Growing up in China, where personal savings rates are about 44%, Kikoff cofounder Cynthia Chen has long understood the virtues of living within one’s means and establishing good credit in order to be able to afford life’s larger purchases like automobiles or a new home.
“As I grew older, I realized that my parents were very good at paying back their debts,” says Chen, who also helped found a blockchain lending startup called Figure in 2018. “Had there been a credit system [in] that part of the world…they would have gotten an 800 credit score.”
In 2019, Chen partnered with Christophe Chong, former head of growth at Lime, the shared scooter, bike and vehicle company, to start a fintech that would help members of Generation Y and Z, and immigrants establish a good line of credit within 30 to 45 days.
On Wednesday, Kikoff launched publicly following a $30 million Series B round of funding led by Portage Ventures, a firm focused on early-stage fintech bets. Lightspeed Venture Partners led its $12.5 million Series A round announced in July 2020, joined by investors including GGV, Coatue and Core Innovation Capital. Other notable Kikoff backers include former chief financial officer of the U.S. Treasury Department Teresa Ressel, Wex CEO Melissa Smith and NBA star Steph Curry.
Kikoff aims to improve its users’ credit scores by providing them with a $500 revolving line of credit to spend on products like personal finance e-books that cover topics such as budgeting and financial planning, as well as licensed courses that cover personal finance, how to set up an e-commerce store and even Python programming courses, found in the company’s online store that range from $10-$20 apiece. Using the payment history of its users, Kikoff will send the information to the three major credit bureaus (Equifax, Experian and TransUnion) to help establish credit within the first 30 days of opening an account. There are no interest charges or late fees associated with the line of credit and the annual percentage rate will remain at 0% for all users. Kikoff will profit from the markups it charges on products in its store and its users, which it claims are in the hundreds of thousands, are required to spend their $500 in revolving credit there. Once a user establishes a good credit record Kikoff says it intends to offer more products suitable for users’ lifelong financial journey. Another potential revenue source could come if Kikoff allows credit card merchants and other third parties to market to its growing user base.
Though Kikoff takes a novel approach, credit-building is not new territory in the startup world. Austin, Tex.-based Self Financial has raised nearly $80 million and seeks to boost credit for people with no history by signing them up with an installment loan and reporting payments to credit bureaus. Other fledgling companies with similar goals include TomoCredit and Welcome Tech. Meanwhile, startups such as MoCaFi, Esusu and digital bank Dave help users build credit by reporting timely rent payments.
There is also the traditional route most people take in getting their first credit cards: signing up for a secured credit card through banks, or even through some digital quasi banks like Chime. (These cards act as debit cards, barring users from spending more money than they have in a linked bank account.) Young people can also ask a parent who has a stronger score to co-sign a credit card.
Though Kikoff will have to contend with larger companies in the business including Credit Karma and Experian, its backers think the fundamental difference between it and most credit building companies is how Kikoff helps the consumer see how important their relationship with their credit is.
“You can get a free credit score obviously from some of the larger players, even now banks offer the ability to check your credit score for free,” says Ansaf Kareem, a partner at Lightspeed who led Kikoff’s Series A. “But very few people really think about how do you actually move or improve your credit score beyond a traditional sort of secured card offering”
Despite its recent fundraising, Kikoff and its investors refused to disclose its valuation. With the Series B, Kikoff is the latest startup to stake its claim in today’s hot fintech market. Fintech companies collectively raised $21 billion from venture capitalists during the first three months of 2021, according to recent data from PitchBook—the second largest fundraising quarter for the sector ever.
Eliza Haverstock contributed reporting to this article.
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