Keith Rabois Leads $ 1.5 Million Funding Round for “Even”, an Interest-Free Mobile Alternative to Payday Loans – TechCrunch
A startup whose first product is a mobile money management app called Even, designed to provide low-income workers with interest-free credit to help them make ends meet between paychecks, has raised 1.5 million dollars in a fundraising round led by Keith Rabois of Khosla Ventures, with participation from other investors. The service is intended to give hourly and usually part-time workers an alternative to riskier payday loans and other loan products when debt builds up, making it even more difficult to recover from the curveballs. of life.
Other investors on the round included Homebrew, Kevin Systrom, Mike Krieger, Michelle Wilson (former general counsel for Amazon), David Tisch, Adam Rothenberg, Sam Lessin, Slow Ventures, Red Swan, Andrew Fine, Zach Brock, Joe Ziemer, Andrew Kortina (Venmo).
One of the worst injustices about the income inequality situation in the United States is how expensive it is to be poor. Setbacks that others would consider inconvenience can actually ruin your life, says author Linda Tirado, in her book “Hand to Mouth: Living in Bootstrap America,” which details what it’s like to live in the world. poverty as a low-wage worker. In one story, she explains how a minor inconvenience for most of us – getting her car towed – ultimately cost her both of her jobs and, soon after, her apartment.
Unfortunately, much of the technology for consumers emerging in Silicon Valley is focused on the needs of the better-off, where just about anything can now be ordered on demand, from groceries to black cars to servants or simply. cookies. There is certainly potential for growth in parts of this market, as Uber watchers might tell you, but emerging companies don’t always meet the needs of the masses.
According to the US Census Bureau, 45.3 million people lived in poverty in the United States in 2013. Almost half of Americans in major cities live in a state of financial insecurity, and many turn to health services. alternative – and often predatory – lending when times are tough.
Even also reports that there are now 51 million in America spending an average of $ 1,000 a year on things you “get virtually free from a bank.”
The big idea of the company? Offer consumers interest-free credit that helps them through bad weeks. The operation of the product is nothing like payday lenders, although they target the same market. Customers using Even will allow the company to manage their money for them. During good weeks it puts some money aside on your behalf, and then during bad weeks users can dip into credit to pay bills or meet other expenses.
The program, available to consumers via a mobile app, is still in the pilot test phase, which means that many details are still being worked out. However, the end result is that clients receive a regular salary of the same amount week to week, even though they work more hours in some weeks and less in other weeks.
The service works with a client’s own bank account and offers a number of features, including automatic budgeting, help with emergency spending, and even a ‘pause’ button when you need to turn off the $ 5 charge. / week while you recover from an ordeal. , like a job loss.
Instead of making it harder to pay off debt, the idea is to be forgiving – taking as little as a dollar a week, if need be, while still maintaining the customer relationship during bad times.
“It’s a bit like insurance,” says co-founder Jon Schlossberg. “You pay a fixed monthly fee for the coverage. “
It’s still expensive to be poor: Even that would cost $ 260 / year, but it’s cheaper than getting into trouble with payday lenders. It could also mean that bills and rent are paid on time, which could potentially break the cycle where a single bad break, or a week with reduced hours, can snowball into homelessness.
Citing a US government study, Schlossberg says he was blown away to learn that 77% of Americans said they would rather have more consistent income than earn more money. A self-proclaimed “privileged white man,” he realizes that things go easy and most don’t, he says.
“Just wanting money to be there every week is something I’ve never been through… it’s something that’s kind of hidden from Silicon Valley.” Jon schlossberg
“Just wanting the money to be there every week is something I’ve never experienced… it’s something that’s sort of hidden from Silicon Valley,” Schlossberg explains. “The problem is income volatility. What is increasingly happening, he explains, is that as the workforce evolves into a more flexible workforce, part-time workers find themselves with more flexible schedules. irregular. This problem was recently detailed in a New York Times profile of Starbucks barista Jannette Navarro, whose ever-fluctuating hours in the popular coffeehouse chain were due to Starbucks’ reliance on scheduling software. employees, designed to increase profits, not to make workers’ lives easier.
In addition to their $ 5-per-week consumer service, Even also sells to businesses and has at least one deal under discussion with a large business that you “visit weekly.” (Starbucks? ”I assumed.“ No comment. ”) With corporate customers, Even could be offered a benefit to the business – potentially even increasing the bottom line due to the high costs associated with employee turnover. part-time, associated with shift planning issues. . (U.S. companies have 69% turnover for part-time workers versus 23% for full-time workers, excluding seasonal work, Even reports.)
The company is based in Oakland in order to position itself strategically as close as possible to potential customers. In addition to product designer Schlossberg, alumnus of Bonobos, his founding team includes designer and engineer, Ryan Gomba, alumnus of Instagram, who worked on the iOS app; Cem Kent, formerly of Taykey; and Quinten Farmer, who previously tried to tackle the student loan problem through The Open Loans Project.
Schlossberg acknowledges that they are unsure whether the business model of charging $ 5 / week will work, as there are still a lot of unknowns the pilot is trying to figure out like the average credit usage or how much they will lose in the event of a loss. default of payment. credit. But he says the big companies they’ve spoken with so far are “extremely receptive to this product.”
“If we’re right, it’s a win for their business, it’s a win for the employees because their lives improve significantly, and it’s a win for us because it allows us to distribute on a market that is grossly underserved, ”says Schlossberg.
Even is expected to be launched publicly this year, although users can request an invite now.