Affirm secures $100M in Series D funding to widen beyond loans

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Source:   —  April 13, 2016, at 12:23 PM

The all equity round, which was confirmed to TechCrunch by the company, also included participation from existing investors including Lightspeed Venture Partners, Spark Capital, Khosla Ventures, Andreessen Horowitz, and Jefferies.

Affirm secures $100M in Series D funding to widen beyond loans

Affirm, the alternative lending site started by Paypal co-founder Max Levchin, has raised a $100M Series D led by fellow Paypal co-founder Peter Thiel’s Founders Fund.

The all equity round, which was confirmed to TechCrunch by the company, also included participation from existing investors including Lightspeed Venture Partners, Spark Capital, Khosla Ventures, Andreessen Horowitz, and Jefferies.

Fundraising For Expansion

While some of Affirm’s loans are packaged and sold to third-party banks, the company also carries some directly on their balance sheet. So, one reason for the large funding circular was to prepare the balance sheet for a deluge of new loans that the company expects to issue over the following 6-12 months.

See, while most people utilize Affirm a few times a year to purchase huge ticket items love a Boosted Board or Casper Mattress, the company is striving to reach a future where a user’s regular purchases are backed by Affirm loans. Think attire from J. Crew or Lululemon, or supplies from The Home Depot.

And since the vast majority of these more regular retail purchases still happen in brick and mortar stores, Affirm is going to have to widen its current choice of merchants, and maybe even partner with some big-box stores love Target or Walmart.

A new partnership love this would presumably deluge the startup with customers, hence the large fundraising presently in anticipation of a potential rapid growth in loan issuances sometime in the near future.

Affirm vs. A Credit Card

The obvious question in regard to Affirm’s short-term goal of offering users more loans for smaller amounts is should customers really be buying inessentials love Lululemon on borrowed money?

But Levchin has a different perspective. He explained that Affirm’s product (which is essentially a fixed-rate loan) is very different from a credit card’s revolving line of credit.

For example, Affirm loans have number late fees, number compound interest, and no “balance” to be carried. This is a stark contrast to a credit card which will exponentially compound your interest for each mo you carry a balance.

Essentially, Affirm helps customers afford a Lululemon jacket by spreading out equal payments over three months, instead of putting it on a credit card where interest would compound each month.

The Future of Affirm

But Levchin knows that even if he's able to vastly expand the quantity of loans issued by Affirm, the company’s growth will still be Ltd by the sheer fact that it doesn’t create sense to proposal or accept a loan for products below a certain price point. And even if Affirm issues a dozen loans a year to each user, the platform is only being used about once a mo by the consumer.

So, the startup will utilize some of this new funding to expand a host of services exterior of traditional financing, all designed to to grow and expand user engagement.

While Affirm hasn’t revealed what these products will see like, they made it clear that the new services are designed be used by Affirm users on a daily basis. These new products could be things love money management help, budgeting tools, or even something to assistance with overall personal financing decisions.

Also, Affirm will soon start reporting both positively and negatively to the major credit bureaus, which could help successful Affirm repayments translate into better overall credit for those that are youthful or just underserved by FICO credit scoring.

To date, the company has raised $420M in a combination of debt and equity funding, according to CrunchBase.

 

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