- Fintech startup Empower has raised $150 million in a new round of funding led by Blisce.
- Founded by a former partner of Sequoia Capital, Empower aims to provide fair access to credit.
- In six years, it has reached almost a million subscribers with a team of less than 60 people.
Warren Hogarth once wrote investment checks for high-flying startups like SunRun and Nubank. Now, with his startup Empower, he’s trying to give millions of Americans fair access to credit when money is tight.
In early 2016, Hogarth left Sequoia after eight years to start his own company, which aims to solve access to credit for people with bad credit. During the pandemic, fintech startup launched Cash Advance, a product that lends people cash when they need it, with no interest. After growing to 1 million subscribers, Empower, led by Blisce, has now raised $150 million in equity and debt financing to expand its offering, the company exclusively told Insider.
The biggest contributors to the round have a social slant like their new portfolio company. Blisce, a growth-stage public company, is a certified B Corp, codifying its vow to promote social responsibility. And Community Investment Management, which provided the debt financing, has a mandate to work with lenders who provide credit to underserved communities. Previous investors including Initialized Capital, Sequoia Capital and Icon Ventures also joined the round.
The new funding increases Empower’s post-money rating from its Series A round in early 2020, though Hogarth declined to share it. The round brings Empower’s total funding to over $175 million.
Empower wants to make people living paycheck to paycheck feel safe. It currently offers cash advances up to $250 and deposits the money into someone’s bank account or Empower debit card. The company does not check credit scores that evaluate a person’s history of borrowing and repaying money. Instead, Empower bases an individual’s eligibility on their recent transactions and income — a better indicator of their ability to repay, Hogarth said.
“Traditional banks won’t sign these people because they’ve made a mistake in the past,” Hogarth said.
He added: “We’re giving almost everyone a chance to show they can pay back, and if you can pay back you get access to more.”
But Empower’s business model wasn’t always so clear. The startup started out as a simple budgeting app, but changed course in 2019 when Hogarth saw a much larger consumer need: fair access to credit. Last year, more than 100 million adult Americans had low or no credit, making it difficult to buy a home or build wealth.
“Tracking money and things like that are helpful and nice,” Hogarth said, “but first you have to release that fear: ‘I have to put food on the table and put gas in the car before I think about budgeting.'”
Empower is now testing a product, Thrive, that increases the line of credit up to $1,000 with each on-time payment. It charges 0% interest if customers pay their balance before their next paycheck — another differentiator, Hogarth said. Traditional credit card issuers set payment dates based on an arbitrary calendar cycle.
With Cash Advance’s growth, Empower says it’s on track to advance consumers more than half a billion dollars over the next 12 months. About a third of his customers self-identify as African American.
Hogarth joined Sequoia in 2008 as a partner from business school and in the middle of a recession. He said he’s watched closely during his eight years at the company as founders like Airbnb’s Brian Chesky and Dropbox’s Drew Houston took a disciplined approach to growth. They used the funds carefully and aimed for profitability.
Hogarth has attempted to apply his investor experience to entrepreneurship. He and his co-founder, software developer Justin Ammerlaan, did not receive a salary for the first year and a half. He said he’s personally invested in all four rounds of funding for the startup since its inception, a sign of his belief. And they’ve grown to 1 million subscribers with a team of less than 60 people.
“I’m trying to build more SEAL teams than platoons,” he said.