Rightfoot, a startup that is helping employers lift employees out of student debt, secured $5 million in seed financing.
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Bain Capital Ventures led the seed round and was joined by BoxGroup and SemperVirens Venture Capital, as well as a group of operators including William Hockey, Annie Hockey and Omri Dahan, as well as Julia Hartz and Kevin Hartz. In total, Rightfoot raised $6.5 million in funding since the company was founded in 2018.
This is the third known deal Hockey, Plaid’s co-founder, was involved in this month, according to Crunchbase data. So far this year he has invested in gaming platform Lowkey’s seed round in January, and Routefusion’s $3.6 million seed round this week.
How it works
The San Francisco company is tackling what the Federal Reserve estimates is $1.7 trillion in U.S. student loan debt. Rightfoot began as a platform for college saving, but Danielle Pensack, co-founder and CEO of the company, told Crunchbase News that she and her team realized saving was not the main pain point — getting out of student debt was.
“While understanding the landscape of how to make payments, we saw companies just sending out checks, but they were bouncing back or not going into the right accounts,” Pensack said. “We know we had the background of building infrastructure, so we got to work on an API.”
Rightfoot’s application programming interface enables developers to integrate debt payment functionality into any fintech, banking or benefits application.
Financial wellness, payroll and employer benefits companies use the API to create programs, such as automating repayments from a borrowers’ paycheck across outstanding debts or creating tax-free student debt repayment programs.
The company soft-launched its API in 2020 and now has 10 clients. It also signed a partnership agreement with Plaid, which provides liabilities data, such as a user’s account number, loan guarantor and interest rate, so Rightfoot can transfer funds to a borrower’s loan account.
The company received increased inquiries in December after Congress extended tax-free student debt repayment benefits for employers through 2025, Pensack said.
“We are tracking and constantly growing, hoping to hit billions of dollars in repayments,” Pensack said. “We also want to help people understand their loans. The problem is not transparent in that they don’t know they can pay an extra $5 to save hundreds or thousands in interest over time.”
Future plans
Next up, Rightfoot plans to focus on employer benefits groups, where 60 percent of its customers are coming from right now. It has its eye on addressing the $14 trillion of U.S. consumer debt that includes credit card, auto and mortgage payments, Pensack said.
The new funding round enables the company to continue building direct integrations with loan servicers, expand its engineering team into new debt verticals, and launch a self-service developer portal that will give developers access to sandbox and instant production keys. The self-service portal is expected to launch at the end of Q1 2021, she said.
“We are seeing companies that want to become a Gratify or Tuition.io without signing onto a new product,” Pensack added. “With the self-service portal, they can get developer keys and build without having to talk to anyone.”
Sarah Smith, partner at Bain Capital Ventures, said in an interview that she met Rightfoot while they were part of a pitch competition. In a previous role, Smith worked in human resources and saw firsthand how big of a problem student debt was to employees.
“If Rightfoot can crack the code of doing the work to clean up the fragmented world of debt repayment, every consumer fintech company could enable smart debt repayment, mortgages, auto loans and health care,” Smith said. “We heard from companies that said if someone could take care of the messy work of where to send the payment, it would make their products work better. Rightfoot is stepping up to do this.”
Feature photo of Rightfoot co-founders, from left, Deirdre Clute, COO, William Schmitt, director of engineering and Danielle Pensack, CEO, courtesy of Rightfoot
Blogroll illustration: Li-Anne Dias
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