Launching a financial lending services company takes considerable working capital. The San Antonio startup FloatMe is doing just that, having closed a $250,000 pre-seed funding round in December 2019 to help grow its micro-lending application.
The Cleveland-based early-stage venture fund Comeback Capital led the round, with participation from San Francisco-based Right Side Capital Management, and local San Antonio investors.
Co-founders Josh Sanchez and Ryan Cleary developed the FloatMe app in 2017 to enable workers to get a “float” or short-term advance on their next paycheck without paying hefty fees or interest. Payday lending is a $46 billion industry that traps users with interest fees up 510%.
The FloatMe app gives employed customers an advance on their paycheck quickly and at much lower interest rates. The app’s balance monitoring service and educational features also help clients save money for emergencies.
Sanchez experienced the pain of needing a short-term loan himself when he had unexpected car expenses once and was short that week. After getting a payday loan for $200 that turned into a $250 payback balance after only two weeks, Sanchez started thinking of less expensive options to access money short term.
“My passion for this idea sprang from listening to so many stories because there aren’t many good alternatives that are low in cost,” Sanchez said.
Read more: FloatMe App Links Workers to Paycheck Sooner for Less
The financial tech (fintech) startup received $25,000 in 2018 from the San Antonio-based Alamo Angels after completing the Geekdom pre-accelerator program.
Read more: After the Geekdom Pre-Accelerator, FloatMe App Secures $25K from Alamo Angels
Scott Shane, managing director at Comeback Capital and deal flow partner at Right Side, is also a professor at Case Western Reserve University, where he met and taught FloatMe co-founder and Venture for America (VFA) alumnus Ryan Cleary.
FloatMe was one of six startups that participated in the 2019 VFA accelerator in Cleveland. During the team’s pitch, it was the startup’s 70,000 waitlist to use the FloatMe app that caught Shane’s attention.
“FloatMe is very early, but they’re solving the real problem of overdraft fees,” Shane said. “What no one else is doing is providing users a quick turnaround advance in small amounts to help people avoid overdraft fees. The monitoring of a user’s balance also helps customers to avoid the overdraft problem in the first place.”
What struck Shane about FloatMe, who sees “lots of companies, about 2,000 venture ideas a year,” was their focus on solving a substantive problem with payday lending. Comeback Capital focuses on early-stage companies based in the Midwest while Right Side is a high-volume investment firm involved in all Techstars accelerator cohorts.
Because Scott is also connected to both Comeback Capital and Right Side Capital, it led to the co-investment in FloatMe.
The Cleveland connection, of course, helped FloatMe, Cleary said. He was born and raised in Cleveland and still has deep roots there. Cleary and Sanchez met during the October 2017 3-Day Startup Weekend held at Geekdom. Chris Brown also joined the team as the company’s chief technology officer.
The six-member company works out of spaces within Active Capital’s office and is looking to hire a developer. With 2,000 paying customers, FloatMe’s growth has been organic, Sanchez said.
The focus now is on onboarding the 70,000 customers on FloatMe’s waitlist, Cleary said. As FloatMe looks to grow its customer base beyond those on its waitlist, they will be “laying the groundwork for the next raise which will help us scale,” Cleary said.
“[The 70,000 wait list] has grown from word of mouth,” Cleary said. “The fact that we have such a sizable list tells us that this is a huge problem for Americans living paycheck to paycheck trying to manage their financial lives.”
Featured image is of the FloatMe team. From left: FloatMe chief operating officer Ryan Cleary, chief executive officer Josh Sanchez, and chief technology officer Chris Brown. Courtesy photo.
