Workers get cash advances for $3 a week.
Even, an Oakland, Calif.-based financial services startup, has raised $9 million in funding led by Valar Ventures, the investment firm backed by Peter Thiel. Prior investors Khosla Ventures, Qualcomm Ventures, Camp One Ventures, BoxGroup, David Tisch, Keith Rabois, and Homebrew Ventures invested, alongside new investors Henry Kravis, Allen & Company and Bob Jain.
The company has a mission of changing a financial services system that punishes people with lower incomes while rewarding the rich with access to the best services. It’s a massive problem to go after, so CEO Jon Schlossberg decided to pick off what he saw as the simplest problem first: the issue of uneven paychecks for hourly workers.
Because the United States’ 77 million hourly workers don’t have consistent work schedules, their paychecks can vary by hundreds of dollars each pay period. Many of them they don’t have much financial cushion to sustain a slow week, so the lack of consistency often leaves them short on rent and other bills. That shortfall has fueled the $100 billion industry of payday loans, which are expensive and usually put the borrower into a cycle of never-ending debt.
Even’s solution, which is currently available via iOS and Android apps, is a bit like an anti-payday loan. Once users plug their bank accounts into Even’s system, the site analyzes their paychecks and “evens” them out, automatically lending them money on weeks they are short, and paying itself back on good weeks.
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“This effectively gives people a salary,” Schlossberg says. So far, Even’s average advance is $120 and it gets repaid within 1.2 paychecks. The company also offers savings plans.
Rather than charging customers interest on the loans, Even charges a flat $3 weekly fee. Schlossberg believes large Fortune 500 employers of hourly workers will pay the fee, offering the service as a benefit. Even will help with turnover, he says.
To do that, Even must prove that its services will help make workers more financially stable, which will lead to lower turnover. “We have to prove through our data to employers that this will solve the problem,” Schlossberg says.
So far, Even has used its venture funding to finance the microloans, but eventually it will add debt facilities, Schlossberg says.
The new venture capital funding will go toward building a second, more robust version of Even’s product, which Schlossberg would not discuss in detail. The nine-person company will also hire a vice president of marketing and a vice president of credit this year.
Even’s ambitions go beyond offering an alternative to payday loans. “We’re trying to change the culture of the financial industry by creating a new type of financial institution that puts people first,” Schlossberg says.