By Eliza Haverstock
Pictured above: Brigit co-founders Hamel Kothari (left, CTO) and Zuben Mathews (right, CEO).
Nearly two decades before Zuben Mathews co-founded a consumer fintech app, he was studying economics at the University of Chicago as a recent immigrant to the U.S. Despite earning a scholarship and regular allowances from his mother in India, Mathews found himself without a credit score, living paycheck-to-paycheck. He says he spent $1,000 on overdraft fees alone that first year.
“I just couldn’t figure out what was going on,” he says. “The amount of times I went downstairs to the vending machine and got Snickers for dinner is something I’ll never forget.”
This experience helped inform Mathews’ creation of Brigit in 2017, a startup he runs as CEO alongside co-founder and CTO Hamel Kothari, a 26-year-old Berkley grad recently featured on Forbes’ 30 Under 30 2021: Big Money Startups list.
Brigit, a nearly 40-person operation based in New York City, raised a $35 million Series A round in early 2020, previously unannounced until now. Lightspeed Venture Partners led the round, with participation from lead seed investor DCM, along with Nyca, Canaan, DN Capital, CRV, Core, Shasta, Hummingbird, Abstract, Brooklyn Bridge Ventures, Secocha, Ashton Kutcher’s Sound Ventures and Flourish Ventures. NBA star Kevin Durant, who invests through his firm Thirty-Five Ventures, also backed Brigit in the round—and Durant is slated to take a more active role promoting the startup once the basketball season ends.
Anticipating and covering overdraft fees, typically running about $35 per instance for traditional banks, sticks out as one of Brigit’s key offerings. Once a user adds their bank credentials to the app, Brigit’s algorithm digests up to two years worth of personal financial data to build a holistic overview of that individual. Brigit can underwrite these individuals and, using cash flow history, predict if they’re going to run out of money in their bank account. If necessary, Brigit can automatically transfer up to $250 into a user’s account before an overdraw charge hits, thereby saving them an average of $514 in overdraft fees per year. The startup also extends emergency loans upon request that can be delivered in under 90 seconds.
Generally, individuals need to earn about $1,500 per month to be eligible for the full $250 cash advance—which is interest-free, setting Brigit apart from notorious “payday loan” services. The app’s algorithm monitors spending habits to manage whether the company can lend to a user long term, or change the amount they can borrow if necessary.
Overdraft fees are a big business: In 2019, banks raked in more than $11 billion through the fees, according to the Center for Responsible Lending. The organization also found that just 9% of account holders pay 84% of the fees each year—and this group tends to carry balances of less than $350.
Brigit is not alone in attempting to help consumers through this challenge. Fintech startup Chime operates a “SpotMe” program, allowing members to overdraw up to $100 on their debit cards without incurring a fee (though you can leave a tip), while the app Dave can cover overdraft fees up to $75 for qualified users with a $1 monthly subscription (tip optional). Unlike these competitors, though, Brigit’s focus is more targeted, and it has no aspirations to become a digital bank. That’s intentional, per the CEO, to help users gain their financial footing without overloading them with features or accounts.
“I can’t understand budgeting if I’m in financial stress, and one of the main causes of financial stress would be clearly not having money when I’m deserving of it,” Mathews says.
Beyond overdraft coverage and emergency loans, the app offers budgeting tools, identity theft insurance, information on how to sign up for side hustles and other financial wellness tips. For example, Brigit can send cash-strapped users a script to help them negotiate with cell phone plan representatives for lower rates, plus the phone number they need to call. For T-Mobile customers, Brigit found that its prompt saved them an average of $19.85 per month after a 21-minute call.
Brigit’s full set of products, including the loan options, runs $10 per month—and company’s revenue is presently based 100% in this subscription model. Brigit serves more than 1.5 million active users today, about 250,000 of which were paying subscribers as of late September. Expected revenue for 2020 was $30 million at that point.
Lightspeed partner Jeremy Liew, also on Brigit’s board
Engagement and retention figures, especially in the context of a finance app, caught Lightspeed’s attention early on, according to Jeremy Liew, a partner at the firm who joined Brigit’s board. (Liew also made early bets on Snapchat, Giphy and Affirm—a pay-later startup which doubled its valuation to $24 billion in an IPO pop on January 13).
“One of the ways we measure that has been looking at the daily active user (DAU) and monthly active user (MAU) ratio, and that was actually super high in the context of a finance app, where oftentimes people might look at an app once a month,” Liew says. “We were seeing DAU to MAU ratios at 20% to 25%, which is comparable to social media apps… that did suggest that Brigit was building a new habit with its users.”