Fintech
Kleiner Perkins Leads $14.4M Seed Round on Fizz, a Credit-Building Debit Card Targeting Generation Z College Students
Carlo Kobe and Scott Smith believed so strongly in the need for a debit card product designed specifically for Gen Z that they dropped out of Harvard and Cornell at ages 19 and 21, respectively, in 2021 to build a startup called Effervescent.
The couple wanted to go beyond creating a debit card for younger generations. They wanted to make using the card a way to establish credit and become more educated about finances in general and ultimately be financially independent. The best way to do this, they decided, was to make its core an AI-powered budgeting product and offer gamified financial literacy courses presented in “a fun, interactive quiz format.” Its target demographic is college students, aged 18 to 24.
Uniquely, the duo also decided to build their own infrastructure from scratch instead of, as they put it, “becoming a patchwork of fintech SaaS providers.” In particular, considering all the recent upheavals in the world of Banking-as-a-Service (BaaS) startups, Fizz opted long ago to have a direct banking partnership, rather than offering its services through an intermediary, or a third party , BaaS.
They spent the first two years building a tech stack and partnership with Lead Bank, the Kansas City bank acquired by former Block executive Jacqueline Reses in 2022 before Fizz launched its debit card to the public in early 2023 .
Now Fizz is announcing exclusively to TechCrunch that it has raised $14.4 million in seed funding led by Kleiner Perkins, with participation from SV Angel, Y Combinator, New Era Ventures, and the founders and operators behind several unicorns, including Handshake, Postmates and Public.com. The startup has passed through Y Combinator’s Summer 2021 cohort.
Over the past 12 months, the pair said, Fizz has grown from nothing to having “tens of thousands” of customers. Its offering is available to students at more than 300 colleges and universities, including all Ivy League schools and all top 25 schools ranked in U.S. News & World Report. Fizz, which is expected to surpass nine figures in annual card volume this year, the founders say, works directly with schools. It also uses campus ambassadors and TikTok to promote its offerings.
Fizz is an acronym for ” Ffinancial Iindependence for the gen Z, with an extra Z added for punch (and not to be confused with another startup of the same name a social network for university students). Its team of 11 is made up of senior engineers and designers from the likes of Meta, Microsoft and Amex. It primarily competes with cards from big banks like Discover, Capital One, and Bank of America, as well as Rocket Money and Credit Karma when it comes to its budgeting and AI feature set.
German immigrant Kobe (CEO) and Detroit native Smith said they were inspired to start Fizz by their own experiences as young college students.
“I couldn’t get a credit card because my parents couldn’t cosign for it,” Kobe recalls, “and I didn’t want to put down a big security deposit. And because I had no established credit history, I was denied over and over again.”
He initially thought it was an international student problem, but then realized it was a general problem for this demographic.
Scott points out that New York-based Fizz has decided to offer college students a different on-ramp to construction credit.
“University students constitute a particularly homogeneous segment. And if you ask any of them, they’ll tell you they’re against credit cards, but they’re not necessarily against credit,” he told TechCrunch. “So maybe half of them might know that they need to build credit in a nebulous way and the other half doesn’t know that they need to build credit. So our point of view is to tell them, ‘OK, you need credit to rent an apartment, get a car and even get a mortgage someday.’”
Knowing that this group of customers needs not only credit, but also tools to learn to use it wisely, Fizz offers a suite of financial literacy content, as well as budgeting software and other help.
“It’s not that our cardholders simply have a payment device; they have access to budgeting tools, savings advice and a one-on-one financial advisor,” Scott said.
Image credits: Effervescent
The pair are also proud to have launched the Fizz product with two direct banking partnerships. In addition to Lead Bank, it is also a partner of Mastercard and credit agencies.
“We built our own registry. We created our own subscription methodology and got the licenses,” Kobe said. “I think in fintech you need to do the hard part. And we did that, and I think it served us really well.
The company earns primarily from interchange revenue and collaboration with other brands it recommends (in some cases, with discounts) and optional subscription products. Its credit building offer is free.
The new capital will largely go towards expansion and development of the product roadmap, as well as continued hiring in sales, marketing and engineering.
“There are a lot of AI products we want to release,” Smith said.
Ilya Fushman, partner at Kleiner Perkins, who joined Fizz’s board of directors as part of the financing, said his firm first invested in Fizz when it joined YC Group in 2021. Many People get their first credit cards on college campuses, he said, including himself.
“This is a time when consumers are moving away from home and becoming financially independent. Unlike traditional credit cards with hidden fees and high interest rates, Fizz offers a line of credit based on your spending patterns without requiring credit checks, cosigners or security deposits,” he told TechCrunch. “Most products Entry-point financials are not so good. They typically have low limits, high fees, few discounts, require co-signers, and lack effective guidance for newly financially independent adults on their journey.”
Fizz is one of several fintechs aiming to serve the broad Gen Z market. For example, Frich, a social and financial education community for Generation Z, just raised $2.8 million in seed funding.
Also in January, Alinea Invest, a fintech app offering AI-based wealth management aimed at Generation Z women, raised $3.4 million in seed funding ahead of the launch of an AI virtual assistant that will help users with their investment needs. And Bloom, a zero-commission stock investment tool for teen investors, surfaced stealthily last July, announcing it had reached 1 million downloads after launching in February 2022. Meanwhile, in March, based in Miami Private onyxa Y Combinator-backed digital bank that provides banking and investment services to high-income millennials and Generation Z, announced that it is ceasing its banking operations and move to a B2B model instead.
Similarly, and perhaps to a lesser extent when it comes to comparison, there is Copper, which is actually more geared towards teaching teenagers about finances, but who had problems with its debit card offerings due to the BaaS industry chaos. There’s also Step, a digital banking service aimed at teenagers and young adults, championed by NBA star Stephen Curry, and Currentwhich began life as a parent-controlled teen debit card but expanded over time to offer other services.
Want more fintech news in your inbox? Subscribe to TechCrunch Fintech Here.
Do you want to contact us with a suggestion? Email me at maryann@techcrunch.com or text me on Signal at 408.204.3036. You can also send a note to the entire TechCrunch team at tips@techcrunch.com. For safer communications, Click here to contact uswhich includes SecureDrop (instructions here) and links to encrypted messaging apps.