Curql has built a collective of credit unions that are pooling their capital for maximum strategic benefit, says managing partner Craig Ibsen.
More than 160 US credit unions came together to raise a $360m startup investment fund last week — the largest of its kind. While individual credit unions might be too small to compete with big banks on technology investments, this collective fund, known as Curql, is designed to give them access to startup breakthroughs.
Curql invests in startups with technologies of interest to credit unions — in areas such as AI, cybersecurity and stablecoins — and any member can partner with portfolio companies after the investment is made. It puts in effort to connect portfolio companies and credit union members, setting up one-to-one meetings, events and even negotiating discounts on portfolio company products.
It is also an appealing proposition for startups, says Craig Ibsen, Curql’s managing partner. Credit unions, which offer banking services on a non-profit model, make up roughly 10% of the US banking market. With so many in the collective, Curql offers a huge number of potential customers and strategic partners for emerging fintech companies to tap.
“If I’m talking to a fintech startup and they’ve got a solution that’s focused on the US banking sector and they haven’t been thinking about focusing on the credit union market, they’re giving up 10% of the addressable market,” says Ibsen. “And no fintech today would willingly give up 10% of the market.”
A democratic set-up
The deal scouting and due diligence are handled by Next Level Ventures, a VC firm headed by Ibsen, but the decision to invest is taken by an investment committee and the overall organisation is run by representatives chosen by the credit unions themselves. It’s a democratic structure, and with more than 160 of them onboard, it has to be.
“We have five representatives on the investment committee, and they make the decisions,” Ibsen explains. “But above that, we have a governing board that’s called the Curql Collective, and that also has a board of directors, and they are elected by all of the credit unions that are on the Collective. So, the credit unions themselves elect the board and that board chooses the investment committee that I report to.”
Why stablecoins could be a key technology for credit unions
Ibsen says Curql’s strategy targets anything in fintech that can support one of its members, and that means almost everything except neobanks. Its portfolio includes startups in cybersecurity (DefenseStorm) and voice authentication (Illuma Labs) as well as AI – last year it backed a $45m series B round for Posh, creator of a conversational AI platform for the banking industry, and Ibsen says the team is looking at several agentic AI startups right now.
One key area going forward is stablecoins. Although Curql doesn’t have any stablecoin startups in its portfolio yet, the technology was the focal area of its last bi-monthly call, when some 200 credit union representatives showed up to hear about their potential.
“I think stablecoins as a payment mechanism have the ability to disrupt the current payment modalities and compress interchange, and that’s an area banks and credit unions are very interested in and are participating,” Ibsen (left) says.
Stablecoins could, among other things, disrupt the fees that merchants have to pass on to payment services providers like Visa and MasterCard as well as banks and credit unions when they sell something. That is amplified when they sell across borders, converting one currency to another.
Several large companies, including Apple, Amazon and Walmart, are exploring the creation of their own stablecoins. If they can convince customers to use them as a form of payment, they can then sidestep the interchange fees they pay out and reduce income for Curql’s members.
But the technology also has plus points. Credit unions could end up issuing their own stablecoins or make money converting stablecoins back into fiat currencies like dollars. The GENIUS Act, passed in the US last month, is the country’s first attempt to set down a regulatory framework for stablecoins, and it provides another opportunity.
“The GENIUS Act mandates that a stablecoin issuer has to back a stablecoin one to one with a US dollar,” says Ibsen. “Credit unions and banks have a particular interest in monitoring that and potentially providing a custody role for those assets that are backing those stablecoins.”
One issue facing credit unions in particular is deposits, Ibsen explains. The National Credit Union Administration is a US government-backed organisation that insures deposits at credit unions, but only up to $250,000. So, if you take larger deposits, a significant portion might remain uninsured. One of Curql’s startups, ModernFi, is tackling that by building a reciprocal network allowing credit unions to help each other with that burden.
“[ModernFi] enables a credit union to take part of that deposit and share it with other depository institutions, other credit unions, thereby spreading the risk,” he says. “So, if you were to bring a million-dollar deposit to a credit union, they would insure $250,000 within their four walls and the other $750,000 with three other institutions, thereby spreading the risk and providing that federal insurance.”
Next on the horizon: growing the team and growing financing options for startups
Curql’s first fund was some 40% oversubscribed when it closed in 2022, raising $254m from 69 credit unions. Fund II has also been closed amidst some fervent activity, with Curql increasing the size of its collective from about 130 to 160 since the start of May. All of them contributed capital, from a base commitment of $2m up to $20m at the high end.
Ibsen says most of the capital from Fund I has been put to work, though there is still “a good chunk” of money left over for follow-on investments, and Curql is also looking at earlier-stage startups. It formed an accelerator with venture firm Gener8tor in 2023, a 22-week programme where participants get $100,000 each.
The most recent cohort of companies in the accelerator included a system that enables credit unions to offer earned wage access, a startup creating AI-powered scam defence software and a compliance collaboration platform for credit unions.
“They may not have a presence or a customer that is a credit union today, and so we’re going to help those companies that have a reason to support the credit union industry, connect them and potentially help them find their first one, two or three credit union [customers],” Ibsen says.
Curql isn’t sitting around following the close of Fund II, he adds. There are plenty of tasks on the table, but the first step for the firm will be to expand its investment team.
“We anticipate that our family of funds is going to continue to grow as well,” he says. “We’re constantly thinking about how we can continue to support our growing family of credit unions in the US with other products and services. And with our governing body, we’re thinking about other fund strategies that will complement that.”
Those additional strategies may include providing startups with venture debt. Some emerging businesses prefer to take on debt rather than surrendering equity, and when you have so many partners whose primary function is to lend, there’s plenty of capacity to provide that function.
“Obviously, credit unions are very familiar with the lending market, and we see a growing need for venture debt in the US as companies look to continue to expand,” Ibsen says. “They’re looking for capital solutions that are potentially non-dilutive, they’re increasingly [turning] to venture debt. Is that an area we would like to participate in? We’re taking a keen look at that.”
