New York-based Clair, which enables pay-based loans, has raised $25 million in a venture round led by the Big Apple’s Thrive Capital, a recent investor in ChatGPT developer OpenAI. It also secured $150 million from Pathward, an FDIC-insured national bank, to fund its zero-fee pay advances.
Other investors in the current round included California’s Upfront Ventures and New York-based Kairos HQ. The startup has so far raised $44.6 million in four years since its inception. Prior investors include California’s Mischief and Walkabout Ventures, Angus Davies, Paul Appelbaum and Michael Vaughn.
“Front-line workers are astonishingly underserved, as big banks don’t see them as profit drivers and aren’t building the solutions they need,” said Clair co-founder and CEO Nico Simko, a Harvard-educated Swiss with M&A experience at J.P. Morgan.
“This lack of support is unfair when half of Americans live paycheck-to-paycheck and don’t have $500 in savings for an emergency,” he added.
Immigrant-led Startup
Simko, an Argentinian-Swiss immigrant who held hourly jobs in the United States, joined hands with Alex Kostecki and Erich Nussbaumer, in co-founding Clair in 2019. Kostecki, a former Deloitte executive, serves as the company’s chief revenue officer, while Nussbaumer, who is today a leadership coach, is a board member.
“We share common values with Clair, and our partnership has exponential power to increase financial access for more Americans regardless of the economic cycle,” said Pathward President Anthony Sharett.
“Clair’s product has enabled both workers and employers to adapt in a uniquely challenging labor and economic environment,” said Kareem Zaki, partner at Thrive Capital and Clair board member. “In addition to their exponential growth this past year, we’ve been pleased to see that Clair has consistently prioritized compliance and delivering tangible value to their customers.”
A Larger Vision
Clair is taking an innovative approach to what are simple payday loans. It is eliminating the industry’s traditional financial risks by linking directly with companies’ HR systems. This helps it readily evaluate creditworthiness of its customers. It also expects to sneak ahead of rivals via a partnership with a full-service bank such as Pathward. Still, the more interesting thing, perhaps, might be its focus on building a broader financial relationship with its customers, instead of optimizing margins on the payday loans. This is a strategy that has worked for Chime, another fintech firm.
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With this objective, Clair has already launched spending and savings accounts, a debit card, a virtual in-app debit card and financial planning tools. “Our business model is to give earned wage access free for people and then sign them up automatically for a digital bank, and then we make money the same way Chime makes money, which is interchange fees,” Simko told TechCrunch in 2021.
Clair has lent to over 50,000 salaried employees, and it targets a massive market of 76 million workers earning hourly pay. Its loans are available at over 10,000 employers. EverView and Viking Ranges, along with franchisees of DoubleTree by Hilton, Sheraton Hotels & Resorts, and GNC are among its users.
With $7.3 billion raised in eight funds, Thrive Capital has made over 300 portfolio investments and exited over 60. Its recent investments include Lone Palm Labs, Parabola, Medivis and Charm Industrial.
