Pinwheel raises $50M Series B at $500M valuation for its income verification APIs

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    Pinwheel, a payroll connection platform, recently revealed that it had raised an additional $50 million in a round-headed by new investor GGV Capital, only six months after raising a $20 million Series A investment.

    Pinwheel provides application programming interfaces (APIs) connected to payroll, income, and employment data to neobanks and fintechs such as Block, Varo, and Lendly. The tools traditionally used to transmit this information have been inefficient and unwieldy, which was an issue that Pinwheel’s co-founders discovered while working on a firm that assisted businesses in offering pre-tax perks to their workers.

    A stumbling block in implementing their initial solution was encountered by Kurt Lin, Anish Basu, and Curtis Lee, who had met via previous work experiences. They discovered that they were having problems connecting to payroll systems. That’s when they decided to pivot and instead focus on developing an API to handle this issue on a broad scale, according to Lin in an interview.

    Lin explained that the company’s APIs enable its customers to gain more detailed information about individuals’ payroll and employment, in part because they track “non-traditional” sources of income such as payments made through gig platforms such as Uber or mobile payment apps as Venmo. Its core offerings are direct deposit switching, income and employment data, and paycheck-linked loans. According to the business, the data it compiles represents approximately 80 percent of all persons working in the United States.

    This data is available to Pinwheel’s customers for a variety of applications, ranging from providing employees with earned wage access, which allows them to access money as soon as they make it rather than waiting for a paycheck to be deposited in their bank account, to enabling paycheck-linked loans, which are considered less risky than traditional unsecured loans because they do not require borrowers to make a voluntary bank transfer to repay the funds.

    However, despite stiff competition from other competitors in the rather saturated payroll API field, Pinwheel has gained substantial momentum in the industry. It intends to distinguish itself by developing a whole “income layer” of data for its clients beyond payroll information.

    According to the firm, its platform conducts more than 4.6 million procedures every month, representing a 400x growth over the previous year, and the company leads the industry in customer conversion rates. According to the firm, Pinwheel will have increased its yearly recurring revenue by 177x by 2021, while Lin refused to provide any more information on its history or current sales figures.

    Lin attributes the company’s success to three essential factors: commercial traction, an experienced staff, and a mission-driven strategy focused on “changing financial outcomes for clients who do not have access to inexpensive financial products,” according to Lin.

    For example, if an educator or a nurse has been in the same position for five or six years and has a FICO [credit score] of 550, they will be turned down for any good financial product. “We can demonstrate that their income stability is completely intact, that they have been working for a long period, and that they are going to do far better [in terms of loan repayment],” Lin said.

    When it comes to bank account connection, Pinwheel has employed many individuals from Plaid, a $13.4 billion API firm well-known for providing bank account connectivity for fintechs.

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    “We’re the only team that has been able to recruit not just one or two [former Plaid workers], but a large number of ex Plaid employees who are now part of our team.” Our vice president of engineering came from Plaid, as did our director of commercial, and several of our key engineers were involved in the development of the platform while at Plaid. As a result of having such individuals on the team, we have accumulated a wealth of institutional knowledge about how to do things correctly, which has helped us to outperform our competitors significantly,” Lin said.

    Aside from providing direct deposit switching and payroll data, Pinwheel is also the only company to be classified as a Consumer Reporting Agency (CRA) by the Fair Credit Reporting Act, which means that if consumers are negatively affected, Pinwheel’s data, the company will be held legally liable. As much effort as it takes to be an approved regulatory credit reporting agency, Pinwheel’s willingness to “stand behind the integrity of [its] data,” according to Lin, is a positive sign for the company.

    Several significant investors, including AMEX Ventures (American Express’s venture capital arm), Indeed, Kraken Ventures, and Franklin Templeton participated in the Series B round, the company’s first round of funding. Additionally, existing investors Coatue, First Round Capital, Upfront Ventures, and TQ Ventures made investments in the company.

    Pinwheel intends to utilize the additional money to more than double its current staff base of 70 people, with two-thirds of them being engineers. Even while Pinwheel’s engineering staff will continue to be mainly due to the technical nature of its API-focused business, the company aims to make some recruits to enhance its go-to-market strategy, revenue growth, and marketing presence in the market to CEO Liang Lin. According to Lin, the company ultimately hopes to expand into sectors such as tax preparation by assisting businesses in leveraging their income data in novel ways.

    Pinwheel got more than 130 incoming communications from important financial institutions such as Wells Fargo and Citi, as well as several essential fintech companies, Lin said. The business emerged from stealth mode in June 2020 and has received more than 130 inbound messages since then.

    Pinwheel, a payroll connection platform, recently announced that it had raised an additional $50 million in a round led by new investor GGV Capital, only six months after raising a $20 million Series A investment. “It was kind of this lightbulb moment for us because we realized that the platform that we’re building is basically like Pinwheel,” says the company.

    Pinwheel offers neobanks and fintechs such as Block, Varo, and Lendly with application programming interfaces (APIs) tied to payroll income and employment data. When it comes to transmitting this information, the previously utilized methods have been inefficient and burdensome, which was a problem that Pinwheel’s co-founders encountered when working on a company that supported companies in delivering pre-tax incentives to their employees.

    Despite their past work experiences, Kurt Lin, Anish Basu, and Curtis Lee, who had met via previous work experiences, ran into a stumbling block while attempting to execute their first proposal. They realized that they were experiencing connectivity issues with their payroll systems. According to Lin in an interview with Tech Crunch, it was at this point that they took the choice to pivot and concentrated on developing an API to address the problem on a more widespread scale.

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    Luis Lin explained that the APIs provided by the company provides customers with greater access to more detailed information about individuals’ payroll and employment, in part because the APIs track “non-traditional” sources of income such as payments received through gig platforms such as Uber or mobile payment apps such as Venmo. Direct deposit switching, income and employment data, and paycheck-linked loans are among the company’s most popular services. As stated by the company, the data it collects covers nearly 80 percent of all people employed across all industries in the United States.

    Employees can use this information for a variety of purposes, including earning earned wage access, which allows them to access money as soon as they make it rather than waiting for a paycheck to be deposited into their bank account and enabling paycheck-linked loans, which are considered less risky than traditional unsecured loans because they do not require borrowers to make a voluntary bank transfer for the funds to be repaid.

    Although it faces stiff competition from other competitors in the oversaturated payroll API field, Pinwheel has gained significant traction in the industry. It intends to distinguish itself by developing a comprehensive “income layer” of data for its clients beyond payroll and other financial data.

    According to the business, its platform processes more than 4.6 million procedures per month, marking a 400x increase over the previous year, and the company is the leader in the market when it comes to customer conversion rates. It is predicted that Pinwheel will have raised its annual recurring revenue by 177x by 2021, although Lin declined to disclose any further details on its history or current sales data.

    According to Lin, the company’s success can be attributed to three crucial factors: commercial traction, an experienced workforce, and a mission-driven approach focused on “changing financial outcomes for customers who do not have access to cheap financial solutions.”

    Any appropriate financial product will be denied to an educator or a nurse, for example, who has been in the same employment for five or six years and a FICO [financial report] score of 550. In addition, Lin added, “we can establish that their income stability is entirely intact, that they have been working for a long length of time, and that they are going to perform significantly better [in terms of loan payback].”

    If you’re looking for bank account connectivity, Pinwheel has hired many people from Plaid. This $13.4 billion API company is well-known for offering bank account connectivity for fintechs.

    Our team has successfully recruited not just one or two [former Plaid employees], but a vast number of ex-Plaid employees who are now a member of our team.

    ” Our vice president of engineering, as well as our director of commercial, came from Plaid, and many of our key engineers were engaged in the creation of the platform while working at Plaid. As a consequence of having such folks on the team, we have amassed a lot of institutional knowledge about how to do things right, which has enabled us to beat our competition by a substantial margin,” Lin said.

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    In addition to offering direct deposit switching and salary data, the firm has been designated as a Consumer Reporting Agency (CRA) under the Fair Credit Reporting Act, which implies that if Pinwheel’s data badly impacts customers, the company will be held legally responsible. According to Lin, despite the significant amount of work required to become a regulated credit reporting agency certified by the Federal Trade Commission, Pinwheel’s readiness to “stand behind the integrity of [its] data” is a good indicator for the firm.

    Several notable investors took part in the Series B round of fundraising, which was the company’s first round of funding. These included AMEX Ventures (American Express’s venture capital arm), Kraken Ventures, and Franklin Templeton. Previous investors made additional investments in the firm, such as Coatue Capital, First Round Capital, Upfront Ventures, and TQ Ventures.

    To more than quadruple its present workforce of 70 individuals, with two-thirds of them being engineers, Pinwheel aims to use the extra funds to expand the company. According to CEO Liang Lin, while Pinwheel’s engineering staff will continue to be mainly due to the technical nature of its API-focused business, the company plans to hire a few new employees to help it improve its go-to-market strategy its revenue growth and marketing presence in the market. According to Lin, due to supporting companies in utilizing their revenue data in creative ways, the firm intends to expand into fields such as tax preparation eventually.

    More than 130 inbound messages from key financial institutions such as Wells Fargo and Citi, as well as several prominent fintech businesses, according to Pinwheel founder and CEO Lin. The company first emerged from stealth mode in June 2020, and it has received more than 130 incoming emails since that time.

    Lin and his team saw a “lightbulb moment” when they “realized that the platform we’re creating is truly like a growth engine for the whole consumer finance business.”

    The building blocks of our platform contain something that allows you to build not only what you want to do now but also the future of your roadmap for the next five to ten years, whether you are a new digital bank, a PFM [personal finance management company], a new tax product, or a bank or a lender who requires better data for underwriting.

    Lin described consumer finance as “a growth engine for the whole industry.” There is something in the building blocks of our platform that allows you to build not only what you want to do now but also the future of your roadmap for the next five to ten years, whether you are a new digital bank, a PFM [personal finance management company], a new tax product, or a bank or a lender who needs better data for underwriting.

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