Ashton Kutcher’s Sound Ventures co-led the company’s initial financing with Utah Texans.
Why bother? When you can go straight to the actual source of utility spending: your personal paycheck, your bank account Brandon RodmanWeave, the founder of the consumer communications platform, left before the company went public last year to launch a new company aimed at allowing consumers to deduct everyday expenses directly from their paychecks.
Privy connects you with partners looking for a cheaper way to reach customers with cashback deals and ease of payment. To further spice up the partnership, Privy holds the consumer “risk” and pays them on behalf of its partners (and plans to take out a line of credit in the future to pay these fees). In case of lead generation, partners pay a fixed fee to Previ and a certain percentage is sent to the user as a cashback benefit.
The easiest way to understand initiation is to think about incentives. Consumers have an incentive to pay more directly for regular transactions with cashback benefits. Partners have an incentive to acquire customers at a lower cost, and Previ has an incentive to bet on the stickiness of people who are willing to pay regularly for services to opt for automatic payments.
The startup doesn’t charge any of the interest rates, annual fees or late fees often associated with credit cards, and Rodman said that won’t change. However, if a user loses their job and payment, Previ’s backup plan is to withdraw money from their bank account. Users will be prompted to link their bank accounts when they log in if the pre-determined purchase amount exceeds their check. Because it is withdrawn from the user’s bank account and not paid to them, the user does not get the cashback benefits. However, the user is encouraged to reconnect their payroll service when they find their next job so that the cashback incentives continue.
Some think that owning a paycheck is the key to fintech success, as it creates a bond where the consumer makes every transaction through the winning platform. There are startups racing to get closer to consumer revenue, including Claire, which offers free salary growth for HR and Pinwheel, a payroll API platform.
Right now, Privy is not working directly with employers to show it as a line item in the employee’s payroll. Instead, how an employee puts a percentage of their paycheck directly into a savings or 401(k) account, Priv is an option where the employee allocates a fixed portion of their paycheck each time they contribute.
Becoming a body is a delicate process. Previ’s biggest challenge is humanity.
“Really, trust is 1 thing,” he said. “People are hooking up a portion of their paycheck, not their full paycheck. So they have to trust that we’re doing everything we can to take care of that. Privy doesn’t have the opportunity to get the full paycheck, just the allotted amount, but the automatic commitment is still for someone who’s not sure about their ability to stay in a pre-seed startup.” It can feel overwhelming.
And it has a little-known competitor called credit cards. Previ’s target users are tech workers between the ages of 25 and 40, a demographic known to hold credit card points. Money back to win the competition to get more points?
“I don’t think we’ll ever replace him,” Rodman said. “We want to be a legitimate alternative — we think about people’s wallets and how they’re segmented now; sometimes they use Visa, because they go to Costco all the time… but they have Venmo, and they have a cash account, and they’ve got Amex… we want to be in that same conversation.”
For now, investors are fueling the idea. Privy raised $6.5 million late last year from Ashton Kutcher’s Sound Ventures, as well as the founders of Qualtrics and DVV. Other investors include Weave co-founder Jared Rodman; Tyler Hoge, SVP of Product at DV; OATV Managing Director Bryce Roberts; and Derek Anderson, who started Startup Grind and Bevy. Rodman and his wife put $2 million of their own capital into the startup.
Privy is opening its waiting list and is gradually ushering people into its alpha test with a concierge-like service. The goal is to be in beta before the end of the year.
