Six months after his $20 million Series A, payroll connectivity platform Pinwheel just announced that it landed an additional $50 million in a round led by new investor GGV Capital.
Reel serves neobanks and fintechs like Block, Acorns, and Current by providing application programming interfaces (APIs) tied to payroll, earnings, and employment data. Historically, the systems for providing this data have been inefficient and clumsy, a problem the Pinwheel co-founders recognized when working on a startup that helped companies provide pre-tax benefits to their employees.
Kurt Lin, Anish Basu and Curtis Lee, who met through previous work experiences, hit a snag when implementing their original solution because they found they had difficulty connecting to payroll systems. That’s when they decided to turn to building an API to solve this problem at scale, Lin told TechCrunch in an interview.
The company’s APIs allow its customers to access more reliable information about individuals’ payrolls and employment, in part because they track “non-traditional” revenue sources like payments made through gig platforms like Uber or apps like Venmo, Lin said. Its flagship products include direct deposit transfer, income and employment data, and paycheck-linked loans, and the data it aggregates covers nearly 80% of those employed in the United States, according to the company.
Pinwheel’s customers can use this information for a range of applications – from providing access to earned wages to employees, allowing them to access the money as soon as they have earned it rather than waiting for a paycheck to be deposited into their bank account, activating paycheck-linked loans, which are considered less risky than traditional unsecured loans that require borrowers to make a voluntary bank transfer to repay funds.
Despite competition from other players in the somewhat crowded Payroll API space, Pinwheel has demonstrated significant traction in the market and hopes to differentiate itself by creating a comprehensive data “revenue layer” for its customers that spans the beyond just payroll information.
Its platform runs more than 4.6 million processes per month, a 400x increase from last year, and the company leads its market in customer conversion rates, according to the company. Pinwheel increased its annual recurring revenue by 177 times in 2021, according to the company, although Lin declined to share further details on its historical or current revenue figures.
Lin said his success can be attributed to three key factors: business traction, an experienced team and a mission-driven approach focused on “improving financial results for clients who do not have access to financial products. affordable”.
“One of our clients, for example, may be a teacher or a nurse who may be in the same position for five or six years, may have a FICO [credit score] of 550, and thus be declined from any affordable financial product. We can actually show that their income stability is totally there, they’ve been employed for a long time and they’re actually going to perform a lot better [in repaying a loan]“, said Lin.
Pinwheel has hired a number of its employees from the $13.4 billion API firm Plaid, known for enabling bank account connectivity for fintechs.
“We are the only player who managed not only to take one or two [hires from Plaid], but we actually have a number of ex-employees on our team. Our vice president of engineering came from Plaid, our sales manager came from Plaid, many core engineers were also building the platform at Plaid. We have all this institutional knowledge of how to do it the right way, which has really allowed us to outperform our competition with having these people on the team,” Lin said.
Pinwheel is also the only company to provide direct deposit and payroll commutation data that is classified as a Consumer Reporting Agency (CRA) under the Fair Credit Reporting Act, which means that if consumers are harmed by Pinwheel’s data, the company would be legally liable. . Although operating as a regulated CRA requires a “herculean amount of work”, it shows that Pinwheel is willing to “stand behind the integrity of [its] data,” Lin said.
A number of strategic investors have also backed Pinwheel for the first time in the Series B round, including AMEX Ventures (the VC arm of American Express), Indeed, Kraken Ventures, Franklin Templeton. Existing investors Coatue, First Round Capital and Upfront Ventures also participated.
Pinwheel plans to use the new funds to triple its 70 employees, two-thirds of whom are engineers. Although the team will remain in charge of engineering due to the technical nature of its API-focused business, Pinwheel also plans to hire to advance its go-to-market strategy, revenue expansion, and marketing presence. , Lin said. It plans to eventually expand into areas like tax preparation by helping businesses leverage its revenue data in new ways, Lin said.
Just after Pinwheel first came out of stealth mode in June 2020, the company received more than 130 inbound messages from major banks like Wells Fargo and Citi, as well as a number of major fintechs, Lin said.
“It was kind of that light bulb moment for us because we realized that the platform we’re building is basically like a growth engine for all of consumer finance,” Lin said. “Whether you are a new digital bank, whether you are a GFP [personal finance management company], whether you’re a new tax product, a bank, or a lender that just needs better data for underwriting, there’s something about the building blocks of our platform that actually allows you to build not just what you want do now, but the future of your roadmap 5-10 years from now.
