Written by Christime Hall; Illustration by Li-Anne Dias
Saving and building credit are two of the most difficult challenges for a majority of Americans. In fact, statistics show that 69 percent of Americans have less than $1,000 in savings, while 61 percent ran out of emergency savings by the end of last year.
“I grew up in Central Texas in a poor family and know the struggles of being low income,” said SeedFi COO and co-founder Eric Burton, said in an interview. “Credit is a necessity of life, but I put myself through school and got trapped in a cycle of debt.”
San Francisco-based SeedFi is creating a platform aimed at those Americans who don’t have adequate resources to build credit, save money, access funds and plan for the future.
The financial health company announced a $65 million raise Wednesday that included $15 million Series A funding and $50 million in debt offer two products: Credit Builder Plan, where customers can save as little as $10 from every paycheck, which is reported to the credit bureaus to build their credit history, and generate $500 in savings in as little as six months, and the Borrow & Grow Plan provides immediate access to funds while also helping customers build savings and credit.
Andreessen Horowitz led the Series A and was joined by Flourish Ventures, Core Innovation Capital and Quiet Capital. SeedFi has now raised a total of $69 million in funding since it was founded in 2019, Jim McGinley, co-founder and CEO of SeedFi, told Crunchbase News.
McGinley and Burton both have backgrounds in the credit card industry, as well as mission-driven startups. For Burton, SeedFi’s mission is particularly personal after losing out on a banking job for having poor credit.
What both of them saw while working — McGinley at Capital One, and later with Burton at personal loan company Oportun, was that even the most well-intentioned person can get into a cycle of debt.
“If they have an emergency need, the reality is the need isn’t the problem, it is what if they don’t have savings to address it,” Burton added. “The insight we’ve learned is to combine savings with credit to address the immediate need for credit in a way that will leave them better off and down the path to a better financial future.”
SeedFi intends to use the funding to grow its customer base as it brings its products to market nationally with bank partners. In addition the company will build out its product suite, McGinley said.
Building savings, credit history over time
The company offers two products today: Credit Builder Plan, where customers can save as little as $10 from every paycheck, which is reported to the credit bureaus to build their credit history, and generate $500 in savings in as little as six months. The Borrow & Grow Plan provides immediate access to funds while also helping customers build savings and credit.
Since launching the platform in 2019, SeedFi tested its products on thousands of customers and helped them build more than $500,000 in savings through 2020, McGinley said.
In addition, after six months of on-time payments, SeedFi customers with no credit history were able to establish a credit score of 600, while customers with existing credit scores and less than three credit accounts boosted their scores by 45 points.
“We are able to show that we have had a positive impact, as well as help people avoid evictions and save more emergencies,” McGinley said. “Our next step is to build out a suite of products, expand nationally and grow.”
Meanwhile, as part of the investment, Andreessen Horowitz General Partner Angela Strange will join the SeedFi board of directors and Flourish Ventures Managing Partner Emmalyn Shaw will join as a board observer.
Flourish likes to invest in disruptions in fintech, as well as those that make an impact, and Shaw sees SeedFi uniquely positioned from a technology perspective to provide credit building and lending products that build in savings.
“SeedFi is targeting the 70 percent of people living paycheck-to-paycheck,” Shaw said in an interview. “Building credit is an Achilles heel for folks, so to give them lending products and a saving element will help them break the cycle of poverty by building in good financial habits.”