Brian Mandelbaum had a hunch that cash-strapped consumers would be willing to give up some financial privacy in exchange for cash.
He was right. His startup, Klover, which provides consumers advances on their paychecks, has signed up 1.7 million consumers in about 18 months. The company just raised $60 million.
Borrowers don’t pay interest. Instead, they give Klover real-time access to their banking transactions. Companies such as Wayfair, DoorDash and GoodRX, pay Klover to advertise their products to borrowers based on their spending habits.
“What’s remarkable is how willing people are to share their personal information,” says Tim Calkins, a marketing professor at Northwestern University’s Kellogg School of Management. “People talk about the importance of privacy, but when there’s a reason to share it, they do it. There’s a certain school of thought by some people that all my information is out there anyway.”
The average borrowers are millennials between 25 and 35 with an average income of $50,000 to $60,000 who borrow less than $250, Klover says.
"We believe consumers’ data is an extremely valuable asset and should be used to their benefit," Mandelbaum says. “We don’t sell the raw data. (Marketers) come to us to match their customer data with our customers. Mostly they want to find new customers."
Klover plans to double its headcount of 30 by year-end. Mandelbaum says the app company raised $30 million in equity and $30 million in debt to fund the advances to customers. He declined to disclose revenue. Mercato Partners, based in Salt Lake City, led the investment round, which included Chicago-based investors Lightbank, Starting Line and Motivate Venture Capital.
Mandelbaum, who previously launched a video-advertising company called Clearstream TV, says advertisers are looking for better ways to target customers, based on actual purchase data rather than product searches. He says increasing privacy safeguards and the planned phase-out of tracking cookies by Google are forcing advertisers to find alternatives to reach new customers.
“We’re playing in a space where there are headwinds for marketers: privacy and getting access to first-party data, which is gone,” Mandelbaum says. “Dealing with brokered (consumer) data, it’s going away at a rapid clip.”
