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Inside Track

A look at what’s behind today's Minnesota business headlines.

Sezzle plans to go public in Australia

CEO Charlie Youakim of Sezzle, flanked by co-founders Killian Brackey and Paul Paradis. Photo: Tuesday, October 30, 2018 

Sezzle, the emerging Minneapolis fintech firm focused on a zero-interest, layaway-style payment tool for people without conventional credit, is raising capital.

Sezzle hopes to raise up to $30 million through an initial public offering on Australia’s ASX exchange in June or July. The company chose to file on the Aussie ASX exchange because it's less restrictive for early-stage companies and because competitors have launched from Melbourne.

Sezzle brass met this spring with Australian securities regulators and local investors.

“Now is the right time to go public in Australia because investor demand is very high and it gives us access to a large amount of capital at a very critical inflection point for our company,” said Sezzle Chief Revenue Officer and co-founder Paul Paradis.

Sezzle’s largest competitor, Afterpay, also is based in Melbourne.

“U.S. competitor Sezzle is set to become the latest buy-now-pay-later fintech to list on the ASX, with the Minneapolis-based startup inspired by the success of its local rivals,” according to an April article in the Australian Financial Review.

Sezzle with 78 employees, raised $5.6 million in a private stock offering in April, according to a U.S. Securities and Exchange filing.

The round was led by Chicago-based Continental Investors, an investment fund founded by former Morgan Stanley CEO Philip Purcell.

Sezzle previously raised more than $8 million to revamp its business model and raised $100 million in debt from Connecticut-based investor Bastion to help finance its expanding operation.

Sezzle started in 2016 as a developer of debit-card payment technology to help merchants save on costs of credit card transactions.

Sezzle switched course in 2017 as executives realized they had a better opportunity with a tool for online shoppers to make payments with no interest in four installments over two months. However, Sezzle and other competitors do charge late-payment fees.

Sezzle’s revenue flows from a merchant-transaction fee that’s about 3% more than that paid to credit card providers.

CEO Charlie Youakim and Paradis are the single-largest stockholders in Sezzle.

Nightware gets FDA "breakthrough designation" for studies of PTSD-related app

Minneapolis-based NightWare, developer of a “smartwatch therapeutic” for those with PTSD-driven traumatic nightmares, has received “breakthrough therapy designation” from the U.S. Food and Drug Administration for its development-stage application.

NightWare also is launching two clinical trials for its digital intervention, one of which is being conducted within Department of Veterans Affairs hospitals.

“We’re FDA regulated but because this is a low-risk treatment, digital-therapeutic, we are enrolling for a virtual clinical trial and anyone in the United States can enroll [at],” CEO Grady Hannah said Wednesday.

Hannah said Nightware has been running on several-hundred thousand in invested capital since 2017 and that the app was invented by a computer science graduate student in 2016.

 “[Breakthrough status] is a really nice thing...because we have, internally, had a lot of discussions around the reasons why we thought this was a significant and important advance in medical technology,” Dr. Daniel Karlin, chief medical officer at NightWare, told MobiHealthNews. “We’re engaged with the agency in trying to generate a body of evidence that doesn’t just show efficacy, but shows efficacy versus sham, versus placebo … and we’re doing it quickly because among veterans with PTSD, there’s a suicide per hour. We believe that this may reduce suicide, so we have an obligation to get this to folks as fast as we can.”

NightWare’s product is an app for the Apple watch that uses the device’s biometric sensors to monitor the sleeping wearer’s heart rate and movement, he said. Within just a night or two of sleep, the app’s machine learning component is trained to detect when the wearer is distressed by a nightmare. At this point the smartwatch vibrates to interrupt the wearer’s dreaming, but not enough to wake them up or disrupt their circadian sleep pattern.

“We’re … asking questions about nightmares and obviously we help to reduce nightmares, but the endpoint we’re actually looking at is sleep quality,” Karlin told MobiHealthNews.  “If we’re waking someone up too much, we’re not going to make them better. The goal is not just to reduce nightmare, but to improve sleep.”

NightWare has been conducting trials of the app with the VA, and will soon launch a new 240-participant blinded, randomized, placebo-controlled trial in Minnesota VA hospitals.

Should the therapy prove effective among this population, Karlin and Hannah noted that these hands-on trials with the VA will offer their company a clear initial path toward commercialization.

Hannah, 46, is a Silicon Valley veteran who grew up in St. Paul and went to Macalaster College.

Investment banker J.P. Morgan this year ranked NightWare one of the 20 most-promising health care tech firms found in "flyover country" between the east and west coasts.