Earned wage access startup ZayZoon plans to continue its expansion in the United States following its recent $12.5 million CAD equity raise and a new $13 million CAD credit facility with ATB Financial. In fact, look for ZayZoon in Canada, and you won’t find it. The startup solely serves the US market.
When asked why ZayZoon only operates in the US, the startup’s president and co-founder, Tate Hackert, laughed. “It’s a question we get a lot, and a question our own staff ask quite a bit.”
ZayZoon has payroll partnerships representing about 50 percent of the American workforce, including franchises like McDonald’s and Burger King.
Hackert said when ZayZoon first introduced earned-wage access to the Canadian market in 2016, it was such a new concept that people didn’t understand it or grasp its value. “We found we were fighting tooth-and-nail to get partnerships,” Hackert recalled.
Earned wage access is the ability for workers to access on demand pay that they have already earned.
In Canada, growth of the product was stagnant. At the same time, the startup ventured down to a two-day trade show in the US, and signed more partnerships there than it had landed in Canada in the previous 12 months.
“That was a really clear indicator to us that if we’re going to spend a dollar, it’s better spent down there,” Hackert told BetaKit. While Hackert believes the Canadian market is now starting to accept the idea of on-demand pay, he noted the US is a better option for ZayZoon, and continues to be its focus for growth.
With its new funds ZayZoon wants to continue to build its pipeline south of the border. Hackert claims the startup has payroll partnerships representing about 50 percent of the American workforce, including franchises like McDonald’s, Burger King, Senior Helpers and Choice Hotels.
Now, the Calgary-based startup wants to reach the small-and-medium-sized businesses across the United States, convincing them that they should take the 25 minutes necessary to activate ZayZoon for their workforces.
Jamie Ha, co-founder and CFO of ZayZoon, said: “With this financing, we are positioned to bring ZayZoon’s Wages On-Demand service to millions of people across America, especially during a phase when hardworking employees need it the most.”
ZayZoon’s core product, Wages On-Demand, gives employees access to wages that they have already earned, but would otherwise have to wait until their next payday to receive. The startup claims that in less than three minutes, an employee can sign-up and access their earned wages instantly to their existing bank account, or other available wallet options.
“We help people in their most vulnerable moments, an individual who’s living pay cheque to pay cheque,” Hackert said. “They need short-term cash for groceries, medication or whatever else.”
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ZayZoon’s revenues are fee-based. If an employee advances funds from their own bank account, they are charged a fee of up to $5 for the transaction. In May, the startup announced a ZayZoon Visa prepaid card. If employees use the card, they aren’t charged a fee, while ZaZoon collects revenue from the merchants for the transaction.
Besides continuing to build out its product in the US, ZayZoon intends to offer new services, although Hackert didn’t get into details. He only allowed that over the next 18 months the startup wants to launch new products that will further “embed” ZayZoon in peoples’ financial lives.
ZayZoon also wants to use the funds to bulk up its existing staff of 70 with another 14 positions by the end of the year.
Carpae Investments and Alpenglow Capital led the equity round with participation from existing shareholders, including InterGen Capital, Prairie Merchant Corporation, and angel investors: Sanders Lee, the executive chairman and founder of Hopewell, a real estate enterprise; and Rob Ohlson, the president of custom home builder, Maillot Homes.
Other investors included senior management at ZayZoon, whom Hackert said participated “quite heavily,” and members of the board.
ATB Financial provided the debt facility. Hacket is particularly pleased about the latter, noting that ATB is the first financial institution backer for a debt facility for ZayZoon. Previously, they’d secured debt financing through family offices or alternate lenders. ZayZoon uses the debt facilities to fund the wage payouts it makes. The equity round and debt facility closed in late March.
So what exactly is a ZayZoon? Hackert said years ago he attended the University of Hong Kong for a semester as an exchange student. One of his economics professors’ last name was ZayZoon, albeit spelt slightly differently. Hackert thought it was a “neat” word, and used it to hold a web domain that, years later, would actually be used for the FinTech company’s website.
Founded in 2014, ZayZoon previously raised $15 million in 2019. To date, the startup has raised $40 million.
“ZayZoon has proven the value it can bring to millions of employees and their employers through a unique distribution channel,” said Marcos Lopez, a principal at Alpenglow. “We are excited to see the team continue their impressive growth and the use of their product by more employees and employers, helping them efficiently access their earned wages more effectively.”