Clair Raises $4.5 Million to Disrupt Payday Loans
Over the past several months, there’s seemingly been an uptick in venture capital funding for FinTechs who help ease financial pain points that the current pandemic has exacerbated. Take, for example, the need for those who are working to access their money quickly in order to catch up on their bills. That’s what the startup Clair aims to help with — and now the company has announced that it’s raised $4.5 million. The seed round was led by Upfront Ventures, with Founder Collective, Walkabout Ventures, former Venmo COO Michael Vaughan, and Seamless founder Paul Appelbaum also participating.
Clair offers instant pay access solutions for gig economy apps as well as traditional workforce companies. By allowing workers to tap their earnings right away, the hope is that these employees, freelancers, and contractors will be able to avoid pricey payday loans or other options when they need funds.
Clair also believes that its services can help with bringing new workers aboard and retain them. Citing a 2019 report, the startup notes that 65% of skilled gig workers said they’d consider moving to a different platform if it meant they’d be paid faster. Additionally, 85% stated that they’d likely work more if they received their pay more quickly.
Commenting on the need for Clair’s services, the Fintech’s CEO and co-founder Nico Simko remarked, “We are thrilled to be one of the only sources of free capital for America’s hourly and gig workers. We believe that everybody should be able to freely access money they’ve already earned.” Simko added, “There are more payday lenders than McDonald’s in the US that charge on average more than 300% annual interest on loans. So we have one simple vision: it’s time for change.” Meanwhile, Upfront Ventures partner (and now Clair board member) Aditi Maliwal said of the company, “We are excited to back a social-impact driven FinTech with a sound business model. Many FinTechs that we’ve seen often struggle with profitability because their customer acquisition costs are so high. We think Clair’s strategy of creating a product embedded in other services that workers already use today is one that will set them apart in the long run.”
As it turns out, Clair isn’t alone in thinking that workers should be paid sooner. For example, DailyPay allows employees to access their earned funds for a $1.99 per transfer fee (although this fee had been waived in recent months due to the pandemic). Currently, some of the brands utilizing DailyPay include Burger King, Sprinkles, Vera Bradley, Berkshire Hathaway, Westgate Resorts, and more.
With the financial challenges that employees and freelancers are facing, it’s easy to see how Clair’s platform could be helpful. Moreover, with the gig economy continuing to grow, there’s definitely opportunity for the service to grow. Therefore, while Clair may only be at the seed round now, don’t be surprised if larger funding rounds follow closely behind.