Charli D’Amelio-endorsed fintech Step borrows $300 million to bring crypto to teenagers
The last bull market created a new wave of investors as more and more decided to make their first foray into the markets. Step, a digital banking service aimed at teenagers and young adults, is one of the many companies aiming to make money by serving the new investors. And even though fortunes have taken a turn for the worse in the stock and crypto markets in recent months, Step is doubling down on its growth plans.
The company just launched a crypto investment feature to the nearly 4 million users on the platform, CEO and founder CJ MacDonald told TechCrunch in an interview.
Step also announced today that it has raised $300 million in a debt financing led by Triplepoint Capital and Evolve Bank & Trust. The new funding represents a significant portion of the total $500 million Step has raised to date, most recently in a 2021 Series C equity round from investors including Coatue, Stripe and angels such as Charli D’Amelio and Jared Leto.
“We launched on September 30, 2020, during the pandemic, so we literally just passed the two-year mark,” MacDonald said.
While MacDonald declined to share any details about the company’s revenue, he said it has “grown significantly since we launched” and noted that the crypto launch demonstrates how Step is introducing additional revenue streams to its business beyond its core revenue source of brokerage fees. from the credit card product.
Step is initially launching bitcoin access on the platform and expects to have added about 40 different cryptocurrencies by the end of the month, according to MacDonald. Eventually, the plan is to add NFTs and DeFi tools like staking, MacDonald told TechCrunch in an interview in April.
The offer will also be launched in connection with a financial literacy platform that provides educational content for the children and parents on the Steps app, said MacDonald. For children under 18 on the platform, parents have the ultimate say over how they allocate their money, but for Step customers over 18, there will be no limits or restrictions on how much of their portfolio they can invest in crypto, he noted.
The company chose to launch its crypto offering before an equity investment feature, the latter of which MacDonald said is currently in the works for Step customers and will likely launch before the end of the year.
Step is one of many investment platforms that have recently waded into the cryptosphere. Roboadvisor Acorns added crypto to its platform this year, and fellow startup Stack raised $2.7 million for its crypto trading and education app for teenagers in September.
MacDonald said Step plans to use the fresh funds to further invest in two areas – product and people. The company employs over 100 people today, according to MacDonald.
“We have some other products that we’re going to launch and having additional capital helps set us up for long-term success … So timing-wise it worked out and we’re grateful for the opportunity. It basically allows us to expand the runway for the business to really set out to [achieve] our mission,” MacDonald said.
Asked why Step raised debt instead of equity, especially in today’s rising interest rate environment, MacDonald said the company is “very well capitalized today” and noted that equity is dilutive while debt is not.
“We went from zero to one very quickly, and now we have to go from one to 10 and 10 to 100 and just scale the business,” MacDonald said of the decision to take on the debt. He added that he believes economic conditions could force companies unable to raise new capital in the next 12 to 18 months out of the market, noting that Step’s new capital will help the team “put their heads down and build and control our own destiny.”
