Fintech Karat aims to become an influencer bank and raises $ 26 million


Dive brief:

  • Karat Financial, a fintech offering credit cards tailored to the designer and influencer community, said on Thursday it had raised $ 26 million in a Series A funding round led by Union Square Ventures with participation from GGV Capital and SignalFire, according to TechCrunch and Fast business.

  • Karat Financial’s target demographic is the independent creator economy, which includes Instagram influencers, Twitch streamers, and TikTok and YouTube creators, among others. Eric Wei and Will Kim, co-founders and co-CEOs of Karat, founded the startup in 2019 and launched their first product, the Karat Black Card, in 2020.

  • “There are so many traditional institutions out there, why are people coming to us? Because these traditional institutions haven’t done a good job of reaching a new underfunded population,” Wei told Fast Company. “We want to be the very first and first choice of future designers and build more for them. [banks] there haven’t done it yet. They missed. That’s why we’re here. ”

Dive overview:

Karat Financial’s funding increase comes as the designer and influencer marketing industry is expected to be valued at $ 15 billion next year, according to a 2019 estimate of Business Insider Intelligence.

Startups like Karat Financial are betting that their tailored services and knowledge of the growing space gives them an edge over traditional institutions that may not understand the industry’s business model.

“Banks have to understand you to trust you, and only when they trust you are they ready to extend credit, process your payments, and hold your money.” Wei told TechCrunch.

Karat’s black card, offered by a partner bank, determines a user’s credit based on criteria such as social media tracking and current income.

The average Black Card cardholder has over $ 100,000 in the bank and 1 million combined subscribers on their social media platforms, Kim told Forbes Last year.

FinTech plans to go beyond credit cards and offer a suite of financial tools, including bank accounts and tax preparation services.

“[T]the backbone of the financial business is what we build ”, Wei told Crunchbase Last year.

Other fintechs and neobanks have launched themselves in recent years with the aim of offering specialized services to the economy of startups, concerts and independents.

San Francisco-based Brex, which launched in 2017, targets start-ups with its banking services and credit cards. FinTech assesses a startup’s cash flow and financial support to determine its creditworthiness. The company is is also pursuing its own banking license via the charter route of industrial credit companies.

Launches, who closed a $ 2.8 million funding round in May, targets the gig economy and uses automation to deal with the typical volatility of a freelance writer’s income by creating a series of sub-accounts for the user.

The New York-based digital bank splits a portion of a user’s payments over their personal salary, tax deductions, balance of business expenses, and a savings account.

The bank challenger Better Financial aims to solve insurance problems for concert workers. The start, who launched last month, uses current account holders payroll data and their payroll history to take out low-interest emergency loans.

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