Getting your working salary on a monthly basis (not weekly or bi-weekly) has become a more prevalent trend as the price of salary management has increased and organizations’ cash flow has declined. This 30-day shift may be a boost for employers, but not for employees, who may need to access these wages more immediately and find it difficult to expand their income from one position to another. month to month.
Today, a London-based startup raised significant funding for a service aimed at filling this gap. Wagestream – which works with employers to allow employees to take a percentage of their income during the month for a small, lump sum – today said it has closed a Series A of £ 40million ($ 51million ).
Funding comes in the form of equity and debt, with Balderton and Northzone leading the equity side accounting for £ 15million of the increase, and Shawbrook Savings Bank investing £ 25million on the debt side to fund employee withdrawals. . Other investors in the cycle include QED, the Rowntree Foundation, the London Co-investment Fund (LCIF) and Village Global, a social venture capital firm backed by Bill Gates and Jeff Bezos, among others.
The company is not disclosing its valuation, but that brings the total raised to just under £ 45million, and “the valuation is significantly higher now,” according to CEO and co-founder Peter Briffett.
The list of investors is proving useful to Wagestream as it grows. I asked if Bezos’ company Amazon was working with Wagestream. Briffett confirmed that he is not a current customer, “but we are talking to them”. However, a number of other customers have already signed up including the Rentokil PLC pest control service, Camden Town Brewery, Slug & Lettuce pub chain and Carluccio restaurant chain, as well as the NHS and Hackney. Council – covering some 120,000 workers. in all.
Amazon is an indicative example of one of the great opportunities for the company, which is now active in the UK but aims to expand in Europe and the rest of the world.
Although it is one of the largest employers in the tech world, where it can typically pay six-figure salaries in managerial, operational and technical positions, it is also growing its business by being one of the most large employers of hourly workers in its warehouses, larger logistics operations and similar areas. It is employees like these who could be seen as the first wave of employees that Wagestream initially targets, some of whom may earn just enough or a little more than enough to get by (at best), and risk losing. fall victim to what Briffett has called the “cycle of wage poverty”.
Getting paid monthly accounts for around 85% of all paychecks in the UK today, and the proportion is similar in Europe and is also becoming increasingly common in the US, Briffett – who also worked at Microsoft, LivingSocial (when he was still backed by Amazon, and where he started the operation in the UK and led it as CEO for years) and YPlan (acquired by Time Out) – said in an interview. You might ask: Why don’t workers just budget better? But it doesn’t always work that way, especially the longer the gap between the paychecks and if, for example, you have an unexpected expense to cover.
Because of this pervasiveness and the acuteness of the problem (if you have already earned roughly enough, or have been a child in a family whose parents did, you can understand the situation very well), Wagestream isn’t the first time we’ve seen a financial services startup emerge to target this demographic.
However, other attempts have been shockingly disastrous: recall ‘payday loan’ provider Wonga, backed by an illustrious set of investors but ultimately blamed and hit hard by regulators and the public for attacking people in need. funds with loans whose terms were not transparent enough and which led borrowers to get into heavy debt.
Wonga herself has paid a heavy price for her practices, and the company is now bankrupt (and apparently still unable to re-enforce its creditors, according to the latest report in March).
It was the Wonga disaster – and a WSJ article on alternatives to payday loans – that Briffett said got him thinking about the possibilities and building Wagestream. (Ironically note: if you use PitchBook like I do, Wonga is one of the contributors to Wagestream, which Briffett assures me is a mistake.)
Wagestream is positioned as a “social impact” startup to target a very real problem that has an impact on the financial inclusion of a part of the population.
“We fell in love with the strong product-market fit of salary. We very rarely hear such universal positive reviews from anyone who has tried a product, ”said Rob Moffat, partner at Balderton, in a statement. “Businesses were active in supporting the financial health of their users, but this has slowly eroded, as month-end paid employees are effectively subsidizing their employers 29 days a month. salary begins to restore the right balance.
Wagestream works by making agreements with employers to offer its services to its employees, who download an app and link Wagestream with their salary and bank details. Companies are able to set limits on what percentage of their salary employees can withdraw each month and how often the service can be used. Typically, the limit is around 40% of a monthly salary, Briffett said.
Employees can then get the money instantly by paying a fee of £ 1.75 per withdrawal. “We fund all withdrawals in advance,” Briffett said. “We are the first company to combine workforce management and financial data. “
Eventually, the plan will be to expand to Europe as well as the United States, where there are already other services trying to solve the same problem, such as Instant Financial and DailyPay. There are also a number of areas the business could expand into, such as working with companies that employ contract workers and providing additional financial services to workers already using the app to withdraw funds.
More expansion, Briffett said, will inevitably mean more funding as well, especially on the debt side.
For now, the emergence of Wagestream is an encouraging sign of how VCs aren’t just interested in digging into their coffers to bet on tech companies they believe will be successful. They also want to hunt those whose returns may be solid, but who are ultimately bolstered by the longer term effect they might have on the larger consumer landscape, the way they interface with fintech. and pursue their own progress in the world.