TL;DR: Austin’s Self Lender raises a $5 million Series A after seeing rapid customer growth following a pricing change.
This week, Self Lender, a Texas-based startup, announced that it closed a $5 million Series A funding round, led by Silverton Partners and participated in by Deep Space Ventures and Accion Venture Lab. Silverton Partners previously took part in the firm’s $1.5 million seed round back in July 2015.
Two years is a long time for a seed-stage startup to go without fresh capital, making this round all the more interesting. Happily, the company spoke with Crunchbase News regarding its capital event, sharing metrics on its recent growth to help explain why it raised more money now.
In short, Self Lender managed to shift its trajectory from slow growth to far-quicker growth over the last 10 or 11 months. According to Self Lender’s James Garvey, the firm grew its customer base from around 1,000 people in September of 2016 to 24,000 in July. That works out to, ahem, a lot of daily growth over a nearly year-long period.
Breaking down the company’s recent expansion a bit further, Self Lender grew from picking up a half dozen new customers a day in September — using the month again as a benchmark — to 75 per day in October, to 150 today, according to Garvey.
The firm, which I first covered during its TechCrunch Disrupt debut in 2014, and again in 2015 when it raised the aforementioned seed round, picked its new round on the back of that growth. So how did it reach a new growth plane? Price cuts, kinda.
(Pricing changes, I think, would be the more polite way to phrase it.)
Adjusting The Numbers
To understand what we’re discussing, we have to know a bit about the startup’s business. Quickly, Self Lender’s service helps people to borrow small sums of money for a year, recording their payments and reporting the on-time transactions to credit agencies. Up goes the user’s credit score, and, after the loan is paid off, the user gets the cash. Self Lender collects a decent percentage gain on the transaction.
So how do you change the pricing on that? By lowering the total borrow amount, impacting the corresponding monthly payments. Self Lender introduced a lower-priced plan last year, which cost around $50 per month, or about half of what its lower-tier plan cost before. The result was the customer growth mentioned previously.
As we can imagine, folks looking to need a credit makeover might appreciate lower-cost services to do so, leading to growth. (This is also a pretty good reminder about how important pricing is for startups.)
I asked Garvey about the impact of the lower-priced service: would it still have a noticeable impact on how much credit improvement users could expect? Here’s what he told Crunchbase News via email:
“When you’re building a credit score from scratch, being able to demonstrate that you can repay a loan, even at $25 to $50 [per] month, can have a huge positive impact on a credit score. On-time loan repayment is a big juicy data point that’s screaming: ‘I can be creditworthy'”
Cheaper plans have helped bolster the company over the past year. What margins Self Lender can derive from them is a different question. Presumably, the less-expensive plan provides less margin for the company to use to finance marketing. Regardless, its investors are optimistic.
I asked Stephen Hays from Deep Space Ventures about the deal, who provided some notes concerning that point:
“Based on the user growth I’ve witnessed over the last 6 months while tracking the business, along with the limited marketing done to date, I believe the growth potential is quite strong.”
Self Lender has the capital now to spend on marketing. How efficient that spend will be is the next question for the Texas startup.
iStockPhoto / MagicVectorCreation
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