Coatue deposits $ 20 million directly into Pinwheel, a payroll API for neobanks – TechCrunch
One of the most strategically important financial relationships for neobanks is to become the destination of the account for a user’s paycheck. If you’re a bank and have this specific relationship, more and more people will be using this account for everything from day-to-day spending to saving (after all, that’s where their money goes). This activity in turn leads to many opportunities to sell other financial products to users and generate the kinds of fees that banks like to pay.
It turns out, however, that users are often confused as to how to change their direct deposit instructions. To do this, they still have to go to the old payroll systems, fill in the account and routing data, verify that they are correctly configured and much more, all steps that can confuse users who will simply give up. .
Pinwheel is a “payroll connectivity” API designed to bridge this gap. It helps neobanks and other clients connect to a user’s payroll information system, offering everything from direct deposit transfer to income verification (a hot space these days) and related loans. paychecks.
It has proven to be very popular, especially amid the pandemic which has seen millions of people change jobs as well as neobanks reaching stratospheric growth as account holders sought cheaper and more flexible banking options. The company saw its revenue increase 11 times in the last quarter and claims the current mobile and mobile payment service Square Cash as customers.
This early pull attracted a new round of capital. Michael Gilroy of Coatue led a $ 20 million Series A in the business. Gilroy, who arrived at Coatue about two years ago from Canaan, has a long-standing interest in fintech, recently investing in companies such as B2B Melio debt platform, Quanto financial transaction API. and the neobank for teenagers Step.
In addition to Coatue, Primary Ventures and Semper Virens recently joined the round, and early stage investors First Round Capital and Upfront Ventures have also joined the round.
We last featured Pinwheel over a year ago with its $ 7 million fundraiser, exploring how the founders went from offering benefits to solving the more fundamental issue of connectivity in the world. pay. Co-founder Curtis Lee, who was then executive chairman and also venture capital partner at Primary Ventures, has since moved full-time to become president and chairman of the startup. He said the company has doubled its efforts in particular on direct deposit switching as a gateway to the rest of its API offerings.
“For us, it was really about picking one and using it as a wedge and then increasing from there,” Lee said. “Changing direct deposit was the most urgent and top priority for all of our customers, mainly because there was no real alternative. According to him, the company is becoming a market leader in this strategic niche. “In a quarter, we will be doing almost half of all direct deposit transfers in the neobank market,” he said.
Once a customer starts with direct deposits, they begin to migrate to other offerings, like paycheck loans. As low-cost neobanks strengthen their consumer base, they are frantically seeking sources of income to cover their massive growth. Loan is a rich target, and having direct access to payroll data can make it much easier to take out a loan.
Pinwheel has aggressively grown its team, growing from a small coterie a year ago to around 40 people. The company is reopening its offices today in New York’s Flatiron District, and Lee noted that the company is “remote friendly” and has about a third of its staff outside of the New York subway.
Among the notable hires, Lauren Crossett, formerly of Plaid and Quovo, has joined the company as a sales manager. The company has also signed a vice president of engineering, who will join it in the coming weeks.
In addition to institutional funds, a litany of individual investors joined the round, including Gokul Rajaram, Adam Nash, Jackie Reses, Raj Date, Tony Xu, Shishir Mehrotra, Amit Agarwal and Shiva Rajaraman.