Carlo Kobe and Scott Smith believed so strongly in the need for a debit card designed specifically for Generation Z that in 2021, at the ages of 19 and 21, respectively, they dropped out of Harvard and Cornell to build a startup called Hiss.
The pair desired to go beyond creating a debit card for the younger generation. They wanted to make use of the card as a solution to obtain credit, change into more financially literate, and ultimately achieve financial independence. They decided the best solution to achieve this goal was to make it an AI-powered budgeting product at its core and offer game-based financial literacy courses presented in a “fun and interactive quiz format.” The goal demographic is college students between the ages of 18 and 24.
Interestingly, the duo also decided to build their very own infrastructure from scratch, somewhat than, as they put it, “become a patchwork of fintech SaaS providers.” It’s also value noting that given all the recent upheaval in the world of banking-as-a-service (BaaS) startups, Fizz way back opted for a direct banking partnership somewhat than offering its services through an intermediary or third-party BaaS.
They spent the first two years building their tech stack and partnering with Lead Bank, a Kansas City bank acquired by former Block executive Jacqueline Reses in 2022, before Fizz made its debit card publicly available in early 2023.
Now Fizz is announcing exclusively to TechCrunch that it has raised $14.4 million in seed funding led by Kleiner Perkins, with participation from SV Angel, Y Combinator, New Era Ventures and the founders and operators of several unicorns, including Handshake, Postmates and Public.com. The startup made it through the Y Combinator Summer 2021 cohort.
Over the past 12 months, Fizz has grown from zero to “tens of thousands” of shoppers, they each say. This offer is available to students from over 300 colleges and universities, including all Ivy League schools and all top 25 schools as ranked by US News & World Report. The founders say Fizz, whose annual card volume will top nine figures this 12 months, works directly with schools. It also uses campus ambassadors and TikTok to advertise its offerings.
Fizz is an abbreviation of Financial ANDIndependence for Gen WITH, with an extra Z added for punch (and to not be confused with one other startup of the same name which is a social network for college students). Its 11-person team includes senior engineers and designers from corporations resembling Meta, Microsoft and Amex. It competes primarily with cards from big banks like Discover, Capital One and Bank of America, in addition to Rocket Money and Credit Karma in its budgeting and AI feature set.
German immigrant Kobe (CEO) and Smith, who is from Detroit, said they were inspired to found Fizz by their very own experiences in their youth.
“I couldn’t get a credit card because my parents couldn’t sign for it,” Kobe recalled, “and I didn’t want to put down a big deposit. And because I had no established credit history, I was denied repeatedly.”
He initially thought it was an international student problem, but then realized it was a general problem for this demographic.
Scott points out that New York-based Fizz decided to supply college students a different route into the construction lending market.
“College students are an extremely homogenous group. And if you ask any of them, they will tell you that they are averse to credit cards, but they are not necessarily averse to loans,” he told TechCrunch. “So possibly half of them may know they should vaguely build credit, and the other half don’t know they should build credit. So our perspective tells them, “OK, you need a loan to rent an apartment and buy a car and even get a mortgage one day.”
Knowing that this group of shoppers needs not only credit but also the tools to learn to make use of it correctly, Fizz offers a suite of monetary literacy content in addition to budgeting software and other assistance.
“It’s not like our cardholders just have a payment device; they have access to budgeting tools, savings tips and a one-on-one financial advisor,” Scott said.
The two are proud to have brought the Fizz product to market through two direct banking partnerships. In addition to Lead Bank, it also cooperates with Mastercard and credit information agencies.
“We created our own accounting book. We built our own underwriting methodology and obtained licenses,” Kobe said. “I think in fintech you have to do the hard part. And we did it and I think it really helped us.”
The company makes money primarily from trade-in revenue and partnerships with other brands it recommends (in some cases at discounts) and from optional subscription products. The credit building offer is free.
The recent capital will largely be allocated to expansion and execution of the product development plan, in addition to further hiring of employees in sales, marketing and engineering departments.
“There are a lot of AI products we would like to release,” Smith said.
Kleiner Perkins partner Ilya Fushman, who joined Fizz’s board as a part of the financing, said his firm first invested in Fizz when it participated in the YC cohort in 2021. Many people, including himself, are getting their first bank cards on university campuses.
“This is the time when consumers leave home and become financially independent. Unlike traditional credit cards with hidden fees and high interest rates, Fizz offers a line of credit based on your spending patterns, without the need for credit checks, co-signers or security deposits,” TechCrunch said. “Most of the financial products available in the initial market are not superb. They typically have low limits, high fees, few discounts, require co-signers, and lack effective guidance for young, financially independent adults on their journey. “
Fizz is one of several fintechs aiming to serve the expansive Gen Z market. For example, Frich, a financial education and Gen Z community, just raised $2.8 million in seed funding.
Also in January, Alinea Invest, an AI-powered fintech app offering wealth management aimed at Gen Z women, raised $3.4 million in seed funding ahead of the launch of an AI virtual assistant that may help users with their investing needs. Bloom, a zero-commission stock investing tool for teen investors, got here out of hiding last July, announcing that it had reached 1 million downloads after launching in February 2022. Meanwhile, in March, Miami-based Onyx Private, a digital platform backed by Y Combinator bank that provided banking and investment services to high-earning millennials and Gen Z, announced that it was discontinuing its banking operations and shifting to a B2B model.
In a similar vein, though perhaps to a lesser extent in terms of comparisons, we have Copper, which is really geared more towards teaching teenagers about funds, but which has run into trouble with its debit card offering attributable to the BaaS industry mess. There’s also Step, a digital banking service aimed at teens and young adults backed by NBA star Stephen Curry, and Current, which began life as a debit card for teens controlled by parents but has expanded over time to supply other services.