It’s hard to build credit if it’s hard to even get it.
Loans and credit cards are not out of the question, but they are usually offered at high interest rates to those with the least ability to pay.
An Austin-based startup seeks to help people build or gain credit without going into debt. And that startup Steraphihas completed a $15 million Series A funding round to reach that goal.
Lamine Zarrad launched StellarFi in 2021 after selling another fintech company he started, banking app Joust, to ZenBusiness in 2020. Zarrad was struggling to receive credit as an immigrant and was looking for a way to make it accessible to others.
He started StellarFi on the premise that people should be able to benefit their credit scores simply by doing mundane things like paying their rent and bills on time. bills and recurring payments such as rent, subscriptions, and utilities by charging a subscription ($4.99 or $9.99). Its goal is not only to help consolidate payments, but also to help members make payments on time. StellarFi then reports on-time payments directly to his four major credit bureaus (Experian, Equifax, TransUnion and Innovis).
The company does not require credit checks or deposits and does not charge interest. Members claim to see an average 26 point increase in the first month. The average credit score of users at signup is 580.
As a public benefit corporation, StellarFi’s mission is to help “financially disadvantaged” communities build good reputations. The company plans to build a marketplace with new capital and connect members to lenders.
Zarrad said the company’s growth has exceeded expectations since it launched in late June. StellarFi surpassed his $2 million annual recurring revenue (ARR), nearly double his forecast, as he closed out the year.
“In 134 days, we hit $1 million in ARR,” he told TechCrunch. “I’ve built unicorns, but I’ve never seen growth like this.”
Zarrad didn’t disclose the company’s new valuation after its recent funding, but shared that it’s a significant “up round.” Repeater Acrew Capital led Series A with Trust Ventures, ATX Venture Partners, Dream Ventures, Interplay, Accomplice Ventures, Vera Equity, FJ Labs, Fiat Ventures, Gainels, Kelmhurst, Oyster Funds, Hilltop Ventures, Permit Ventures, Kindergarten Ventures , J2 Capital, Socially Financed, Kapital Ventures.
“All seed investors participated in this round,” said Zarrad. “And we’ve added new things. Everyone’s energized.”
StellarFi was to close $5 million in venture debt from Signature Bank for the runway extension. It is still planning to secure a loan from another agency.
Last September, Experian released a new product called Experian Boost, presumably in response to the growing number of fintech companies tackling this problem. Experian Boost, in its own words, helps people “get credit” by paying their rent on time. According to Zarad, With Experian Boost, users link their bank accounts via Finicity, automatically identify certain recurring invoices such as utility bills and rent, and extract that data into an internal model to provide alternative Designed to demonstrate payment behavior. This model only exists in Experian, he points out, as TransUnion, Equifax, or Innovis can’t access it.
“More importantly, lenders don’t use it in their credit decisions,” he added. In contrast, as mentioned above, StellarFi acts as a bill payment manager, helping members keep payments on time, reporting payments to all four credit bureaus, and matching all credit score models. Influence.
“Unlike Boost, StellarFi does not report payment histories derived from linked bank accounts. Instead, StellarFi actually pays bills and members refund us,” Zarrad told TechCrunch. told to “So we can create a credit relationship that reports to every bureau that generates the consumer reports that the lender uses. In other words, our members are covered no matter which credit report the lender pulls.”
company is adding affiliate partners and investing in SEO, and according to Zarrad, it’s growing even faster this year.
“We have deals with neobanks and other fintechs are sending their customers to us,” he said. “We are still onboarding lenders and financial institutions. ”
StellarFi has put a lot of eggs into its affiliate basket, said Zarrad. Because he believes it creates trust and conversions are “much higher” than “going online and buying people on social media.”
The company intends to build more features and is still developing a mobile app.
“Our next goal is to completely conquer the mobile experience,” he said. “Once this is done, members will not only have better credit but also access to capital. We want to help them get that money through our partners.” .”
Surprisingly, so far, Zarrad says StellarFi has “zero defaults” but has seen a ton of fraud. “But we built advanced algorithms to catch it proactively and isolate the would-be fraudsters.”
Acrew Capital’s John Gardner said his firm initially invested in StellarFi at the seed stage because Zarrad and his team “given the success of building Joust to expand another fintech business.” He said it was because he had “strong confidence” in his abilities.
“Stellar’s approach is exciting because it addresses bills where the consumer is: the Internet. Stellar also reports on a broader set of FICO models, meaning that the score benefits apply to larger loans such as autos and mortgages. You can,” he wrote in an email. “When it came time for Series A, it quickly became clear that the team at Stellar could execute their plan with a geeky eye. We scaled our ARR to over $1M within 24 hours and set up our own distribution partnerships to efficiently reach the right audience.For consumer fintechs, especially with clear prospects for profitability. , we are very excited about these growth characteristics.”
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