I read in TechCrunch that ZestCash, just raised $73 million round of funding. $23 million is equity (Matrix Partners, Lightspeed Venture Partners, GRP Partners, Flybridge Capital Partners, and Lighthouse Capital Partner) and they secured a $50 million line of credit (Victory Park Capital).
Now they have $73M to play with. I bet they spend the $23 million on lead acquisition and the $50 million to back loans. Is this huge news? I think for a couple of reasons:
- The cash advance industry has an image problem. When high profile people get involved ( Montel Williams shout out?) it brings a higher level of legitimacy.
- They’re not Advance America $600M + revenues, but it will be interesting to see what happens.
Here is what I found interesting:
- The founder is a Google guy, but he site has very little SEO. They rank in the top 5 for very few keywords (see below). This means they’re buying leads.
- They’e in four states— Utah, Idaho, Missouri and South Dakota. I’m surprised that when you place an application from another state, they just say something like, sorry, we’re can’t give you a loan. They’re not selling unused leads. They make it clear that they’re going into other states.
- They’re not payday loans. Allegedly, they let you select how much you want to pay? It’s on their website HERE.
Comments
5 responses to “Former Google CIO takes payday operation to next level.”
Well they might be operating under certain statutes that permits this type of lending. There prices are outragous compared to a licensed payday lending company in a state for example Florida. It least according to the way they are lending they will have limited states to go into. They certainly won’t be coming to Florida with a cap on consumer finance lending listed under chapter 516. 30% max APR! Payday Loan fees in Florida are also less than this company at 10% plus a 5 verification fee. Ex. 300.00 payday loan is a 35.00 fee up to 31 days. Yes the draw back is they must be paid back on the customers next pay date. But this is how the state of Florida chose to write its laws. I also like the fact that a customer can have only one loan open at a time in Florida. Amazing that zestcash started their company around the same time as my company started and they will blow away the field with that kind of capital. But they will also be limited to individual states based on their model.
Randy, you’re 100% correct. They started in states that are very pro lender. I use this resource for finding good states to operate in. I know it’s a consumer protection site, but it gives good information: http://www.paydayloaninfo.org/state-information
Also Randy, this Quora question shares the same sentiment as you: http://www.quora.com/ZestCash/To-what-extent-is-ZestCashs-dont-be-evil-approach-to-loans-just-marketing-hype-Are-they-just-another-payday-loan-operation-with-disingenuous-marketing?q=payday
Good work with this analysis, Nick! I don’t know how I managed to miss this piece when you originally Posted it.
There are many ways to “skin-the-cat” in the payday loan industry. Lead generation, lead re-marketing, SEO/SEM… are not on the Zest Cash radar yet. Maybe they’ve simply been focused on raising capital and developing their model and don’t have the resources YET to maximize all the payday loan revenue streams available. Or perhaps an insider already “owns” a piece of the Zest Cash lead provider? Conspiracy theory?
Of course, It’s May and this Zest Cash Post may not reflect any new imperatives by the company. I’ll look for your update to Zest Cash when it’s appropriate.
Jer
[…] Letting the Indian tribe do the loans and collecting a huge management fee is the most lucrative way to run a payday business. Did they give us? No. They found a better, easier, more lucrative way to make money. Didn’t you hear? It makes the world go round. Interested in ZestCash / SpotLoan? You can read these older posts: Former Google CIO Takes Payday Operation To Next Level. […]