Karat Financial, a fintech offering credit cards tailored to the creator and influencer community, said Thursday it attracted $15 million in debt financial and $11 milling in equity capital led by Union Square Ventures with participation from GGV Capital and SignalFire, according to TechCrunch and Fast Company.
Karat Financial’s target demographic is the self-employed creator economy, which includes Instagram influencers, Twitch streamers, and TikTok and YouTube creators, among others. Eric Wei and Will Kim, Karat’s co-founders and co-CEOs, founded the startup in 2019 and launched their first product, the Karat Black Card, in 2020.
"There are so many existing traditional institutions out there, why are people coming to us? Because those traditional institutions haven’t done a good job of reaching out to a new population that’s underbanked," Wei told Fast Company. "We want to be the very first and top choice for creators to come to and build more for them. All the existing [banks] out there haven’t done that yet. They failed. That’s why we’re here."
Karat Financial’s funding boost comes as the creator and influencer marketing industry is expected to be valued at up to $15 billion next year, according to a 2019 estimate by Business Insider Intelligence.
Startups like Karat Financial are betting their tailored services and knowledge of the growing space gives them an edge over traditional institutions who may not understand or cater to the industry’s business model.
"Banks need to understand you in order to trust you, and it’s only when they trust you that they’re willing to give you credit, process your payments and hold your money," Wei told TechCrunch.
Karat’s Black Card, which is offered by a partner bank, determines a user’s credit based on criteria such as their social media following and current revenue.
The average Black Card cardholder has more than $100,000 in the bank and 1 million combined followers on their social media platforms, Kim told Forbes last year.
The fintech plans to move beyond credit cards and offer a suite of financial tools, including bank accounts and tax preparation services.
"[T]hat financial business backbone is what we’re building," Wei told Crunchbase last year.
Other fintechs and neobanks have launched in recent years aiming to offer specialized services to the startup, gig and freelance economy.
San Francisco-based Brex, which launched in 2017, targets startup businesses with its banking services and credit cards. The fintech assesses a startup’s cash flow and financial backing to determine creditworthiness. The company is also pursuing its own banking license via the industrial loan company charter route.
Lance, which closed a $2.8 million seed round in May, targets the gig economy, and uses automation to address the typical volatility of a freelancer’s income by creating a series of sub-accounts for the user.
That New York City-based digital bank distributes a portion of a user’s payments toward their personal salary, tax withholdings, business expense balance and a savings account.
Challenger bank Better Financial aims to solve insurance challenges for gig workers. The startup, which launched last month, uses account holders' current payroll data and past payroll history to underwrite low-interest emergency loans.