Dufu says one of the greatest pieces of advice she ever received was about her constant worrying. “My mentor said, ‘If you would spend less time worrying about choices you don’t have and actually creating those choices, you would be better off.’ You know that dynamic of worrying about moving to a new city when you haven’t even applied to the job? Take that energy and instead apply it to the job application or interview.”
Young people have long been a prime, if especially careful, target for financial services companies: find the right and responsible way to connect with them, and you could have a good customer for many years. Today, one of the startups building services specifically for those under 18 is announcing a round of growth funding, money that it plans to use to continue building out its business in the US and UK. GoHenry, which provides a pre-paid debit card and corresponding app to minors as young as 6 and no older than 18 that in turn can be controlled and topped up by parents, has raised $40 million.
Led by Edison Partners, the round also had participation from Gaia Capital Partners, Citi Ventures (the strategic investment arm of Citi Bank), and Muse Capital.
GoHenry is not disclosing its valuation with this round, its first institutional fundraise. Prior to this, the startup had raised about $30 million from friends and family, and via equity crowdfunding. (GoHenry has some 5,000 shareholders as a result, it says, half of which are GoHenry customers.)
As another mark of its rise, GoHenry has been seeing some strong growth.
The startup now has 1.2 million members — a figure that includes both parents and children — and it has doubled its customer base annually for the last six years. It does not disclose how many of those members are parents and how many are children, nor whether the UK or US, the two markets where it is currently active, is the stronger.
In its home market of the UK, GoHenry said that parents paid in £98 million in pocket money in 2019, with their children getting more than £2.2 million for completing tasks around the house. GoHenry’s young users then spent just under £100 million towards the UK economy. (Its cards are personalized with users’ names, eg “GoIngrid” would be on mine, which is a great touch that probably resonates especially well with younger customers.)
And at a time where some companies such as retailers have really been feeling the pinch from the drop in consumer spending this year because of Covid, GoHenry said that it turned profitable in March of this year.
Banking with a purpose
GoHenry was conceived not just as a banking service for young people, but a banking service with a purpose.
There has traditionally been a division between how young people interface with money: it’s more about what parents pay them in cash, or that they might earn from informal work, with maybe a savings account in the wings where money as presents gets deposited. Although it’s gotten easier in very recent times, it used to be almost impossible to get a bank account or any kind of “banking services” like payment cards as a minor.
Yet these days, people under the age of 18 are just as likely as their parents to have a smartphone — and possibly more likely to experiment with a wider variety of apps and services.
GoHenry, founded in 2012 by Louise Hill (who is now the COO), saw that smartphone usage as an opportunity to build a financial service for those younger consumers, one that could serve as an entry point for financial education, getting those young people used to being responsible with money, and understanding the relationship between work and earning it. Not a full-fledged bank account, GoHenry has provided some of the building blocks that mimic how the “adult” world of making money, saving it, and spending it all work.
“For too long, kids have been locked out of the digital economy and parents lacked the tools to help their children gain confidence with money and finances. GoHenry was the first to respond to these needs in 2012 when we launched a groundbreaking financial education app and prepaid debit card that truly empowered children. In 2020, we’ve achieved three key milestones: becoming profitable which many B2C fintechs seek, raising $40m during Covid, and partnering with world leading funds. All three will help us fuel our US expansion.” says Alex Zivoder, CEO, GoHenry, in a statement.
The service is based around a pre-paid debit card that has more controls for parents than an ordinary pre-paid card: they can top up the amount with an allowance, but they can also limit where the card is used and for what, and how much is can be spent in a given period.
Parents can also get reports on how the money on the card is used (or not as the case may be). There is no facility to go overdrawn and into the red on spending. The child’s app, meanwhile, not only gives the young person a way of checking the balance on the card, but also lets the parents set up tasks that the kids can do and check off to “earn” more money.
All of this comes at a price: after a one-month free trial, members pay $3.99 per month for the basic service, with different charges for other transactions, such as when the card is used abroad, or if a parent tops up the account with a debit card instead of a direct transfer from a bank account.
GoHenry is not alone in building banking apps for those under 18. In fact, in recent times there’s been a big rush of launches and funding for startups that have set out to do precisely that. They include teen banking app Step, which most recently raised $50 million earlier this month; Kard, which launched last year in France; Revolut, the challenger bank that recently launched “Revolut Junior”; PayPal’s Venmo, which prototyped a payment card for teenagers earlier this year; and Current, which started out also targeting teens but now has widened that out to any groups that are currently underserved by other banks. To that end, Current raised $131 million a few weeks ago.
GoHenry has some key differences in comparison with those. In addition to this not being a full banking app, perhaps even more notable is that GoHenry doesn’t seem to have any strategy at the moment for holding on to younger customers after they turn 18.
“Right now we are 100% focused on helping kids and teens aged 6-18 years old gain confidence in managing money and learning about finances,” said a spokesperson. In an industry — retail banking — that suffers from a lot of churn as customers migrate quickly from one service to another, it’s interesting (and a little refreshing, since these are kids we are talking about) to see a company that might build strong relationships but not try to leverage that for more business down the line.
“GoHenry is catering to millions of parents who are looking to raise smart, financially literate children but are currently underserved by existing solutions,” said Chris Sugden, managing partner, Edison Partners. “We’re thrilled to partner with Alex and the GoHenry management team on this next milestone in their growth journey and look forward to realizing their ambitions to improve the financial fitness of kids across the globe.” Sugden is joining the board with this round, along with Dawn Zier, a veteran CEO and marketing expert.
Image Credits: Getty Images
Despite several efforts from carriers, telecom regulators, mobile operating system developers, smartphone makers, and a global pandemic, spam calls continued to pester and scam people around the globe this year — and they only got worse.
Users worldwide received 31.3 billion spam calls between January and October this year, up from 26 billion during the same period last year, and 17.7 billion the year prior, according to Stockholm-headquartered firm Truecaller.
The firm, best known for its caller ID app, estimated that an average American received 28.4 spam calls a month this year, up from 18.2 last year. As a result, And with 49.9 spam calls per user a month, up from an already alarming 45.6 figure last year, Brazil remained the worst impacted nation to spam calls, the firm said in its yearly report on the subject.
The coronavirus pandemic, however, lowered the volume of spam calls users had to field in several markets, including India, which topped Truecaller’s chart for the worst nation affected three years ago. The nation, the biggest market of Truecaller, dropped to the 9th position on the chart this year with 16.8 monthly spam calls per user, down from 25.6 last year.
“The COVID-19 pandemic has directly and indirectly affected not only global economies and societies, but spammer behaviour. As the virus spread exponentially worldwide, spam calls started to decrease around March,” said Truecaller, which analyzed over 145 billion anonymous calls to reach this conclusion.
“Spam reached its lowest point in April, when strict curfews and lock downs were implemented worldwide. The overall volume of calls also dipped during this period. However, from this point, reports of scammers taking advantage of the uncertainty around the pandemic emerged. In May, spam calls started to pick up again and have been increasing on average by 9.7% per month. October, with a record high in terms of spam calls, was 22.4% higher than the pre-lockdown period.”
Some other trends from the report:
- Just like us, spammers took time off from work on weekends.
- Last year, the top 10 countries were dominated by the South American region. This year Chile, Peru and Colombia have seen a decrease in spam calls.
- A number of European countries — Hungary, Poland, Spain, UK, Ukraine, Germany, Romania, Greece and Belgium — unfortunately made it to the list.
- The biggest increase of spam calls came from Europe and the US — Hungary saw the biggest jump (1132%), followed by Germany (685%), Belgium (557%) and Romania (395%).
- Indonesia (18.3), India (16.8), Vietnam (14.7) and Russia (14.3) were the most affected countries in Asia.
- An escalation of scam calls and robocalls around the world expanded their share within the most common spam categories. Scammers taking advantage of the pandemic was a reason for the increase of scam calls.
In addition to bringing annoyance, these calls are also being used to scam people out of money. As many as 56 million Americans reported having lost money to phone scams this year, and an estimated $19.7 billion was lost to such calls, according to an earlier Truecaller report.
It’s also difficult to avoid these calls in some markets because trusted institutions — telecom operators and banks, to name two — themselves engage in placing many of these calls, the report found. About 9% of all spam calls that people received in the U.S. were dialled by telecom networks, for instance, the report said.
Image Credits: Kimberly White (opens in a new window)/ Getty Images
Lemonade is launching its renters insurance in France. This is the company’s third European launch after the Netherlands and Germany. Originally from the U.S., Lemonade is now a public company with a current market capitalization close to $4 billion.
Lemonade has optimized its insurance product in different ways. First, it’s supposed to be easier to sign up with Lemonade compared with a legacy insurance company. Second, the company wants to bring back trust by taking a flat fee for its operations.
Premiums are then pooled together and used to pay back claims. If there’s money left at the end of the year, customers can choose to donate to nonprofits. Lemonade is also a certified B-Corp.
But it’s worth noting that other insurance companies try to position themselves as socially responsible, such as MAIF. Insurtech companies aren’t reinventing the wheel on this front.
Third, Lemonade tries to pay you back as quickly as possible after you file a claim.
Chances are you don’t think that much about renters insurance. But it’s a lucrative industry. For instance, home insurance is a legal requirement in France. Due to tenant turnover, there are many opportunities to jump in and convince customers to switch to Lemonade when people move to a new place.
Let’s see how the fight between Lemonade and Luko plays out in France.
Most people know Wish as a site that sells throwaway doodads from China, but in anticipation of its impending IPO, the ten-year-old, San Francisco-based company has begun portraying itself as a kind of Amazon for the rest of us.
Judging by what we’ve read and heard from sources in recent months, Wish wants to paint itself as a patriotic alternative to the trillion-dollar juggernaut and is positioning itself as the better option for the estimated 60% of families in the U.S. without enough liquid savings to get through three months of expenses. Such cost-conscious customers can’t afford Amazon Prime and are — at least in Wish’s telling — willing to wait an extra week or three for a product if it means paying considerably less for it.
We’ll know soon enough if public market investors buy the pitch. Wish registered plans this morning to sell 46 million shares at between $22 an $24 per share in an offering that’s expected to take place next week. The current range would value Wish at up to $14 billion, up from the $11.2 billion valuation it was last assigned by its private investors.
Wish has a lot of reasons to feel optimistic about its story heading into the offering. For one thing, people are clearly still discovering its business. According to Sensor Tower, Wish’s mobile shopping app was downloaded 9 million times last month, compared with the 6 million downloads that Amazon’s shopping app saw and the 2 million downloads seen by Walmart. In 2019, across all types of apps, Wish was the 16th most downloaded app.
There’s a lot to discover once potential customers do check out Wish. According to the company’s prospectus, its more than 100 million monthly active users across more than 100 countries are now shopping from 500,000 merchants that are selling approximately 150 million items on the platform.
While many of these are the nonessential tchotchkes that Wish has long been identified with, from tattoo kits to pet nail trimmers, a growing percentage of the mix also includes essential goods like paper towels and disinfectants — the kinds of items that keep customers coming back in reliable fashion.
It’s a bit of an evolution for the company, whose early focus was almost exclusively on cheap items that didn’t weigh much. First, Wish has always worked with unbranded merchants, mostly in China, that don’t have marketing costs built into the products and like the platform because it enables them to reach new customers for free without cannibalizing their existing market.
But Wish — which takes 15% of each transaction — had also been relying heavily on a partnership with the USPS and China called ePacket that long enabled it to send items overseas to the U.S. for $1 to $2 as long as the items weren’t unusually large or heavy. Yet that changed on July 1, with a new USPS pricing structure that now requires companies like Wish to pay more to ship their goods or else move to more costly commercial networks.
Unsurprisingly, Wish had back-up plans. One of these has involved packing together multiple orders in China based on customers’ locations, then sending them in bulk to the U.S. to a designated location where they can be picked up.
Relatedly, dating back to early 2019, Wish began partnering with what are now tens of thousands of small businesses in the U.S. and Europe that stock its products, trading their storage space for access to Wish’s customers along with a small financial bonus for every in-store pickup. (Wish will pay store owners even more if they can deliver orders directly to customers’ homes.) According to Forbes, these partnerships provided Wish with an “inexpensive distribution network practically overnight.”
It happens to fit neatly into a larger anti-Amazon narrative wherein the Goliath (Amazon), unable to disrupt convenience stores, is now trying to supplant them with its own branded convenience shops, while Wish may be helping them prosper.
It is also a very asset-lite model compared with Amazon. Wish doesn’t hold inventory; it also doesn’t have to buy or maintain a fleet of planes or trucks or warehouses.
None of these developments completely counter the challenges that unprofitable Wish is still facing, beginning with its scale, which remains tiny compared with the towering giants it faces.
While the company is showing moderate revenue growth, its filings also show steady losses owing in part to its marketing spend. (In 2019, Wish reported revenue of $1.9 billion, up 10% year over year, but it saw a net loss of $136 million.)
The company has been making inroads into new geographies around the world, but it is still heavily dependent on China-based merchants. To address this, it has reportedly begun partnering increasingly with more U.S.- and Europe-based retailers, including those with overstocked or returned items that big retailers are looking to offload, along with those looking to sell refurbished electronics. “We’d love to diversify,” Szulczewski told Forbes this summer.
Wish has always been plagued by quality control issues, too, which it has yet to fully resolve. In fact, there are YouTube channels — some very funny — focused entirely around what Wish products look like in reality versus how they are presented to shoppers online. (See below.)
Largely, it’s a cultural issue. For example, at a 2016 event hosted by this editor, cofounder and CEO Peter Szulczewski talked about having to educate Chinese merchants about American customers’ expectations.
“It’s true that consumer expectations in China are very different,” Szulczewski explained at the time. “Like, if you order a red sweater and you get a blue one, [shoppers are] like, ‘Eh, next time.’ So we have a lot of merchants that have only sold to Chinese consumers and we have to educate them that it’s not okay to ship a blue sweater because you don’t have any red sweaters in stock.”
Wish has been working to close the gap, as well as to tackle outright fraud on the platform. Just one of many moves has involved hiring a former community manager at Facebook as its own director of community engagement, a task that reportedly involves organizing Wish users to weed out bad apples. But Wish has surely lost plenty of shoppers burned by their experience along the way.
In the meantime, plenty of public market investors will be watching and waiting. So will the venture capitalists who have provided the company with $2.1 billion in funding over the years, including Formation 8, Third Point Ventures, GGV Capital, Raptor Group, Legend Capital, IDG Capital, DST Global, 8VC, 137 Ventures and Vika Ventures.
For her part, Anna Palmer of Boston-based Flybridge Capital Partners — who does not have a stake in Wish but who is focused very much on so-called commerce 3.0 — thinks that Wish “serves a different use case and a different customer need” than the Amazon shopper.
“If you look at the strong retail performance of the off-price and discount market — think of retailers like Dollar General and Dollar Tree — it bodes well for the continued growth of Wish, especially since the discount market has been a tough one to bring online because of the additional logistics costs involved.”
Outfund, the revenue-based finance startup that wants to help online businesses fund growth without giving away equity, has raised £37 million in a “late seed” investment. A mixture of debt and equity, the round is led by Fuel Ventures, alongside TMT Investment.
Outfund says it will use the funds to offer larger financing to more businesses, and to invest in new finance products and grow the team. It is also committing to lending £100 million to e-commerce and subscription-based businesses in the next 12 months.
Co-founder and CEO Daniel Lipinski, who previously founded and sold logistics platform ParcelBright, says existing financing solutions for online businesses are far from optimum. “[There’s] organic growth which is slow and cumbersome; bank loans which force directors to give personal guarantees and put their home on the line; or venture capital, where you have to give up control of the business and dilute your shareholding. Sadly, none of these are aligned with company goals of revenue generation and equity retention,” he argues.
To remedy this, Outfund has set out to create a fairer — and better aligned — way for online businesses to grow fast. Based solely on revenues and performance, and targeting businesses that take online payments, Outfund offers between £10,000 and £2 million of funding. Companies must have a minimum of £10,000 monthly turnover and to have been trading for at least six months. Outfund then charges a share of revenue, starting from 5 percent and factoring in projected payback time, although the fee is fixed even if it takes longer to pay back the loan.
To assess risk before deploying funding, the fintech’s algorithm pulls information from multiple data sources to determine how a company is performing. “Outfund uses live data as the backbone of our lending decisions, making us non-biased and fast,” adds the Outfund CEO. “This allows us to provide funding of up to £2 million within 24 hours. And, as we use unfiltered data sources, this helps reduce risk on our side meaning we can provide the cheapest possible fees over the longest possible repayment period”.
On direct competitors, Lipinski cites Canada’s Clearbanc, which recently launched in the U.K. “They are based in Canada, [so] it’s a real challenge for them to provide the speed and responsiveness that a U.K.-based company like Outfund can provide,” he claims. Another relatively new local player is Uncapped.
“Outfund is very different in the market in that we provide one fixed fee from 5% regardless of how you spend the funds. For example, other providers in the space charge an increased fee if you use the funding for stock as opposed to marketing. We are focused on technology to make the best lending decisions and means we can advance the cheapest fixed rates on the market regardless of how you spend it”.