Sometime in the late 90s I picked up my first mobile phone, a Motorola StarTAC. The sound quality wasn’t great but it was a radical change to no longer be tethered to a wireline. Next up was the Blackberry, which combined voice with email, and quickly became the device of choice for many. Then, in 2007, the iPhone was released and the smartphone era began.
Today I use a Google Nexus 6P, and it’s hard to imagine living without a smartphone. My guess is I use at least 10 different applications every weekday. At USV, we’ve invested in many mobile-first applications across a variety of services, including Foursquare, Soundcloud, SigFig, DuoLingo, Figure 1 and Clue, but these are only a small fraction of what’s available in the app stores. Smartphones also provide an alternative connection to the internet for those who cannot afford the costs of, or don’t have access to, broadband services.
Over the past few years, the smartphone has become an essential device for work, play and daily life. It also provides an alternative connection to the internet for those who cannot afford the costs of, or don’t have access to, broadband services. Last year the Pew Research Center published an excellent study on the importance of smartphones.
The average price of an Android phone is still over $200, and is not projected to go below that anytime soon. The best unlocked smartphones can easily exceed $500 and are out of reach for many. Our newest investment, PayJoy, addresses this problem by providing underbanked consumers with an innovative financing option at lower cost than normally available to borrowers with little to no credit history.
PayJoy will finance 70-80% of the price of a smartphone over 3-12 months at a monthly cost of $50-150, depending on price and term of payment. Similar to platforms like Lending Club and Funding Circle, PayJoy uses an off-balance sheet model that connects purchasers with a financing source. If customers fail to pay, after multiple notices PayJoy’s technology locks the phone until payment has been received. To date, default rates have been quite low, as you would expect for an essential device.
For many of its customers, PayJoy is their first financing product and the first step towards developing a credit history and using internet-based financial services.
PayJoy currently operates only in the United States, but we believe there is a large global market for its services. We are excited to lead this Series A round to provide PayJoy with resources to expand outside the US, and we look forward to working with PayJoy’s three founders, Doug, Mark and Gib.