The “gig economy” gave rise to a set of startups centered on assembly the wants of freelance and self-employed staff, from labor marketplaces Upwork and Fiverr to consumer administration instruments like Honeybook. London-based SteadyPay focuses on fixing one main ache level for these staff — earnings volatility — which might make managing one’s private funds way more sophisticated. Workers who lack an everyday earnings stream usually can’t entry loans from conventional monetary establishments, making it harder for them to make ends meet.
SteadyPay CEO and co-founder John Downie, who had spent most of his profession constructing tech options for banks, realized that current lending options didn’t tackle the wants of staff with irregular earnings.
“Decades of traditional underwriting and a heavy reliance on FICO credit scores have been holding back a lot of innovation in the space. While for gig and freelance workers there were other solutions for pensions and things, there was very little in the credit space [before SteadyPay],” Downie mentioned.
Founded in 2018, SteadyPay’s core providing is its income-smoothing product, which tops up a person’s checking account when their earnings fall beneath their month-to-month common. Users pay a month-to-month price of £4 per week, or simply over $5 a month, for the service. They can repay the top-ups interest-free, and solely owe repayments again to SteadyPay once they make above their common earnings in a given month, CEO and co-founder John Downie instructed Thealike in an interview.
The firm has over 9,000 energetic customers on the platform throughout a wide range of industries, most of whom are between 22 and 40 years outdated, Downie mentioned.
Downie described SteadyPay’s mannequin as “Netflix for credit,” explaining that early conversations with prospects illustrated their need for a easy, interest-free product. He discovered that customers weren’t essentially in search of the product with absolutely the price — as a substitute, they wished an answer that was predictable and steady.
The firm underwrites customers on the platform via a man-made intelligence-based mannequin. Its algorithm primarily leverages data from “open banking” information, which is safe buyer data that enormous United Kingdom banks are required by legislation to share with third events and technical service suppliers. It additionally incorporates some transactional banking information and customers’ public social media data to foretell a customers’ creditworthiness, Downie mentioned.
The common month-to-month top-up per buyer is about £250, and the utmost steadiness a person can keep on SteadyPay at any given time is capped at £1,000, Downie’s co-founder and SteadyPay COO/CFO, Oleg Mukhanov, instructed Thealike. Since switching from a extra handbook, rules-based underwriting course of to the AI-based algorithm, SteadyPay’s buyer default charges have stayed constantly beneath 10%, he added.
SteadyPay makes loans immediately from its steadiness sheet right this moment, a strategic selection Downie mentioned helps the corporate preserve full management over its underwriting course of. Eventually, although, the startup will possible companion with an area financial institution to supply the capital, he added.
SteadyPay introduced right this moment that it raised $5 million for its Series A spherical led by European enterprise capital agency Digital Horizon, which focuses on fintech and SaaS corporations. Digital Horizon isn’t new to the house — the fund can be an investor in Oxygen, a San Francisco-based startup that additionally affords a credit score product focused at freelancers and was reportedly in talks to boost a $70 million spherical at a $500 million-plus valuation late final yr.
Both current and new buyers participated in SteadyPay’s newest fundraise alongside Digital Horizon, together with Ascension Ventures (by way of their affect Fair By Design fund), the U.Ok. authorities’s Future Fund, and a few angel buyers, in accordance with the corporate. SteadyPay raised its seed round in 2020, bringing in £2.9 million of debt and fairness financing on the time.
In addition to including an embedded B2B providing on its platform, the corporate plans to make use of the brand new funds in three areas, Downie mentioned.
One purpose is to broaden into further merchandise, partly by leveraging its trove of information to make AI-based insights obtainable to customers. Another precedence is to widen its buyer base by focusing on small enterprise homeowners and micro-entrepreneurs, who usually face related earnings challenges to freelancers and have an identical risk-return profile, in accordance with Downie.
The firm additionally needs to make use of the brand new capital to broaden into “at least one” worldwide market, Mukhanov mentioned.
While Mukhanov didn’t title a selected nation the corporate is focusing on, he mentioned that the U.S. could be a good marketplace for the product as a result of “the percentage of freelance workers [in the U.S.] is even higher than in the U.K., and the level of government support or other welfare support is even lower … meaning that the need for this product would be even higher.”