Same, a tech startup that helps consumers budget their own time, has raised $ 40 million in new funding. Khosla Ventures led the Series B round, with Valar Ventures, Allen & Company, and Silicon Valley Bank also investing. This brings Even’s total investment to date to $ 52 million, and Forbes estimates that the Oakland, Calif., startup will reach $ 20 million in revenue in 2018.
Before graduating from college, Jon Schlossberg, co-founder and CEO of Even, believed he wanted to join the FBI as a forensic psychologist, trying to understand the motives of criminals. He scratched that plan when he saw how bureaucratic the organization was and ended up working at a product design agency and then at e-commerce retailer Bonobos. But Schlossberg says his boss at Bonobos finally told him, “You have to go. Whatever you do I’ll be the first to invest, but you’re boring. Schlossberg adds, “I don’t do well when I don’t have authority over a company’s results.”
Many Americans live paycheck to paycheck (60%, according to Even’s estimates) and Schlossberg wanted to fix that. He was inspired when he read a psychology paper on how poverty can cause people to make bad financial decisions. He founded Even in 2014 with Quinten Farmer, whom he met after reading a blog post Farmer has written on cryptocurrencies. They spent three years researching and building the Even app, which launched in December 2017.
The app has three main features. The first is budgeting: it ties into consumers’ bank accounts, extracts income and expenses, asks about upcoming bills, and estimates how much money they have left to spend. It’s harder than it looks: Half of Even’s 35-person team work in engineering, design, or research, and the startup uses machine learning to try to predict personal cash flow. A second feature is automatic savings, a service popularized by companies like Tassels and Figure.
The third feature does more to differentiate Even from the crowded category of personal finance apps: it offers a flexible compensation or “earned pay” option where workers can access their income sooner. Let’s say you have a two week pay cycle and your rent is due in six days. Because your wife recently became ill, she cannot help pay the rent this month. Using Even, employees can withdraw half of their earned wages – so if they have worked six days, they can withdraw the equivalent of three days of wages – instead of waiting until the end of the payroll cycle to access money.
To acquire new customers, Even’s strategy is to first approach employers and then offer the product to their employees as a subscription. In December 2017, Walmart announcement that it was making Even available to its 1.4 million American workers. Today, more than 200,000 Walmart employees use Even monthly, and approximately 100,000 of them use it daily.
But Even isn’t the only paid service to take advantage of this deal. PayActiv, a 75-person company in San Jose founded in 2013, also landed Walmart as a customer, partnering with Even to process flexible pay transactions. Most of the time, a Walmart employee takes a payday advance through Even’s app, it is processed by PayActiv.
Like Even, PayActiv also offers additional features like budgeting and savings, and hundreds of other customers are using these services. A recent study reported that employee turnover fell by 19% when workers used PayActiv. This makes PayActiv both a valuable partner and a formidable competitor for Even.
How much does Even cost? Employees pay $ 6 to $ 8 per month for access. On average, users withdraw $ 150 in flexible advances. If you use Even and only get value from the earned salary feature, you pay around 5% fee to access your salary sooner. So it is not cheap, but it is much better than alternatives like payday loans.
New York startup DailyPay, another competitor of Even, offers a pay-by-pay service, but it has a different business model. Instead of providing a suite of features as a subscription service, DailyPay only focuses on wages earned and fees per transaction. “It’s really hard to give pots and pans to hungry people,” said Jason Lee, CEO of DailyPay. “Hungry people need food.
DailyPay gives users access to 100% of their earned paycheck, and transaction fees ranging from $ 1.25 to $ 2.99 are charged each time a user takes a cash advance. The average cash advance is $ 66, and DailyPay users typically take cash advances once a week. Based in New Jersey SalaryFlex also offers paid services.
Schlossberg disapproves of the transaction-based business model because he believes it is pushing companies to encourage users to take more payday advances. “We don’t push access to earned wages down people’s throats,” he says. “We make less money when people take Instapay [earned-wage advances]because there is a cost associated with it. We want to have higher margins by making sure that people do not rely on this lead because they become healthier financially and they save money.
Lee, of course, disagrees. “DailyPay is an ATM for earned and unpaid wages,” he says. “Just like an ATM, a user accesses their money and pays transaction fees. When was the last time you used an ATM when you didn’t need the money? “
Schlossberg plans to double the bundled services approach, adding more and more functionality over time. “We want to add so much value to the subscription that by the time other companies realize it, they won’t be able to compete anymore,” he says. “Amazon did it with Amazon Prime. It all started with free two-day delivery. And now it’s music and movies… There is so much value in this subscription, no one can match it.