In recent years, there have been an increasing number of startups that tries to make credit more accessible to consumers.
Such a start-up, Petals, announced today that it has raised a $ 140 million Series D funding round.
The company’s new valuation is $ 800 million – more than three times what Petal was valued at when it announced a $ 55 million Series C round in September 2020, according to a source familiar with the transaction.
Founded in 2016, New York-based Petal offers two Visa credit card products aimed at underserved consumers with little or no credit history. The startup says its goal is to help people “build credit, not debt.” And it gives it credit based on cash flow rather than credit score. TomoCredit, which TechCrunch has also covered, has a similar model. (The cards are issued by WebBank, a member of FDIC).
Specifically, Petal offers “modern” Visa credit cards along with a mobile app designed to help people “responsibly” build credit and manage their finances.
Its latest increase follows a year in which Petal has tripled its user base and more than quadrupled its revenue from $ 11 million to almost $ 50 million. today there is nearly 300,000 Petal cardholders, which the company refers to as “members”. It has added 10,000 to 20,000 new members a month, according to Jason Gross, Petals co-founder and CEO. Petal members are largely younger, digitally resident consumers building credit for the first time, though the startup has also served many other customer segments, including those seeking to rebuild their credit, Gross noted.
Petal operated under stealth until the launch of its first product and announced its first financing in September 2017. The company says its technology analyzes banking history – assesses creditworthiness by taking into account a person’s income, consumption and savings to help people qualify even though they have never used credit before. It is dubbed the “CashScoring” process and says the approach makes credit available to a larger pool of people and “on terms tailored to each person’s unique financial situation.”
A majority of Petal members had a thin or no credit history when they first applied for a Petal card, and more than 40% of the new members approved for a Petal card in 2021 were first denied credit by a larger bank, the company said. The company claims that members who joined without a previous credit history have achieved an average credit score of 676 – a “prime” score that qualifies them for auto loans, mortgages “and other financial opportunities that were previously out of their reach.”
Petals CashScore became a separate product in 2021, when the company announced the launch of its first B2B business service, Prism data. The new B2B platform, designed to help other fintech startups and financial institutions use Petal’s CashScoring technology to grow their own businesses, went live in early 2021 and is described as a “sister company” by Gross . He went on to say that Prism is a “next-generation data intelligence platform that translates raw transaction data into action-oriented insights and scores,” making CashScore ™ technology “accessible to the wider market for the first time.”
Erin Allard, who previously held senior positions at Bloom Credit, Green Dot and The Bancorp, has been appointed general manager of the company and will head Prism Data. Petal now has over 160 employees, which has doubled its team over the past year.
“We are following in the footsteps of other fintech companies such as Lithic and Upstart, which have created significant new B2B platforms by producing the new technologies they originally created to solve their own problems,” said Gross TechCrunch.
He further added that Prism Data was founded on the belief that open banking and access to consumer licenses for transaction data in bank accounts will change the way consumer finance works.
“With this change, the future credit score will be a complete, real-time and holistic assessment of a consumer’s financial position, including their income, cash flows and assets, in addition to debt and repayment history,” Gross said. “Prism Data exists to provide financial providers with the tools they need to create next-generation products and opportunities.”
Tarsadia Investments led Petals Series D financing with the participation of Valar Ventures (which led its Series C), CUNA Mutual, Encore Bank, Volery Capital Partners, Gopher Asset Management, RiverPark Ventures, Afore Capital, Gaingels and a number of other new and existing investors. To date, Petal has raised more than $ 240 million in equity and more than $ 450 million in debt financing.
Rishi Reddy, head of venture and growth investment at Tarsadia, believes that the traditional credit system is broken and that consumers “have a desperate need for more modern and accessible financial products.”
“In addition to the exponential user growth, Petal has proven the strength of its technology, as evidenced by the excellent credit performance and rapid scaling of Prism,” Reddy said in a written statement. “We are excited to double Jason and the team as they are pioneers in a new way to accelerate financial inclusion.”
Gross said Petal is hiring for over 100 new roles by 2022, and we will use its capital “to add hundreds of thousands of new card members in the coming year.” The company also plans to add new features and benefits to its cards.