Happy Money, the Costa Mesa, California-based fintech that operates a marketplace that hooks borrowers up with credit union lenders, has raised $70 million in venture funding at a valuation of $495 million.
The Series D round of funding was led by CMFG Ventures, the venture capital arm of CUNA Mutual Group. The round is double its previous fundraising efforts and is more of a strategic investment. CUNA Mutual Group does business with 95% of the credit unions in the U.S. giving Happy Money access to more partners. Under the investment deal, Happy Money will work with CUNA Mutual’s sales force to reach more credit unions.
“This business has a lot of momentum,” said Scott Saunders, chief executive and founder of Happy Money. “We did $35 million in revenue last year and we are currently at a $65 million annualized revenue run rate.” In July of last year, Happy Money announced alliances with Alliant, First Tech and Technology Credit Union, the three credit unions, to provide debt elimination loans. The startup has facilitated $1 billion in debt elimination loans to its customers since then.
Happy Money is among the crop of fintechs that are going after the lending market, hooking borrowers up with financial institutions that want to lend money. It’s taking a different approach in that it is helping customers get rid of credit card debt or what the startup calls “sad” money. At last count, the nation owed $870 billion in credit card debt, with slightly more than half of U.S. adults owing money on at least one credit card. Many people are stuck in a cycle where they pay the minimum due each month racking up expensive interest along the way. On its platform customers can get a loan to pay off high-interest-rate debt, use its digital tools to save more money and evaluate their “happy” and “sad” spending patterns. The company has created a Happy Score to measure the financial well being of an individual using cash flow, savings, behavioral and psychometric data.
“Credit card debt makes people sad and saving makes people happy,” said Saunders. “Because of that, our mission is to help borrowers become savers and help people be happier.” The executive said proceeds from the Series D round will go to build out a national network of credit union partners to offer low-interest rate loans to its customers. Happy Money does plan on adding other financial institutions as partners in the future. The average loan size at Happy Money is $15,000 with most borrowers having a FICO score of at least 700. Happy Money uses its own data and algorithms to assess the creditworthiness of borrowers. Saunders said based on its underwriting criteria, the average borrower’s credit score is around 740.
While Happy Money and other fintech lenders have been growing very few have operated during an economic downturn. Lots of them including Happy Money were born out of the Great Recession. With signs pointing to a economic slowdown, it's not clear how these fintech lenders will fare. After all, when the economy slows, people spend less and in some cases lose their jobs. That could result in them defaulting on their loans. Saunders acknowledges that any company lending money in a recession will experience higher levels of defaults, but he said the type of lending matters. “Prior to the Great Recession revolving credit card debt increased every year for forty years,” said Saunders. “From 2008 until 2014 $200 billion of consumer credit card debt was deleveraged. Of that 25% were defaults but a much greater percentage of consumers were pulling back and paying off their balances. Recessions drive people to pay off their balances.”
