TomoCredit raises $22M at a $222M valuation toward its goal of making credit scores ‘obsolete’ – Fintech

When Kristy Kim began TomoCredit in early 2019, she was on a mission to assist worldwide college students extra simply get hold of credit score.

Three and a half years later, that mission has developed. TomoCredit, which goals to assist younger adults who’re in good monetary well being however haven’t any credit score rating, is not simply centered on immigrants.

As we speak, Tomo is increasing its focus to a broader group of individuals in america who need “to construct credit score quick,” together with home college students and SMBs.

“As we’re getting greater, we’re realizing that the goal market we are able to tackle is manner greater than what we have been anticipating. We now know that the credit score invisible goes manner past immigrants,” CEO Kim instructed Fintech in an interview. 

Tomo is totally different from many different credit score choices on the market in that it doesn’t depend on FICO scores to underwrite. Moderately, it applies a “proprietary” underwriting algorithm (Tomo Rating) to establish “excessive potential debtors” and not using a credit score rating. The TomoCredit card requires no credit score verify, no deposit, 0% APR and no charges. The fintech presents cardholders credit score limits as much as $30,000 based mostly on their money stream. It makes its cash solely off of interchange charges charged to retailers, not off shoppers instantly.

Sounds dangerous? Effectively, it’s.

However Kim maintains that the corporate’s default charge — at 0.11% — doesn’t mirror that danger. (For context, American Categorical stories a 2.5% default charge.) 

“Our clients spend 1000’s per 30 days, far more than another fintech clients,” she mentioned. “We discovered this by speaking to different neobanks.”

“Our clients aren’t in monetary bother…When you establish them, and provides them a card, they spend so much and don’t default. Our efficiency has been nice and that gave us and our traders the arrogance to scale.”

To assist supply extra credit score to much more Gen Zers, TomoCredit introduced immediately that it has raised $22 million in a Collection B funding spherical at a post-money valuation of $222 million. It has additionally secured $100 million in debt financing. Since its inception, TomoCredit has raised $39 million in fairness.

The increase follows a yr during which the startup stories seeing 1,000% income development, which Kim described as “primarily natural.” Tomo is on monitor to do one other 1,000% year-over-year income development, she mentioned.

Kim declined to reveal what number of cardholders Tomo has, however did say that it has acquired 2.5 million purposes over time. 

The fundraise, Kim notes, was a “locked deal” earlier than the market turned and valuation was agreed upon earlier this yr.

The corporate plans to use its new capital to diversifying its product choices, akin to providing auto loans and mortgages. Sure, mortgages. Kim views the truth that the mortgage market is at present getting hammered as a possibility.

“Through the pandemic, we noticed a giant surge in purposes. Throughout a market downturn, we’re seeing one other peak of shoppers coming to us,” she instructed Fintech. “Throughout instances of uncertainly, clients turn out to be extra aware of private funds.”

Since inception, Tomo has operated with a lean mentality. As we speak, it has 50 workers. A part of its new capital may also go towards hiring extra engineers and product of us, Kim mentioned.

Curiously, Morgan Stanley’s Subsequent Degree Fund and Mastercard participated within the “oversubscribed” fairness portion of the financing, which included participation from GoldHouse, Asian Hustle community and Hyphen Capital. The debt was offered by Silicon Valley Financial institution. 

“As a first-generation South Korean immigrant, I wished to assist immigrant communities to achieve their American Dream quicker with TomoCredit,” Kim mentioned. “It has been great to associate with minority-focused funds who really perceive Tomo’s mission.” 

Alice Vilma is co-portfolio supervisor of Morgan Stanley’s Subsequent Degree Fund that primarily invests in early-stage tech and tech-enabled firms with ladies or various mangers as a part of their founding groups. She mentioned she was drawn to again TomoCredit as a result of she was impressed with Kim’s capacity to establish an issue as a younger feminine immigrant and switch it into a brand new monetary product.