Calgary-based FinTech startup ZayZoon has secured $34.5 million USD in debt and equity Series B financing.
ZayZoon, which helps employees at small to medium-sized businesses in the United States (US) access money they have already earned from hours they have already worked but haven’t been paid for yet, plans to invest in “recruiting efforts and continued growth and innovation.”
“We’re laser-focused in our mission to save 10 million employees $10 billion,” ZayZoon co-founder and president Tate Hackert told BetaKit. “This comes by way of saving employees funds they otherwise would spend on predatory fees … but also it comes by offering up other impactful financial and workplace engagement tools to both the employee and employer. This financing will help us to execute on the next phase of ZayZoon.”
Framework Venture Partners led the round with co-investment from EDC and participation from ATB Financial and undisclosed existing investors.
The round was led by Toronto’s Framework Venture Partners with co-investment from Export Development Canada and participation from Alberta’s ATB Financial and existing investors, including undisclosed angels and members of ZayZoon’s management team. Framework partner Ajay Gopal will join ZayZoon’s board as part of the round.
The financing consisted of $20 million in debt and $14.5 million in Series B preferred share funding. It brings ZayZoon’s total funding to about $53 million.
ZayZoon’s Series B round comes just over a year after the company closed $22.5 million CAD to fuel the expansion of its earned wage access business across the US. Approximately half of that financing consisted of equity, while the other half came in the form of a credit facility with ATB Financial.
When asked by BetaKit, Hackert declined to say when the round closed, whether it contained any secondary capital, or disclose ZayZoon’s latest valuation. The co-founder did note that ZayZoon’s Series B was an up round relative to the startup’s 2022 financing.
Founded in 2014, ZayZoon is an earned wage access provider. Earned wage access, also referred to as on-demand pay, enables workers to draw a percentage of the wages they have already earned prior to traditional weekly, bi-weekly, or monthly pay periods, typically for a fee. Earned wage access is marketed as a way to give employees more financial flexibility by providing them with control over when they get paid.
ZayZoon claims on its website that companies using its earned wage access product have typically seen reductions in employee absenteeism and turnover, and a rise in job applicants. The startup’s customers currently include Amazon warehouses, Dunkin’, Burger King, Domino’s, DoubleTree by Hilton, Lids, Mazda, McDonald’s, Panera Bread, and Subway.
While this earned wage access model never caught on in Canada for ZayZoon, as BetaKit previously reported, it has taken off south of the border. Today, ZayZoon only serves the US market.
ZayZoon and other earned wage access providers, which include Toronto-based Payfare, often pitch their products as a means of helping clients avoid predatory high-interest payday loans and credit cards, but as TechCrunch and Vox report, the reality is often less rosy. Although earned wage access is a cash advance, not a loan with interest, the business model has been called “payday loans by another name” because in practice it still involves the consumer paying to receive their paycheque.
Many North Americans live paycheque-to-paycheque and face difficulties making ends meet as inflation rises in both the US and Canada. In this economic environment, ZayZoon claims to have seen more than 400 percent growth in payouts year-over-year. As US businesses in many sectors struggle to hire and retain workers amid low unemployment and labour shortages, ZayZoon sees room for continued growth.
The startup intends to use this capital to offer enhanced resources and features for employees and employers in industries like hospitality, retail, and food services.
UPDATE (09/19/23): This story was updated to note responses from ZayZoon co-founder and president Tate Hackert.
Feature image courtesy ZayZoon.