Personal finance startup Dave Inc. plans to use the roughly $ 450 million from its next public listing for acquisitions, new products, and potential cryptocurrency investments.
The Los Angeles-based company offers an app for people who frequently run out of cash or overdraw their bank accounts, and is in the process of merging with VPC Impact Acquisition Holdings III Inc., a special-purpose acquisitions company. The deal is expected to close in the next few weeks and Dave’s shares will likely begin trading on the Nasdaq in early January, CFO Kyle Beilman said. The merged company is expected to have an equity value of around $ 4 billion on a pro forma basis.
Dave sought a public listing, in part, because he wanted to better position himself to acquire other non-bank consumer finance companies in the coming years, Beilman said. The agreement with SPAC provides Dave with capital and shares to bid for other companies, he said.
“We see ourselves in the next few years as a consolidator in space,” Beilman said.
An increase in venture capital funding in recent years has led to the creation of hundreds of fintech companies, according to Peter Wannemacher, principal analyst at Forrester Research Inc., a market research firm. Some of the companies provide banking services, including Dave and others called neobanks like Chime Financial Inc., while others focus on niche products like payments or investments.
Founded in 2016, Dave raised about $ 61 million before his deal with SPAC from investors like venture capital firm Norwest Venture Partners. The company, through its brand, aims to make its products sound familiar and accessible to consumers, Beilman said.
The company primarily generates revenue from financial products that meet the needs of approximately 11 million customers, many of whom live paycheck to paycheck. Dave’s standard cash advances have no fees, but expedited advances have fees that range from $ 1.99 to $ 5.99. The company also offers an option for customers to pay what they think the service is worth. The average tip is around $ 4, according to the company. Separately, it charges $ 1 a month for a service that helps users keep track of their expenses.
Dave does not have a banking charter and instead offers debit cards through a partnership with Evolve Bank & Trust, a bank based in Memphis, Tennessee. Dave earns income through the interchange fees that merchants pay when customers swipe their debit cards, for example when they make a payment at the grocery store or gas station. The company has no plans to buy a bank or request a letter, but said it is an option that it will evaluate over time as its product offering expands.
The company expects to generate approximately $ 200 million in revenue this year, or 60% more than in 2020. Currently, Dave’s business is not profitable and he does not expect to achieve profitability in the next few years, Beilman said, adding that the company is primarily focused on expanding its customer base.
This year, several large banks have ditched overdraft fees – flat fees, often around $ 30, that banks charge when customers overdraw their accounts. The US Consumer Financial Protection Bureau released a report this month on overdraft fees in the banking industry and said it will “take steps to restore meaningful competition in this market.”
Beilman said many clients knowingly overdraft, using it as a form of short-term credit between paychecks. “There is that kind of need in the market for a product like this. Historically, it has been extremely expensive, ”he said.
In the coming months, Dave plans to launch new products. Among them is a peer-to-peer donation account that works similarly to a GoFundMe account, Beilman said. The company also plans to launch a peer-to-peer money transfer product, similar to Venmo, he said.
Norwest partner Parker Barrile said a priority for the company after its public listing will be to add new products and services to attract more customers on a massive scale.
The company is also exploring potential uses for cryptocurrencies, Beilman said. As part of his SPAC transaction, Dave raised $ 210 million through a private investment in public equity, or PIPE. One of the inventors in that deal was cryptocurrency exchange FTX Trading Ltd., which invested $ 15 million, Beilman said.
Dave is actively looking for ways to use cryptocurrencies, for example, as a cheaper way to transfer money, according to Beilman, who declined to provide additional details. The company hopes to provide an update on this in the coming months, he said.
Write to Kristin Broughton at Kristin.Broughton@wsj.com
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