Prize-linked saving provider PrizePool launches & raises $4.25 mn

By Pavithra R

PrizePool, a California based startup, has announced its launch aiming to reimagine savings and create new ways to incentivize Americans to build a better financial foundation. The FinTech has also announced a seed round of $4.25 mn led by Bling Capital, Accomplice, Coatue, SciFi VC, and World Innovation Lab, among others.

A majority of Americans are at financial risk, and the need for the security of savings is more evident due to the economic uncertainty created by the pandemic. According to PrizePool, more than half of Americans do not have the savings to cover an emergency expense of $1000, living paycheck to paycheck with no reserve for ‘what if.’ However, a majority of Americans spend cash on the lottery every week in the hope of a big win. According to the North American Association of State and Provincial Lotteries, the actual odds of winning with the lottery and scratch cards are very low. Still, people in the U.S. spent more than $91 bn on lottery tickets in 2019.

PrizePool is planning to use the funding to invest in product development, boost marketing initiatives, drive user acquisition, and build its team with new hires. Franklyn Chien and his co-founder, Joe Woo, sold their first company, LearnSprout, to Apple in 2015. PrizePool is available nationwide.

“Now more than ever, Americans need to be saving money to protect their future. But we know that saving can be hard to prioritize, and our goal is to reduce the barrier to saving money by making it fun in two unique ways. First, we guarantee a total of $50,000 in real cash prizes every month, and second, our referral program makes saving a social activity — so that you can save and win together,” said Frank Chien, co-founder, and CEO of PrizePool.

PrizePool is reimagining the savings accounts by giving customers a new, fun place to save by offering a chance to win real cash prizes guaranteed to a total $50,000 every month. PrizePool pays out a $25,000 Grand Prize every month, along with other smaller prizes. Based on a model of prize-linked savings (a concept of using the chance to win a prize to incentivize personal savings), the firm feeds the desire that people have ‘to play and win’ but does so as they saves under no cost or risk to customers.

PrizePool’s referral program is designed to transform saving money from a solitary act to a shared, social, and even more rewarding experience. Once signed up for PrizePool, users can refer others to join and save. When a user refers a friend, they both will receive a 10% bonus, when the friend wins a prize, he/she will receive an extra 10% boost for using the first customer’s referral code, and the original user gets a bonus of 10% for their friend’s winnings. These bonus prizes are incentives to save and play together.

“We have been big fans of prize-linked savings for a long time, and believe it has the potential to reshape savings habits in America. We’re glad to have found an excellent team to execute on this,” said Nellie and Max Levchin, Partners at SciFi VC. Max also is CEO of Affirm, Co-founder of PayPal.