When Kristy Kim started TomoCredit at the beginning of 2019 she had a mission to help international students get credits more easily.
Three and a half years later, that mission has evolved. TomoCredit, which aims to help young adults who are in good financial health but do not have a credit score, no longer focuses solely on immigrants.
Today, Tomo is expanding its focus to a broader group of people in the United States who want to “build credit quickly,” including domestic students and SMEs.
“As we grow, we realize that the target market we can tap into is much larger than we anticipated. We now know that the credit invisible goes way beyond immigrants”, CEO Kim told businesskinda.com in an interview.
Tomo differs from many other credit offerings in that it does not rely on FICO scores to underwrite. Rather, it applies to a “patented” underwriting algorithm (Tomo Score) to identify “high potential borrowers” with no credit score. The TomoCredit card requires no credit check, no deposit, 0% APR and no fees. the fintech offers cardholders credit limits up to $30,000 based on their cash flow. It only makes its money from interchange fees charged to merchants, not directly to consumers.
Sound risky? Well it is.
But Kim argues that the company’s default rate — 0.11% — doesn’t reflect that risk. (For context, American Express reports a default rate of 2.5%.)
“Our customers spend thousands a month, far more than any other fintech customer,” she said. “We learned this by talking to other neobanks.”
“Our customers have no financial problems… Once you identify them and give them a card, they spend a lot and they don’t default. Our performance was great and that gave us and our investors the confidence to scale.”
To extend credit to even more Gen Zers, TomoCredit announced today that it has raised $22 million in a Series B funding round at a post-money valuation of $222 million. It has also secured $100 million in debt financing. Since its inception, TomoCredit has raised $39 million in equity.
The increase follows a year in which the startup reported seeing 1,000% revenue growth, which Kim described as “primarily organic.” Tomo is on track to deliver another 1,000% year-over-year revenue growth, she said.
Kim declined to reveal how many cardholders Tomo has, but did say it has received 2.5 million applications over time.
The fundraiser, Kim notes, was a “locked deal” before the market flipped and a valuation agreement was reached earlier this year.
The company plans to use its new capital to diversify its product offerings, such as offering auto loans and mortgages. Yes, mortgages. Kim sees the fact that the mortgage market is currently being hammered as an opportunity.
“During the pandemic, we saw a large wave of applications. During a market downturn, we see a new spike of customers coming to us,” she told businesskinda.com. “In times of uncertainty, customers become more aware of their personal finances.”
Since its foundation, Tomo has worked with a lean mentality. Today it has 50 employees. Some of the new capital will also go toward hiring more engineers and product people, Kim said.
Interestingly, Morgan Stanley and Mastercard’s Next Level Fund participated in the “oversubscribed” equity portion of the funding, which includes the participation of GoldHouse, Asian Hustle Network and Hyphen Capital. The debt was provided by Silicon Valley Bank.
“As a first-generation South Korean immigrant, I wanted to help immigrant communities achieve their American Dream faster with TomoCredit,” Kim said. “It has been great to partner with minority-focused funds that really understand Tomo’s mission.”
Alice Vilma is co-portfolio manager of Morgan Stanley’s Next Level Fund, which invests primarily in technology early-stage and tech-enabled companies with women or diverse executives as part of their founding teams. She said she was drawn to TomoCredit because she was impressed with Kim’s ability to identify a problem as a young female product and turn it into a new financial product.
“She understands what clients like them want and need from the financial services industry,” Vilma wrote via email. “We are excited to be part of TomoCredit’s journey as it works to democratize access to credit and build a more inclusive credit landscape.”
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