On Tuesday, Slash announced it has closed a $41 million Series B round at a $370 million valuation led by Goodwater Capital. The startup will use the funding, which comes two years after it raised $19 million in Series A and seed funding, to expand its business providing specialized financial services as a neo-bank. The neo-bank model means offering a limited array of banking services without the overhead of physical branches or a full-blown bank license.. 

The founders came up with Slash after playing around with different startup ideas while Cardenas studied at Stanford and Bai at the University of Waterloo, and learning about the vibrant community of sneaker resellers. Many of these resellers were generating substantial revenue but were unable to access key bank products, like virtual credit cards, because of their age or unincorporated status. 

Many fintech startups with a similar offering—like Mercury, Brex, and Ramp—take a horizontal approach by selling to companies across different industries. Cardenas and Bai decided to instead operate with a vertical model by creating banking services tailored for sneaker resellers, with the idea of expanding to other sectors. 

The strategy paid off, with Slash’s revenue exploding and the startup raising seed and Series A rounds from top investors, with both rounds led by NEA. But when Kanye West began spouting anti-Semitic tirades, Adidas ended its partnership with the rapper, gutting one of sneaker resellers’ most lucrative lines of business: Yeezys. Slash’s revenue went down by 80% almost overnight. “We had raised $19 million and hired all these people, but the market that was the bedrock of our company evaporated,” Cardenas told Fortune. 

For the past 18 months, Slash reworked its existing infrastructure to target other sectors: namely, performance marketing agencies, crypto firms, and HVAC operators. The pivot worked, with the startup now processing around $300 million a month on its cards. “It’s pretty rare that you get to see a team and a company at the stage they were at facing such a big existential risk, work their way out of it, and just start to thrive,” said NEA partner Rick Yang, who backed Slash in all three of their funding rounds. 

Vertical banking

Cardenas argues that a vertical software approach to banking, where Slash can design services directly for specific sectors, makes more sense than trying to compete with fintech giants like Ramp and Mercury (which, in turn, are competing with American Express and Chase). Instead, by offering differentiated features, Slash can focus on certain client bases without spending massive amounts on customer acquisition.  

The first sector Slash targeted after the Kanye debacle was performance marketing firms, which run ads on behalf of e-commerce companies on platforms like Facebook and Google. Slash helped solve one of their biggest pain points: Allowing these firms to create distinct accounts within their banking system for each of their end customers to give visibility into key metrics, like how much prepayment is left. Now, according to Cardenas, more than 1% of all Facebook ads are bought with a Slash-issued card. 

Another vertical has been crypto-native businesses, where Slash enables companies to swap between fiat currency and crypto holdings, as well as manage all their various crypto holdings—an in-demand service, especially after many crypto firms were turned away by traditional banks under the Biden administration. With 35 employees, Slash plans to use the new funding to expand and tackle new sectors, with Cardenas eyeing e-commerce, online travel, and property managers as potential targets. 

“If we continue solving these niche, vertical, specific financial workflows for businesses across different industries,” Cardenas told Fortune, “Then we can sneakily become one of the largest commercial credit card issuers in the country.”

Slash’s raise is the latest round in the red-hot fintech sector, with peers like Plaid and Ramp announcing major funding in the past few months and late-stage unicorns like Chime and Circle preparing to go public. 

Until recently, many fintech startups were hampered by their ability to find agile partner banks, as well as the blow-up of the middleware banking-as-a-service startup Synapse, which connected fintechs and banks. Cardenas said that Slash’s growth has been aided in part by its relationship with Column, a chartered bank started by a Plaid cofounder designed to work with tech firms. “Of all the partner banks that we talked to, they’re the most thorough and they’re the ones that actually wanted to get to know our business the absolute best,” Cardenas told Fortune.