On its face, the shuttering of Tally, a FinTech focused on helping consumers manage credit card debt, offers a snapshot of how tough fundraising is in the technology arena, how cash, once burned, is tough to replenish.
Beyond the cautionary tale for FinTechs overall in terms of business economics, there’s also a highlighting of the urgency — that several companies are trying to meet — of helping consumers manage their credit card debt.
Unable to Go On
As has been widely reported, and as detailed in a LinkedIn post, the California-based startup has come to the end of its road as it was, in the words of CEO Jason Brown, “unable to secure the necessary funding to continue our operations.” Tally had exited its direct-to-consumer operations earlier in the year and had sought to transition to a B2B model, wherein the company offered its software to financial institutions (FIs) that, upon embedding that software, would let consumers manage their debt within the FI’s own platform.
At the time, the release noted that “Tally’s first partner, a large publicly-traded consumer company with more than 50 million users, is slated to launch Tally’s software to its users in July 2024. Tally raised additional capital from existing investors to develop its B2B offering and to date, has raised over $200 million to build and scale the platform.”
The company’s website does not detail that launch, or its progress tied to that $200 million. Elsewhere, media reports have detailed some customers were complaining that Tally had not, through its traditional offerings, been making payments on those cards.
But the fact that the company could not access funding implies that it needed to offset at least some cash burn with investor dollars. Investors, who had valued the company recently at about $855 million and had raised a cumulative $172 million, can be a fickle lot. Crunchbase has noted that funding throughout the financial services industry has been slowing for several quarters. Slowing still implies some growth, and indeed the $9.7 billion raised in the second quarter is up 17% from last year … but in absolute terms, we’re far from the peak of $40 billion raised by these companies in the second quarter of 2021.
For the FinTechs, the lesson here is that outside funding’s not a given, that a business model pivot may not in fact be a saving grace, and that scale matters, sure, but so does return on investments.
Managing the Debt Load
The Tally app and its mechanics offer a snapshot into the need, and appeal, for consumers to manage their debt digitally, as the company promised to “manage” payments, tracking APR, due dates and balances, while automatically paying down cards through a single point of billing. “We pay all your cards, and you pay us back — that’s it,” said Tally, advertising lower-interest lines of credit.
The debt consolidation trend has been a positive one for companies such as SoFi, which said in its most recent earnings report that personal loan originations (which can be used to pay off credit cards) were up 12% to $4.2 billion. LendingClub, for its part, notched loan originations of $1.8 billion. CEO Scott Sanborn said on the earnings call with analysts that that “card balances, which stand at historically high levels, [are] priced at historically high rates … personal loans are a tool they turn to for the tangible value we provide.”
Tally now joins the tally of startups that ran out of time, and seemingly ran out of money — while a real need remains out there in the market.
