Morgan Stanley, Silicon Valley Bank join TomoCredit’s $122 million Series B

TomoCredit, a credit card provider for those without credit histories, is gearing up to apply its cash-flow underwriting methods to heftier loans. A fresh round of funding will enable these efforts.

On Thursday, the company announced a Series B raise of $122 million in equity and debt. A combination of big names and minority-focused funds took part, including Morgan Stanley’s Next Level Fund, Mastercard, Silicon Valley Bank, Gold House Ventures, Asian Hustle Network and Hyphen Capital. Gold House and Hyphen invest in companies with Asian founders while Asian Hustle Network is an online community that started a fund with Tomo as its first investment.

“We are excited to be a part of TomoCredit’s journey as it works to democratize access to credit and build a more inclusive credit landscape,” Alice Vilma, co-portfolio manager of Morgan Stanley’s Next Level Fund, said in a press release. The fund primarily invests in early-stage technology companies with women or diverse members as part of the founding team.

TomoCredit is known for its credit card, which assesses consumers' creditworthiness based on cash-flow data, but auto loans and mortgages would be a step forward.

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The current product operates as a weekly charge card where customers have to pay their balance in full every seven days. It is issued by Community Federal Savings Bank, which is based in Woodhaven, New York, and has $600.5 million of assets. The card has no fees and charges no interest, nor requires any deposits; instead, it makes its money from interchange fees. Kristy Kim, co-founder and CEO, is eager to diversify beyond credit cards. Users of the TomoCredit card card can get limits up to $30,000, but Kim says her company has the data to offer even higher limits. 

She hopes to launch auto loans next year and eventually move into mortgages as well.

“From day one, our mission was to bring positive change for both lenders and consumers,” Kim said in an interview. “I don’t see banks or fintechs as my competitors. I see them more as players in the market where Tomo is the first mover to signal that we are able to do high credit limits without FICO.”

She will also put the money toward hiring, primarily for engineering and product staff. The company currently employs 50 people; Kim wants to reach 100 by the end of the year. 

TomoCredit says that revenue grew 1,000% between December 2020 and December 2021. Kim would not disclose the numbers behind that growth, but said it is all tied to gross merchandise value, or total transaction volume. The company does not disclose the number of users, but reports it has received 2.5 million applications since the product launched. Kim says this growth has happened largely organically, as the company did not spend money on marketing until August 2021.

“Seeing that kind of growth gave me new insights that the product I built is not just for immigrants or international students, but can help way more people than I expected,” said Kim. Her original goal was to help immigrants to the U.S. like herself with sparse histories access credit. But through conversations with top spenders at TomoCredit, she has found that entrepreneurs, such as social media content-makers, are also a waiting audience. 

Small-business owners may not separate their personal and business expenditures when they are starting out, but they have strong cash flow and want high credit limits. 

“We thought that was an interesting market,” Kim said.

In a March interview, Kim talked about the difficulties in sourcing funding at the same pace as some of her peers. “Overall it has been getting easier as we enter the new phase of the company,” she said. She hopes investors realize that “female founders are good at risk management,” she said. “We do not burn cash like crazy.”