When a hard-nosed venture capital firm like Andreessen Horowitz puts money into your startup, you know you have money-making potential. Brooklyn fintech startup Propel has long had users for its app aimed at food stamp recipients. But, after its latest $4 million funding round, it’s sure the product is a bona fide commercial proposition as well as one helpful for low-income Americans.
“It’s a strong piece of commercial validation for a company like ours that operates in a somewhat non-traditional space,” says CEO Jimmy Chen in an interview. “If you talk to Andreessen Horowitz, they would tell you they don’t see this as a . . . special case deal. We see a real business opportunity in serving low-income Americans at scale.”
The mobile bank-like Fresh EBT app helps users to budget EBT (electronic benefit transfer, the name for food stamps and other welfare programs) income and outgoing payments. It incorporates a map showing nearby stores and farmers markets and food pantries that accept EBT, and a calculator feature, so users know how much of is left in their EBT account as they’re shopping. EBT payouts average $125 a month, and the app means recipients can check balances online without having to call a 1-800 number.
More than 250,000 people a week use the app, which was launched in early 2016. And Chen says there’s a good opportunity to reach more of the 45 million monthly recipients and their annual $70 billion grocery budget. Propel plans to offer an advertising platform for grocery chains and food companies and to expand its user-base by offering more grocery discounts.
Andreessen Horowitz is joined in the funding round by the Omidyar Network, a financial inclusion specialist fund, and the Durant Company, Kevin Durant’s investment vehicle. Propel already works with the AARP, and Foodtown, a Northeast grocery chain, both of which offer discount offers through Fresh EBT. The hope is to save users money as well as help them manage it, Chen says.
Propel is one several startups targeting customers traditionally underserved by either banks or fintech. “There are not a lot of tech entrepreneurs who understand the challenges of low-income Americans, so there are not a lot of tech entrepreneurs who start these types of companies,” Chen says. “A lot of entrepreneurs understand what it’s like to be a twenty-something male who’s dating in the city, or trying to buy lunch, or getting their dry-cleaning done. That’s why there are so many of those types of companies.”
Chen’s family emigrated to the U.S. from China when he was small. Though they didn’t live on food stamps, Chen says his family was hardly wealthy. Another member of the Propel’s five-member team, lead designer Kaela Gallo, did live on food stamps for a time, giving Propel personal insight into its target market, he says.
Chen argues there’s often a lack of trust among low-income users towards financial services because their experiences have been “fairly negative, around fees and and predatory services.” “There’s been a level of trust missing among our users when it comes to the financial services industry and we’re trying to overcome that,” he says.
Propel was part of the 2015 cohort at the Financial Solutions Lab at the Center for Financial Services Innovation (CFSI), which is also an investor. (We previously wrote about Propel when its proposition was enrolling people to food stamp services). “At the end of the day, EBT dollars are going into the grocery industry and they are hoping to attract EBT dollars,” Chen says. “By helping consumers save money, grocers can compete for those dollars and we can offer a win-win experience for our users and the retailers.”