Stack of Credit Cards

In the U.S., household debts are rising and have grown to $14 trillion. Now, a startup called Credit Sesame has announced its funding round and plans for an IPO. It has also highlighted its success and the signs of the demand for its services. Credit Sesame helps consumers check their credit card scores and gives options to rebalance the loans to improve their current financial status. The CEO of the company, Adrian Nazari stated that the company has just raised $43 million. The revenue of the company has been increasing by 90% every year for the last five years. Nazari said that this is the last round before the company goes public.

Currently, Credit Sesame isn’t disclosing its valuation because this new round will add more money to the company.  Nazari stated that the value of the company would be over $1 billion in the coming months. The company has raised $110M in the new funding round.

There is a mix of debt and equity in the round and consists of both financial and equity investors. The round has been led by the ATW Partners and it includes previous investors. The previous investors of the company include Inventus Capital, Globespan, Menlo Ventures, Symantec, Capital One Ventures, IA Capital Groups, and Stanford University. New investors would also invest when the round expands.

The fact that the company is raising both debt and equity is quite interesting. Nazari stated that the company has been profitable for quite some time. Therefore, it would prefer less dilution when it raises money now. The company will use this new funding to work on its artificial intelligence algorithms and expand its business. Although there are many companies currently working in the fintech arena, Nazari said that Credit Sesame would work on some mergers and start after its IPOs.

Some direct competitors of the company include NerdWallet, Experian, ClearScore, Equifax, Credit Karma, and many others. Even Apple has introduced a virtual credit card. Nazari stated that the main thing that differentiates Credit Sesame from the crowd is its approach and the way it helps customers in managing credit score.

The Company has used the term “Personal Credit Management.” It has built an algorithm on a simple score provided by TransUnion, which is a well-known agency that calculates credit scores. The scores also contain factors that show consumers the action they can take to improve their scores. The checking of initial score is free and evaluating options to rebalance the debts and loans is free too. However, users who take a new credit card or transfer balance, take products through the engine, or use other premium services of the company, would have to pay.

The Credit rating industry has gone through several complications in recent years. The first big news was the breach at Equifax. The other one was when the Consumer Financial Protection Bureau fined Equifax and TransUnion for misrepresenting user’s data and not being transparent. However, Nazari stated that this had a good effect on the company.

Nazari said, “The overall effect from Equifax has been positive. These kinds of incidents create awareness and stress on the need for consumers to check their credit. These examples also show that identity theft breaches can happen at any time.”

Online security has become like unknown territory for people. We can prepare ourselves as much as we can but we never know when a breach would come. We also don’t know when someone would use a party of our disclosed information and steal our money. However, Credit Sesame is using transparency to protect online financial identity.

Kerry Propper, the managing partner at ATW Partners, made this statement, “Credit Sesame is revolutionizing the whole credit card industry. Initially, the consumers considered credit cards as black boxes with a lot of mystery. However, Credit Sesame is disclosing things as easily digestible information that would improve the user’s financial health. We are quite thrilled and happy to work with Credit Sesame.”