Fintech Karat aims to become influencers’ bank, raises $26M

Dive Brief:

Karat Financial, a fintech providing bank cards tailor-made to the creator and influencer neighborhood, mentioned Thursday it raised $26 million in a Series A funding spherical led by Union Square Ventures with participation from GGV Capital and SignalFire, in accordance to TechCrunch and Fast Company.

Karat Financial’s goal demographic is the self-employed creator economic system, which incorporates Instagram influencers, Twitch streamers, and TikTok and YouTube creators, amongst others. Eric Wei and Will Kim, Karat’s co-founders and co-CEOs, based the startup in 2019 and launched their first product, the Karat Black Card, in 2020.

“There are so many present conventional establishments on the market, why are individuals coming to us? Because these conventional establishments haven’t executed an excellent job of reaching out to a brand new inhabitants that’s underbanked,” Wei informed Fast Company. “We need to be the very first and best choice for creators to come to and construct extra for them. All the present [banks] on the market haven’t executed that but. They failed. That’s why we’re right here.”

Dive Insight:
Karat Financial’s funding increase comes because the creator and influencer advertising trade is predicted to be valued at up to $15 billion subsequent 12 months, in accordance to a 2019 estimate by Business Insider Intelligence.
Startups like Karat Financial are betting their tailor-made providers and data of the rising house offers them an edge over conventional establishments who might not perceive the trade’s enterprise mannequin.
“Banks want to perceive you so as to belief you, and it’s solely after they belief you that they’re prepared to offer you credit score, course of your funds and maintain your cash,” Wei informed TechCrunch.
Karat’s Black Card, which is obtainable by a companion financial institution, determines a consumer’s credit score primarily based on standards similar to their social media following and present income. 
The common Black Card cardholder has greater than $100,000 within the financial institution and 1 million mixed followers on their social media platforms, Kim informed Forbes final 12 months.
The fintech plans to transfer past bank cards and supply a set of monetary instruments, together with financial institution accounts and tax preparation providers. 
“[T]hat monetary enterprise spine is what we’re constructing,” Wei informed Crunchbase final 12 months.
Other fintechs and neobanks have launched in recent times aiming to supply specialised providers to the startup, gig and freelance economic system.
San Francisco-based Brex, which launched in 2017, targets startup companies with its banking providers and bank cards. The fintech assesses a startup’s money move and monetary backing to decide creditworthiness. The firm can also be pursuing its personal banking license by way of the commercial mortgage firm constitution route.  
Lance, which closed a $2.8 million seed spherical in May, targets the gig economic system, and makes use of automation to deal with the everyday volatility of a freelancer’s earnings by making a sequence of sub-accounts for the consumer. 
The New York City-based digital financial institution distributes a portion of a consumer’s funds towards their private wage, tax withholdings, enterprise expense steadiness and a financial savings account. 
Challenger financial institution Better Financial aims to clear up insurance coverage challenges for gig staff. The startup, which launched final month, makes use of account holders’ present payroll knowledge and previous payroll historical past to underwrite low-interest emergency loans.

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