenue of $90 million. This means it’s currently valued at approximately 13 times sales. When you consider that Brazilian payments company, StoneCo (NASDAQ:STNE), trades at 27 times sales, the idea of paying half that to bet on a proven entrepreneurial winner seems like an intriguing possibility.
I’ll want to do a lot more research on Dave as it gets closer to listing on the public markets, but from where I sit, any financial app that makes the legacy banks work harder is worthy of serious consideration.
And, of course, it doesn’t hurt that Wilk has already proven he can deliver profits for hard-to-impress shareholders like Mark Cuban.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
