UK-based Wagestream, a flexible wage app, has secured 40 million pounds in funding. Balderton and Northzone led the round.
London, 20 May 2019 — Flexible wage app, Wagestream, which campaigns against payday poverty and seeks to end the financial stress caused by the monthly pay cycle, has secured the largest social impact investment ever in the UK.
The firm’s latest round sealed this week — with early-stage venture capital specialists Balderton and Northzone co-investing together — adds £15m resulting in a total raise of £40m ($52.5m).
The funding total means that Wagestream — which allows staff to draw down a percentage of their earned wages any day of the month for a flat £1.75 fee — has attracted the largest pool of social impact investment in UK history.
With Wagestream, there are no loans involved and therefore no interest is charged.
Tech investor Balderton has raised £2.7bn over 19 years and has backed startups including Revolut and Nutmeg, while Trustpilot-backer Northzone has raised €1bn, targeting more than 130 companies since 1996.
This latest round comes on the back of earlier investments from QED, co-founding Investors in Wagestream, the Joseph Rowntree Foundation, the London Co-investment Fund (LCIF) and Village Global — a global VC backed by leading entrepreneurs including Bill Gates and Jeff Bezos — on top of a wholesale funding facility of up to £25m from specialist savings and lending bank, Shawbrook.
Venture capital and professional funders measure the investment worth of companies by looking at the full range of their capital resources.
Wagestream is on a mission to end in-work poverty, eradicate payday loans and destroy the ‘Poverty Premium’, whereby people on low incomes pay more for a range of essential products and services such as insurance, energy, and credit.
Wagestream is doing this by short-circuiting the monthly pay cycle — an antiquated monthly windfall that forces workers into the hands of payday lenders and other high-cost lenders when they approach the end of the month or face unexpected expenses.
Rapid adoption of the Wagestream platform by UK corporations proves employers are willing to invest in staff financial wellness and tackle in-work poverty.
Employers from across the private and public sphere including Rentokil Initial, Hackney Council and Roadchef have identified a number of CSR and HR advantages to the service.
For example, staff have greater financial security, which breeds loyalty, and employers trying to fill overtime shifts, particularly during unsociable hours, have noticed it becomes easier to do this once they use Wagestream.
This is because employers can elect to give workers access to that pay as soon as their shift is over — thereby re-establishing the link between work and reward. In fact, research shows that shift workers choose to work 22% more hours on average once enrolled in Wagestream.
The Joseph Rowntree Foundation’s investment came through the Fair By Design Fund, a movement committed to tackling the Poverty Premium by changing essential services so they don’t cost more to low income consumers. It is a joint partnership with JRF, Big Society Capital, Barrow Cadbury Trust and Tech Trust.
Wagestream is also a supporter of Finance For Good — a collective of fintech services firms committed to improving the financial wellbeing of everyday people.
Peter Briffett, CEO and Co-Founder, Wagestream, commented:
“The feedback we are getting from private companies and public sector customers alike is that staff are happier, more productive and have greater financial security once they start using our service.
“The antiquated monthly pay cycle inflicts huge financial damage on household finances and its days are numbered. Too many people are pushed into a corner by in-work poverty and forced into the hands of payday lenders and high-cost credit.
“Wagestream is at the point of scaling up rapidly and this historic investment is going to accelerate the pace at which companies across the country liberate their staff from payday poverty and the disastrous social consequences that stem from it.”
Dr. Thomas Hellmann, Professor of Entrepreneurship and Innovation at Oxford University’s Saïd Business School, added:
“This fund raising is an example of the convergence of VC and impact investing, a Fintech venture attacking a pressing social problem with an innovative business approach. Fintech is constantly evolving and maturing, so it is exciting to see it deliver not only commercial, but also social, value.”
Nigel Morris, Co-Founder and Managing Partner of QED Investors, commented:
“We are extremely proud of our investment in Wagestream. As its co-founding investor, we’ve worked closely with management since its inception, helping Wagestream grow from a seed-stage start-up into the dominant player in the space.
“Employers and employees love this business, and so do we. It’s a unique combination of high customer satisfaction, strong leadership, rapid growth and social good. Very few companies check all those boxes. We’re thrilled to be associated with Wagestream.”
Rob Moffat, Partner, Balderton Capital, added:
“We fell in love with the strong product-market fit of Wagestream. We very rarely hear such universal positive feedback from all who have tried a product. Companies used to take an active role in supporting the financial health of their users but this has slowly been eroded, to the extent where employees paid at the end of the month are effectively subsidising their employer for 29 days a month. Wagestream starts to restore the right balance.”
Jeppe Zink, Partner, Northzone added:
“Fintech is delivering where the financial services industry has failed, by putting consumers’ financial wellness at the core of the industry. This is not just a new business model, it’s a fundamentally new way of doing business. We think Wagestream can be the leading light for a consumer-led era of finance, and we are excited to partner with them on the journey.”