Earnin Raises $ 125 Million For No-Fee Payday Advance Platform
All Transform 2021 sessions are available on demand now. Look now.
To win, a startup that aims to help employees beat the ‘rigid paycheck’ system and instantly access their income, has raised $ 125 million in a round of Series C funding from the existing investor Andreessen Horowitz, alongside his recently announced financing. Cultural Leadership Fund, as well as Spark Capital, Matrix Partners, DST Global, March Capital Partners, Coatue Management and Ribbit Capital.
Founded in 2012 as Activehours, Earnin renamed last October to a name that “captured our purpose better,” company founder and CEO Ram Palaniappan said at the time. The name change came a month after Earnin raised his $ 39 million Series B round led by Andreessen Horowitz.
Earnin is one of several startups designed to help workers unlock their income without having to wait days or weeks for their next paycheck. Reports suggest that more than three-quarters of American workers live paycheck to paycheck, meaning millions of people lack a safety net to cover unforeseen expenses.
Traditional payday loan fees can be astronomical as lenders prey on people facing urgent expenses or those struggling to cover basic living expenses. That is why legislation imposing greater restrictions on the sector is underway, but that’s also why there has been a slight increase in the number of tech companies looking to close the gap between people’s paychecks and the bills they owe. .
A few months ago, a budgeting app called Even raised $ 40 million to show you how much money you can safely spend at any given time, and it also offers an “Instapay” service that allows staff to ” access income before their paycheck arrives. A company called PayActiv recently raised $ 20 million for a similar proposition.
There is a concerted push, it seems, to put predatory payday lenders out of business.
How Earnin Works
To access Earnin’s service, users must first connect their bank account and enter their employment information. The company has agreements with a number of payroll service providers to help manage payments. Workers can then decide how much of their pay they want at any given time – after completing a shift each day, for example. When payday arrives, Earnin automatically collects the prepaid amount from the user’s bank account.
There are limits in place. Most users can withdraw up to $ 100 for each pay period, although that can reach $ 500 once a worker has built sufficient confidence over time.
Earnin must also verify that workers performed the hours for which they were supposed to work. Its verification systems require contractors to submit photos of timesheets, while salaried staff can turn on GPS location tracking so Earnin can see where they were for a specific period of time.
All of this brings us to a question, however. What’s in it for Earnin? It must take a percentage of something somewhere along the line, right? Well not really. The company advertises itself as “100% community backed” and only makes money with tips a user chooses to give. In truth, that doesn’t really sound like a sustainable business model for a startup that has raised nearly $ 200 million in private funding, but right now that’s exactly how it makes money. And with $ 125 million fees in the bank, he plans to grow his team and business across the United States.
“We will continue to shine the spotlight on injustice,” said Palaniappan. “Our job doesn’t end with the payroll cycle. We will expand our team and develop new partnerships, but most importantly, continue to raise awareness of the financial challenges that face so many Americans. “
It’s worth noting that Earnin also offers a ‘pay it forward’ feature that prompts workers to leave a larger tip – when they can afford it – to cover someone who can’t. And this system is also used to support causes – for example, the company said the Earnin “community” helped other members in evacuation areas during the recent hurricane season by covering fuel costs.
Earnin has already gained ground, claiming workers from some 50,000 American employers, including Apple and Starbucks.
“It’s rare for a company to tackle social change while solving financial problems, but Earnin’s advocacy and unwavering drive to redefine the banking system are what sets them apart,” added Alex Rampel, General Partner. by Andreessen Horowitz.
VentureBeat’s mission is to be a digital public place for technical decision-makers to learn about transformative technology and conduct transactions. Our site provides essential information on data technologies and strategies to guide you in managing your organizations. We invite you to become a member of our community, to access:
- up-to-date information on the topics that interest you
- our newsletters
- Closed thought leader content and discounted access to our popular events, such as Transform 2021: Learn more
- networking features, and more
Become a member