Kafene Gets $75M to Offer Flexible Payments Options to Underbanked Consumers
Kafene, a NYC-based tech startup offering “buy now, pay-later” options for the underbanked, announced Thursday it raised $75 million in fresh funding, which it will use to scale its retail footprint and grow its team.
According to a press release, the package includes $50 million in credit facility from global investment firm Credit Suisse, another $10 million from alternative credit asset manager Hudson Cove Capital Management and $15 million in Series A funding co-led by equity investors Valar Ventures and Third Prime. Both Valar Ventures and Third Prime also participated in Kafene’s original $14 million Series A round over the summer.
“We welcome this opportunity to work closely with Credit Suisse, Hudson Cove, and our equity investors,” Kafene’s co-founder and CEO Neal Desai said in a statement. “The ability to secure debt financing and equity investment underscores the stability and trajectory of our business. This additional capital will help drive the next phase of our growth strategy.”
And there is certainly a lot of room for growth. According to Kafene, nearly one in three Americans have low or “subprime” credit scores. That means there are lots of people out there who could benefit from the service the startup provides: a “flexible ownership” model in which users can buy bigger-ticket items like furniture, appliances and electronics without having to pay a bunch of money up front.
Here’s how it works: once a user gets approved, Kafene will buy the desired product from a merchant on that user’s behalf, then rent it back to them over the next 12 months. If the user makes all the payments, they own the item, and if they can’t Kafene reclaims the item and takes the loan loss. Plus, if the user is able to make all the payments in a shorter amount of time than the allotted 12 months, then that means they’ve purchased the item at a discounted price and boosted their credit score at the same time since Kafene will report them as a positive payer.
Of course, Kafene isn’t the first tech startup to take this kind of approach. Companies like Affirm, Klarna, Billie and many others have seen massive success recently for their own flexible payment options — and they show no signs of slowing down anytime soon. This is also true of Kafene, which claims to have grown “exponentially” over the last year.
“Kafene has identified a huge market underserved by traditional lenders and has developed an innovative, cost effective financing platform to serve it,” Fred Wang, a partner at Hudson Cove Capital Management, said in a statement. “We see strong upside for Kafene’s business and have confidence in the team to execute its vision.”