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DoNotPay raises $12 million as the business of helping consumers get refunds soars

June 23, 2020, 1:00 PM UTC

Stay-at-home orders in the wake of the coronavirus pandemic has left consumers with a flurry of unwanted gym memberships, concert tickets, and airline boarding passes. But getting any money back has been a headache.

Those customer service hassles and legal paperwork nightmares have translated into growth and additional funding for “robot lawyer” DoNotPay, says CEO and founder Joshua Browder, who started the company as a 19-year-old at Stanford University seeking a better way to fight parking tickets.

The startup, which charges $3 a month for a subscription, helps consumers parse through legalese to win refunds for canceled flights or to break up with their nearest sports club. At its core, DoNotPay uses bots to send emails and letters to companies or government bureaus on behalf of the consumer, allowing it to expand into data privacy, robocallers, and even medical bills. The company has seen its user base surge several times over, from 10,000 to 20,000 subscribers before the coronavirus to over 50,000, says Browder.

Seeing its growth, investors led by Coatue Management closed on a $12 million Series A round in a mere two weeks over Zoom. Other investors including Andreessen Horowitz, Founders Fund, Felicis Ventures, and Day One Ventures also participated, valuing the startup at about $80 million.

“I think everyone is struggling, especially some of these big companies are passing on their struggle to consumers. Airlines are not giving refunds to avoid bankruptcy,” he says. “But consumers need the money more than even the companies. Some of these categories, like gym cancellations, were up 30 times [during the pandemic].”

DoNotPay arbitrages the disconnect between what consumers know about their legal rights (often very little), and what companies tell them (sometimes even less). One example: Airline travelers complained early on about receiving vouchers instead of full refunds when the pandemic grounded flights indefinitely. But citing rules from the U.S. Department of Transportation that requires airlines to issue refunds on nonrefundable fares, even in the event of a delay, DoNotPay sends messages via bots directly to the airline calling for full repayments.

As some states prevented landlords from collecting late fees and from evicting tenants, DoNotPay has also jumped in, pressuring landlords with the relevant laws and executive orders to defer payments. In the case of gym memberships, sports clubs are somewhat notorious for making canceling difficult—and now some are facing bankruptcy. Most clubs require a printed letter of cancellation, which DoNotPay handles by sending one straight to the club’s legal department using bots to automate the process.

Backstop

Fallout from the coronavirus also led DoNotPay to add another feature to its app: credit and debit card chargebacks. 

That’s been especially relevant as most live events have been canceled, leading to reports of consumers struggling to get refunds from ticketing companies like Ticketmaster or StubHub. So DoNotPay sought a different path: While government laws may not protect consumers in this case, says Browder, debit and credit card company bylaws are far friendlier if a service is not delivered.

Inspired by those complaints, DoNotPay says it is now able to try to stop unwarranted charges by linking up with, say, a Visa or American Express if a company refuses to comply with initial requests through the customer service channels. As a final resort, DoNotPay will go to small-claims court, says Browder.

Its investors are betting DoNotPay’s growth is no temporary boost.

“In good times, the company was doing well fighting robocallers and canceling free trials,” says Matt Mazzeo, the partner at Coatue who led the DoNotPay investment, said in a statement. “Since March, they have been focused on refunds and customer service. There will always be consumer problems in the world for DoNotPay to solve.”  

Next steps

When asked about profitability, Browder said the company was previously at breakeven but reentered the research and development phase with the new round of funding. “Going forward,” he says, “we’re trying to release a product every three weeks, and we’re trying to go faster than we were going up until now.”

That includes a raft of other consumer-related legal products, including one that allows homeowners to renegotiate their property taxes, an issue particularly relevant as the coronavirus tanks home values in some areas.

“What we’ve discovered is all of these issues share the same infrastructure,” says Browder. “So it doesn’t really matter if it’s a matter of getting you out of a parking ticket or gym membership, as long as DoNotPay is good at generating the correct letter, it can solve the whole fleet of problems.”