Dave: Banking for Humans — A Startup Investment Thesis by Nolan Sheow

Overview

Dave.com is an online banking platform and personal financial management app. It is headquartered in Los Angeles and was founded in October of 2016 by Jason Wilk, John Wolanin, and Paras Chitakar. The name was derived from David vs. Goliath, where “Dave” is the financial protector against big financial institutions. Dave.com aims to help the 4 out of 5 Americans living paycheck to paycheck not just survive, but thrive.

Around three million users use Dave to help with budgeting and avoiding bank overdraft fees — enabling more and more of their customers to live more stable financial lives. The company started by looking for innovative solutions for simple annoyances — such as overdraft protection and budgeting. As the firm expanded and built out their customer base, they have attempted to reinvent other areas of finance — taking on no-interest cash advances, income creation, and unbounceable checks.

Goal of Dave.com

Protect the 99% by building approachable financial products.

The Problem

Banks make billions. Massive financial institutions raked in nearly $33 billion dollars in overdraft fees in 2016 alone. These profits are expected to rise to $40 billion by 2020.
One in four Americans overdraft. Over 25% of Americans have overdrafted in the last 12 percent. Around 10% of Americans have overdrafted more than eight times in the last year.
17,000% APR is the typical interest rate associated with overdraft fees.

The Solution

Dave.com offers a large range of solutions to making the financial world easier to navigate for the 99% of Americans.

I. Banking with Dave
- Skip overdraft fees entirely. You can open a no-minimum, no overdraft checking account with Dave. You get unlimited access to thousands of ATMs across the nation.
II. 0% Interest Cash Advance
-For those looking for a cash advance and the next paycheck isn’t for a few days, Dave allows a cash advance of up to $100. No interest, no credit check.
III. True Overdraft Protection
-For those who choose to stay with their bank, Dave.com offers true overdraft protection. This includes alerts ahead of time if you are at risk of being charged an overdraft fee. According to Dave.com, the median Dave user saves $500 each year in fees.
IV. Other Miscellaneous Services
-Access to 32,000 nationwide ATMs — no withdrawal fees.
-Lost card? You can freeze or unfreeze your card just from the app. If the card is lost entirely, Dave will ship a new one out to you.
-You can send free checks out to pay for rent, utilities, and other bills.
V. Automatic Budgeting
-Dave uses an algorithm to create an automatic budget to help you plan for upcoming expenses, such as phone bills and car payments.
VI. The Side Hustle
-Dave has a network of partners that can help you both discover and apply for work — right from your phone.
-Dave has also partnered with CreditPop to report rent payments to large credit bureaus, allowing you to build your credit score with Dave. Dave users have seen an average of a 28 point increase over two months, and 70 points after two years.

Business Model

Dave.com is a subscription service, with membership at $1/month. While this may seem counterintuitive — adding an extra cost when the goal of the company is to better budget — the app allows members to earn free months by making everyday purchases at popular stores. The app currently has 4 million members.

Meet the Team

Jason Wilk, CEO & Co-Founder
- Jason Wilk has always been the entrepreneurial type. He began as
the founder of 1DaySports.com in 2006, an early pioneer in the daily
deal space and acquired in 2008. He then founded “WriteyBoards”, a
Mark Cuban backed dry erase board company. He then co-founded
AllScreen TV, a technology company that enables large media outlets to control their digital content with their publishers.
Dr. John Wolanin, CPO & Co-Founder
- John Wolanin is a product designer with a doctorate in clinical
psychology. He led product design and vision for multiple
consumer-facing companies, including Google and Apple.
Paras Chitakar, CTO and Co-founder
- Paras Chitakar oversees the technology group at Dave.com and has
been a longtime partner with Jason, serving as the CTO and
co-founder of their previous venture, AllScreen TV.

Competitive Landscape

MoneyLion
MoneyLion is an online lending platform that provides personal loans and credit monitoring tools. They offer a zero fee checking account, a fully managed investment account, no interest instacash, and a 5.99% credit builder loan. Their differentiator is an automated algorithm driven investment vehicle. Their loans are not accessible under the core account — it requires a $19.99/month membership to build credit with their Credit Builder Plus membership. This membership also allows for weekly credit monitoring and advances of up to $250 per pay period.
Founded in 2015, MoneyLion has received $27.25 million in Series B funding from notable investors such as Macquarie and EdisonPartners. With offices located in New York, San Francisco, Salt Lake City, and Kuala Lumpur, MoneyLion has a fairly strong global presence. However, their goal is to reinvent the banking system — rather than make it accessible to those who live paycheck to paycheck. The high cost of subscription to access basic services that Dave.com provides forces MoneyLion to take on a targeted audience with slightly more liquidity.

Even.com
Even is a mobile app that merges attendance, payroll, and banking systems to provide financial wellness solutions for the working class. The app allows employees to access their wages before the paycheck actually hits, thus giving them credit when they’re short on cash. Their Instapay design allows employees access to up to 50% of their current net pay, ensuring they’ll receive an ample amount on actual payday. Employees can also track their timesheets and next earnings, automatically save, and intelligently budget.
Despite making paychecks easier to track for employees, Even.com is more focused on the firm’s side, as it is designed to help firms help their employees progress. The cost of a monthly subscription is $8, but this is priced for firms, not individual employees.

Brigit
Brigit offers free budgeting tools and alerts, as well as $250 in cash when needed. Brigit offers instant loans with an advertised 20 second approval time. Brigit has an automatic loan feature that sends cash whenever it senses your balance may be too low to cover expenses.
However, the app has lots of hidden fees in the fine print. Instant cash is not necessarily instant — it requires one business day to deliver. Express delivery sends cash within 20 minutes, but this requires a $4.99 fee, which isn’t the most helpful for those living paycheck to paycheck and need quick cash. The majority of advertised services, such as no late penalties, automated delivery, free instant transfers, and financial tracking are included with premium membership, which is an additional $9.99 per month. Brigit also only has 1 million users, compared to Dave.com’s four.

Notable Investors

Notable investors in Dave.com include Norwest Venture Partners, CreditEase Fintech Investment Fund, and Victory Park Capital. Individual investors include SharkTank’s Mark Cuban. The company has raised $26.3 million total in Series B funding. Total funding amounts to $183 million through six funding rounds.

Metrics

Dave has an estimated $2M in annual revenue. This is in third out of four when compared to MoneyLion, Even.com, and Brigit ($5M, $4.5M, and $1M respectively).

In the last 30 days, Dave.com has reached 442,000 downloads, with monthly site visits topping 725,000. The company has 41 total employees.

Conclusion

Dave.com provides solutions for those struggling to make it day by day. Unlike the pricing schemes of other subscription-based budgeting apps, Dave.com truly seeks to bring those who have difficulty meeting their expenses to a place of financial stability. Fintech is becoming an increasingly competitive space, but despite the competition, Dave.com has amassed nearly 4 million users in just three years of operation.

What sets Dave.com apart is its extremely low subscription rate for services that other firms upcharge to nearly the cost of Netflix. When expenses are hard to control and income is barely enough to cover, adding another large subscription is counterintuitive. Those who just manage to make it month by month wouldn’t be fond of adding a $10/month service, making Dave.com the clear choice for any financially conscience worker. And unlike other fintech companies aiming to democratize finance — Dave puts its money where its mouth is by undertaking philanthropic pursuits — planting trees with a percentage of each tip you leave.

Dave also supports an impressive user-friendly app, designed by Dr. Wolanin. With encouraging notes and an aesthetically pleasing design, the Dave app helps uplift those going through financial troubles — giving the company the potential for higher subscriber retention rates than its peers.

Disclaimer: All information in this report has been aggregated through numerous, public news reports/articles or Dave’s website itself. Any misrepresentation of the company is purely accidental. BV is more than willing to correct any mistakes.

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