[ad_1]
Building credit is difficult when it’s even harder to get a loan.
While it’s not impossible to get a loan or credit card, they are often offered to people who can’t afford to pay the high interest rates.
One Austin-based startup is helping people build — or get — credit without taking on debt. And that beginning, StellarFiIt has closed a $15 million Series A round of funding to help advance that goal.
Lamine Zarad founded another fintech company in 2020 after selling a fintech company he started. Launched StellarFi in 2021. For ZenBusiness in 2020. Facing his own struggles with getting credit as an immigrant, Zarad was looking for a way to help others access credit.
People who started StellarFi should be able to see benefits in their credit scores just by paying their daily bills like rent and bills on time. It does this by charging a subscription fee — $4.99 or $9.99 — to manage members’ bills and recurring payments like rent, subscriptions and utilities. The aim is not only to consolidate payments but also to help members make timely payments. StellarFi then reports those hourly payments directly to the four major credit bureaus – Experian, Equifax, TransUnion and Innovis.
The company does not require a credit check or deposit and does not charge any interest. It says members see an average increase of 26 points in the first month. At the time of enrollment, users’ average credit score was 580.
As a public benefit corporation, StellarFi’s mission is to help “financially disadvantaged” communities with support to build good credit. With the new capital, the company intends to build a marketplace to connect members with lenders.
Since launching the offering in late June, the company’s growth has exceeded expectations, Zarad said. StellarFi closed the year with more than $2 million in annual recurring revenue (ARR) – almost double its target.
“Within 134 days, we hit $1 million in ARR,” he told TechCrunch. “I’ve built unicorns before, but I’ve never seen progress like this.”
While Zarad did not disclose the company’s new valuation after the latest raise, he did share that it is a “big round”. In total, StellarFi has raised $22.2 million in funding. Repeat backer Acrew Capital led the Series A, which included Trust Ventures, ATX Venture Partners, Dream Ventures, Interplay, Accomplice Ventures, Vera Equity, FJ Labs, Fiat Ventures, Gaingels, Kelmhurst, Oyster Funds, Hilltop Ventures, Permit Ventures. Kindergarten Ventures, J2 Capital, Social Finance and Venture Capital.
“Every single seed investor participated in this round,” Zarad said. “And we’ve added new ones. Everyone has power.
StellarFi was about to close a $5 million venture loan from Sirmacher Bank for a runway extension — a deal that fell through after the facility was forced to close earlier this month. He still plans to secure debt from another institution.
Last September, Experian – perhaps in response to the growing number of fintechs to address this problem – launched a new product called Experian Boost, which, in its own words, allows people to “get credit” to pay their rent on time. According to Zarad, Experian Boost allows users to link their bank accounts through Finicity, which then automatically identifies recurring bills like utilities and rent and outputs the data to their internal models to show alternative payment features. This model only exists at Experian, Zarad pointed out, and TransUnion, Equifax or Innovis won’t have access to it.
“More importantly, lenders don’t use it in credit decisions,” he added. In contrast, as mentioned above, StellarFi acts as a bill manager to help members continue to make on-time payments, and reports payments to all four credit bureaus, affecting all credit scoring models.
“Unlike Boost, StellarFi does not report payment history from linked bank accounts. Instead, StellarFi pays the bills and members pay us back, Zarad told TechCrunch. “Thus, we are able to create a credit relationship that we report to all the bureaus that generate the utility reports used by lenders. In other words, our members are covered, no matter what their lender reports on their credit report.
The organization Zarad said he has added affiliate partners and is investing in SEO and is seeing rapid growth even this year.
“We have signed contracts with Neobanks and other fintechs are sending us their clients,” he said. We are still putting lenders and financial institutions to shame.
StellarFi has put a lot of eggs in the affiliate basket, Zarad says, because he believes it creates trust and conversions are “very high” and “buying people online and on social media.”
The company intends to build more features and is still developing a mobile application.
“Our next goal is to completely conquer the mobile experience,” he said. “Once this is done, members will not only be able to get better credit but also access to capital. We want to help them get the money through a partner.
Interestingly, so far, Zarad says StellarFi has had “zero defaults” but has seen a lot of fraud. But we’ve built sophisticated algorithms to catch them head-on and identify fraudsters.
Acrew Capital’s John Gardner said the company initially invested in StellarFi at the seed stage because it had strong faith in Zarad and the team’s ability to “build on their success building another fintech business.”
“Stellar’s approach is exciting because it meets consumers where they are – online payments. We believe this form factor is very easy for consumers to understand and relate to, helping them see a quick and sustainable boost to their credit score in a short period of time. Stellar also reports to a wide range of FICO models, which means the score benefits apply to loans like autos or mortgages,” he wrote in an email. “When it came time for Serie A, it became clear that the Stellar team could execute their plan with focus. They improved credit scores for members within 30 days, raised over $1MM within a few months of ARR launch, and developed unique distribution partnerships to effectively reach the right audience. For consumer fintech, we are very excited about these growth features, especially when there is a clear line of sight regarding profitability.
Want more fintech news in your inbox? sign up over here.
Got a news tip or insider information about a topic we’ve covered? We want to hear from you. You can reach me at maryann@techcrunch.com. Or you can drop a note at tips@techcrunch.com. I am happy to honor identity requests.
[ad_2]
Source link