Technology

BNPL crackdown didn’t crush Walnut and its latest $110M Series A – TechCrunch


Walnut was founded by Roshan Patel to bring the buy now, pay later model to healthcare, arguably the home of some of the least transparent and least taxed financial transactions. After being part of the inaugural cohort of Plaid’s startup accelerator, the fintech meets the health tech game launched last year with millions in venture capital behind it.

Since then, the market for BNPL – and its best-known pioneer Affirm – has lost some of its luster, with stock prices falling and a chilling sentiment among investors. Patel agreed with this characterization, saying the BNPL model is “one of the first things that cuts in a market downturn” because it encourages discretionary spending. Still, he thinks Walnut is still safe.

“For health care it’s non-cyclical, and people always need it and I think being able to help patients with something they really need versus what they want is really helpful when there’s a market downturn,” he said. Patel responded that he hasn’t seen any decline in usage among customers needing different ways to fund healthcare checks. Walnut says it has increased its revenue by 50% every month for the past six months and is now helping “thousands” of patients to split their bills and pay them in smaller chunks.

Investors have noticed the growth. The startup is back with new funding this time in the form of a $110 million Series A. The round is split into two tranches: $10 million in equity financing and $100 million in debt financing. Existing investors participated in the round, including Newark Ventures, Afore Capital and 2048 Ventures, as well as new investors such as AngelList, Weekend Fund, Company Ventures, Banana Capital, Goodwater Capital and Muse Capital. The founders and executives of Ramp, Teachable, Clearbit, Afterpay, PillPack and Giphy are also investors.

Fundraising had a different temperature this time around, says Patel, who shut down the Walnut seed just over a year ago. The founder said he had other questions about the profitability and economics of the unit, “that hadn’t really been asked before”, but that was clearly not an issue to answer. He didn’t disclose the valuation for today’s round, but said they probably could have gotten a valuation about 50% higher had they gone higher in the fourth quarter. In the end, he says it was an “excellent assessment”.

The $100 million debt financing leg, led by ClearHaven Capital, will help Walnut address its biggest challenge, balancing underwriting a low-income population, paying healthcare providers upfront and collecting money from patients as a last resort. Since the startup’s launch, Patel says the default rate – or the percentage of patients who are unable to repay us – has been “much better than expected” and on par with more mature lenders. “The ability to price and assess risk is really important in a BNPL, and we see our underwriting competence as one of our core technologies,” he added.

In his view, Walnut is a point-of-sale lending company that helps patients pay for their health care over a period of time. Walnut is working with healthcare providers so that a patient’s bill can be paid off in increments of $100 per month for 30 months, instead of just one aggressive credit card swipe.

Many BNPL startups, including Walnut, do cash flow underwriting, in which the company connects to users’ bank accounts to see daily income, spending habits, and savings to see if a loan is likely to be. reimbursed by the end of the month. Since this method does not consider credit scores, it is considered a more accessible way to decide if someone is capable of handling a loan.

A year later, the startup has transitioned from selling to small private practices to providing services largely to other venture capital-backed digital health startups. For these startups, Walnut can work as a platform layer (and a benefit) for customers. However, to really make an impact, Walnut needs to make sure it caters to low-income demographics where they are (and it might not always be a tech startup). Patel noted companies like Juno and Cureai as companies they work with that reduce the cost of care, and they specifically target a low-income population.

He noted that the most popular specialty among Walnut users is behavioral health services, an expensive but hugely important aspect of healthcare. He believes this sector has a good number of startups working to reduce the cost of care for patients, so Walnut is able to make a bigger impact than if it focused more on fertility, which is inherently expensive. . The startup also does not charge any interest or fees to consumers.

The startup aims to expand its service nationwide and grow its workforce from 15 to 50 people by the end of the year.



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remon

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