Petal Is on the Verge of Becoming a Unicorn With a Fresh $140 Million in Cash to Upend the Broken Traditional Lending System

By Michael Head Last updated Sep 27, 2022 0

The number of firms that are attempting to make credit more accessible to customers has increased significantly in recent years.

Petal, one of these startups, revealed today that it has raised $140 million in a Series D round of funding from investors.

According to a source familiar with the deal, Petal’s new valuation is $800 million, which is more than treble what the firm was valued at when it announced a $55 million Series C round in September of 2020.

New York-based Petal, which was founded in 2016, offers two Visa credit card products geared at individuals who have little or no credit history and are underserved by traditional financial institutions. According to the company, its mission is to assist customers in “building credit, not debt.” And it does it on the basis of cash flow rather than credit scores, which is advantageous. (The cards are issued by WebBank, which is a member of the Federal Deposit Insurance Corporation.)

Petal, in particular, provides “contemporary” Visa credit cards, as well as a mobile application, that are intended to assist people in “responsibly” building credit and managing their money.

Petal’s most recent funding round comes after a year in which the company tripled its user base and more than quadrupled its income, going from $11 million to over $50 million in revenue. Petal cardholders, who the firm describes to as “members,” number roughly 300,000 in the United States today. According to Jason Gross, Petal’s co-founder and CEO, the company has been attracting 10,000 to 20,000 new members per month on average.

Petal members are primarily younger, digitally-native consumers who are establishing credit for the first time, according to Gross, although the business has served a wide range of other client categories as well, including individuals who are attempting to rehabilitate their credit history.

Petal operated in secrecy until launching its first product and disclosing its first round of funding in September 2017, when it went public. People who have never used credit before can benefit from the firm’s technology, which analyses banking history and assesses creditworthiness by considering a person’s income, spending, and savings, according to the company. Credit is made available to a larger pool of people through a process known as “CashScoring,” according to the company, and on “terms tailored to each person’s particular financial circumstances.” There are some companies said as Credit Building Companies which helps you in all the procedures.

“With this change, the credit score of the future will be a complete, real-time and holistic assessment of a consumer’s financial position, including their income, cash flows, and assets, in addition to debt and repayment history,” Gross said. “Prism Data exists to give financial providers the tools they need to create next-generation products and capabilities.”

Tarsadia Investments led Petal’s Series D financing, with participation from Valar Ventures (which led its Series C), CUNA Mutual, Encore Bank, Volery Capital Partners, Gopher Asset Management, RiverPark Ventures, Afore Capital, Gaingels, and “a number” of other new and existing investors. To date, Petal has raised more than $240 million in equity capital and more than $450 million in debt financing.

Rishi Reddy, head of venture and growth investing at Tarsadia, believes that the traditional credit system is broken and that consumers “are in desperate need of more modern and accessible financial products.”

“In addition to exponential user growth, Petal has proven the power of its tech as evidenced by stellar credit performance and the rapid scaling of Prism,” Reddy said in a written statement. “We are excited to double down on Jason and the team as they pioneer a new way to accelerate financial inclusion.”

According to the firm, the majority of Petal members had little or no credit history when they first applied for a Petal card, and more than 40% of new members authorised for a Petal card in 2021 had previously been rejected credit by a major bank. A credit score of 676, according to the firm, has been achieved by members who joined with no prior credit history and have gone on to qualify for auto loans, mortgages, and “a variety of other financial opportunities” that were previously out of reach.

With the debut of Prism Data, Petal’s CashScore became a standalone product in 2021, following the company’s announcement of the launch of its first B2B enterprise service. Founded in early 2021 by Gross, Petal’s new B2B platform, designed to assist other fintech companies and financial institutions in leveraging Petal’s “CashScoring” technology to expand their own businesses, became online in early 2021.

Gross refers to the new platform as “a sister company.” The CEO went on to add that Prism is a “next-generation data intelligence platform that transforms raw transaction data into actionable insights and scores,” and that it makes the CashScoreTM technology “available for the first time to a broader market.”

As general manager of the company, Erin Allard will oversee the operations of Prism Data, having previously held executive positions at Bloom Credit, Green Dot, and The Bancorp. Erin Allard formerly worked for Bloom Credit, Green Dot, and The Bancorp. Petal now has more than 160 employees, more than doubling its workforce from the previous year.

In an interview with TechCrunch, Gross explained how the company is following in the footsteps of previous fintech companies such as Lithic and Upstart, which have built significant new B2B platforms by productizing the original technology that they initially developed to solve their personal challenges.

The company’s founders also stated that they believe that open banking and access to customer-permissioned bank account transactional data will fundamentally alter the way consumer financing is conducted.

The CEO went on to add that Prism is a “next-generation data intelligence platform that transforms raw transaction data into actionable insights and scores,” and that it makes the CashScoreTM technology “available for the first time to a broader market.”