Providing financing to smaller businesses, those with no or fewer than 10 employees, is a problem that some believe is insoluble. Virtually all women-owned businesses have no or fewer than 10 employees.*
The Covid-19 pandemic and the distribution of Paycheck Protection Program (PPP) loans have revealed the challenges that smaller businesses have faced in obtaining these loans. The ignition of the Black Lives Matters movement after the murder of George Floyd continued to focus the media on social injustice.
Fintech startups emerged after the 2007-2009 financial crisis, proving that there is a way to advance financial inclusiveness and provide easy access to financial services that are useful and affordable for small businesses. Fundid is taking advantage of these trends.
As a solo founder from Montana, Stefanie Sample, CEO and founder of Fundid, has several strikes against her. VCs prefer to fund startups with co-founders who are male and from traditional innovation hubs. Still, she felt she was uniquely qualified to solve this problem and that the time had come. Others think so too!
Sample is a successful small business owner with multiple exits. In the 15 years she ran these businesses, she never saw her gender as a barrier. However, “once I was seen as a great business owner and joined a predominantly male business network, it created a barrier for what I thought was an unlimited path to success,” Sample said. “I’ve gone down a rabbit hole to better understand the issues facing female entrepreneurs.”
Sample started a non-profit organization to help women business owners. Very quickly, it became clear that what women entrepreneurs needed most was money. She decided it was a market hole she wanted to fill. She didn’t know what that solution would be, but it became clear that fintech would be the foundation of the solution.
It was not Sample’s intention to start a fintech company. At first she was just curious. She had never raised angel capital or venture capital. Then, all of a sudden, she had made a pitch deck, attended investor meetings, and closed a $3.2 million seed round from Builders and Backers, Nevaut, and The Artemis Fund.
The truth is, it was uncomfortable going back to friends and colleagues and asking for introductions again and again. Unlike men, his network was finite. Fortunately, “I had ambassadors,” said Sample. “There were a handful of men and women who opened a lot of doors for me, and their credibility gave me credibility without me earning it.”
Businesses need money to start up, grow, consolidate debt and cover day-to-day expenses. To test the waters, the first service launched by Sample was a searchable grants database.
Grants are money given to businesses by federal, state, and local governments, philanthropists, and corporations with no expectation of repayment or participation in the business. Currently, there is no one-stop-shop to find out about these grants, especially those offered by companies. Every day, Fundid scours the Internet for these business opportunities.
Eligibility requirements vary widely from grant to grant. There are grants available for all types of businesses, many of which are specifically for businesses owned by women, people of color, or that target an industry, geography, or business size.
If you win a grant, it’s a good source of non-dilutive funding that doesn’t have to be repaid. Although you won’t be giving away part of your business, paying interest, or needing to repay money, there can be a lot of work to do to apply for some grants. And in the case of government grants, there can be many ongoing accountability requirements to ensure taxpayer dollars are well spent. The higher the grant amount, the more you can expect to work.
Sample’s second product will be a business creation card. This business credit card charges no interest if paid within 30 days. If the money owed is not paid within 30 days, the money is converted into an installment loan with a fixed interest rate. The interest rate has not yet been determined.
“We are determined to find a way to keep the interest rate as low as possible,” Mr. Sample said. “If we find a capital partner, like a foundation, it could be very low. If we have to use a high-risk capital partner who will charge us 12%, it will be very difficult to offer a low interest rate.”
Still, “we have to prove to the market that we can lend to this segment profitably,” Sample said. “There’s a belief that maybe these people aren’t being funded for a reason. We have to overcome that belief, and that takes time.
The traction develops. When the company launched in May 2021, things got off to a slow start. Today, up to 100 people a day use the grant matching service. The startup also attracts partners. Experian helps develop Fundid’s underwriting criteria. Visa Fintech Fast Track has accepted the startup into its program, making it easier for startups to go to market. He has a banking partner who not only wants to market differently, but who is committed to innovating and doing things differently. This relationship has not yet been announced.
How will you challenge the mindset that limits your growth?