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Ashton Kutcher’s Sound Ventures led the company’s first round of financing with Utah Tech.
Why bother? When you can go straight to the actual source of utility spending: your personal paycheck, your bank account Brandon RodmanWeave, the founder of the consumer communications platform, left before the company went public last year to launch a new company aimed at allowing consumers to deduct everyday expenses directly from their paychecks.
Privy connects users looking for cashback offers and ease of payment with partners looking for a cheaper way to acquire customers. To further spice up the partnership, Privy will hold consumer “risk” and pay them on behalf of its partners (and plans to issue a line of credit to support these payments in the future). A certain fee and certain percentage will be sent to the consumer as cashback benefit.
The easiest way to understand initiation is to think about incentives. Consumers have an incentive to pay more for regular transactions with cashback benefits. Partners have an incentive to acquire customers at a lower cost, and Previ has an incentive to bet on the stickiness of people who are willing to pay regularly for services to opt for automatic payments.
The startup doesn’t charge any of the interest rates, annual fees or late fees often associated with credit cards, and Rodman said that won’t change. However, if a user loses their job and payment, Previ’s backup plan is to withdraw money from their bank account. Users will be prompted to link their bank accounts upon registration if the pre-determined purchase amount exceeds their check. Because it is withdrawn from the user’s bank account and not paid to them, the user does not get the refund benefit. However, the user is encouraged to reconnect their payroll service when they find their next job, so that the cashback incentives resume.
Some think that owning a paycheck is the key to fintech success, as it creates a bond where the consumer makes every transaction through the winning platform. There are startups racing to get closer to consumer revenue, including Claire, which integrates with HR to offer users free salary growth, and Pinwheel, a payroll platform.
Right now, Privy is not working directly with employers to show it as a line item in the employee’s payroll. Instead, how an employee puts a percentage of their paycheck directly into a savings or 401(k) account, Priv is an option where the employee allocates a fixed portion of their paycheck each time they contribute.
Becoming a body is a delicate process. Previ’s biggest challenge is humanity.
“Of course, trust is the number one thing,” he said. “People are connecting a portion of their salary, not their entire salary. So they have to trust that we’re doing everything we can to take care of that.”
Making consumers believe in their source of livelihood. Privy isn’t likely to get his entire paycheck, just his allotted one, but an automatic commitment could still feel overwhelming to someone unsure of his ability to stick with a pre-seed start.
And it has a little-known competitor called credit cards. Previ’s target users are tech workers between the ages of 25 and 40, a demographic known to hold credit card points. Is the cashback enough to win the contest to earn more points?
“I don’t think we’ll ever replace him,” Rodman said. “We want to be a legitimate alternative — we think about people’s wallets and how they’re divided now, sometimes they use Visa, because they’re always going to Costco…but then they’ve got Venmo, and they’ve got Cash Accounts and Amex…we want to be in the same conversation.
For now, investors are fueling the idea. Privy raised $6.5 million late last year from Ashton Kutcher’s Sound Ventures, as well as the founders of Qualtrics and DVV. Other investors include Jared Rodman, co-founder of Weave, Tyler Hoge, SVP of production at DV, OATV managing director Bryce Roberts and Derek Anderson, Startup Grind and Bevy. Rodman and his wife put $2 million of their own capital into the startup.
Privy is opening its waiting list and is gradually ushering people into its alpha test with a concierge-like service. The goal is to be in beta before the end of the year.
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