Carlo Kobe and Scott Smith believed so strongly in the need for a debit card product designed specifically for Gen Zers that they dropped out of Harvard and Cornell at ages 19 and 21, respectively, in 2021 to build a startup called Fizz.
The pair wanted to go beyond creating a debit card for the younger generation. They wanted to make using the card a way to establish credit and become more educated about finances generally and ultimately be financially independent. The best way to do this, they decided, was to make its core an artificial intelligence budgeting product and to offer gamified financial literacy courses presented in “a fun and interactive quiz format.” Its target demographic is college students, aged 18 to 24.
Uniquely, the duo also decided to build their own infrastructure from scratch instead of, as they put it,”becoming a patchwork quilt of fintech SaaS vendors.” Also notably, considering all the recent upheaval in the banking-as-a-service (BaaS) startup world, Fizz long ago opted to have a direct banking partnership, rather than offer its services through an intermediary, or third-party, BaaS.
They spent their first two years building a tech stack and a partnership with Lead Bank, the Kansas City bank acquired by former Block executive Jacqueline Reses in 2022 before Fizz launched its debit card to the public in early 2023.
Now Fizz is announcing to TechCrunch exclusively that it’s raised $14.4 million in seed funding led by Kleiner Perkins, with participation from SV Angel, Y Combinator, New Era Ventures, and the founders and operators behind several unicorns, including Handshake, Postmates and Public.com. The startup went through Y Combinator’s Summer 2021 cohort.
In the last 12 months, the pair said, Fizz grew from zero to having “tens of thousands” of customers. Its offering is available to students at over 300 colleges and universities, including all the Ivy League schools and every top 25 school as ranked in U.S. News & World Report. Fizz, which is expected this year to cross nine figures in annual card volume, the founders say, partners directly with schools. It also uses campus ambassadors and TikTok to promote its offering.
Fizz is a portmanteau acronym of Financial Independence for Gen Z, with an extra Z added for punch (and should not be confused with another startup with the same name that is a social network for college students). Its 11-person team is made up of senior engineers and designers from the likes of Meta, Microsoft and Amex. It primarily competes with cards from big banks such as Discover, Capital One and Bank of America, as well as with Rocket Money and Credit Karma on its budgeting and AI feature set.
German immigrant Kobe (CEO) and Smith, who hails from Detroit, said they were driven to start Fizz from their own experiences as young college students.
“I couldn’t get a credit card because my parents couldn’t co-sign,” Kobe recalls, “and I didn’t want to put down a large security deposit. And since I didn’t have any established credit history, I got denied over and over again.”
He initially thought it was an international student problem but then realized it was an overall problem for this demographic.
Scott points out that New York-based Fizz set out to offer college students a different entry ramp into building credit.
“College students are a uniquely homogenous segment. And if you ask any of them, they’ll tell you that they’re credit card averse, but they’re not necessarily credit averse,” he told TechCrunch. “So maybe half of them may know that they need to build credit nebulously and the other half doesn’t know that they need to build credit. So our angle is telling them, ‘OK, you need credit to lease an apartment and get a car and even one day get a mortgage.’”
Knowing that this group of customers needs not only credit, but also the tools to learn to use it wisely, Fizz offers a suite of financial literacy content, as well as budgeting software and other help.
“It’s not like our cardholders just have a payment device; they have access to budgeting tools, savings tips and a one-on-one financial adviser,” Scott said.
The pair also take pride in the fact that they launched Fizz’s product with two direct banking partnerships. Besides Lead Bank, it is also partnered with Mastercard and the credit bureaus.
“We built our own ledgering. We built our own underwriting methodology and we got licenses,” Kobe said. “I think in fintech you need to do the hard part. And we did that, and I think that has served us really well.”
The company makes money primarily from interchange revenue and from partnering with other brands that it recommends (in some cases, with discounts) and optional subscription products. Its credit-building offering is free.
The new capital will largely go toward expansion and building on its product roadmap, as well as continued hiring in sales, marketing and engineering.
“There’s a lot of AI products that we want to release,” Smith said.
Kleiner Perkins partner Ilya Fushman, who joined Fizz’s board as part of the financing, said his firm first invested in Fizz when it participated in YC’s cohort in 2021. Many people get their first credit cards on college campuses, he said, including himself.
“This is a time when consumers move away from home and become financially independent. Unlike traditional credit cards with hidden fees and high interest rates, Fizz offers a credit line based on spending patterns without requiring credit checks, co-signers, or security deposits,” he told TechCrunch. “Most entry point financial products are not that good. They typically have low limits, high fees, few discounts, require co-signers, and lack effective guidance for newly financially independent adults on their journey. ”
Fizz is one of several fintechs aiming to serve the expansive Gen Z market. For instance, Frich, a financial education and social community for Gen Z, just raised $2.8 million in seed funding.
Also in January, Alinea Invest, a fintech app offering AI-powered wealth management aimed at Gen Z women, raised $3.4 million in seed funding ahead of the launch of a virtual AI assistant that will help users with their investing needs. And Bloom, a zero-commission stock investing tool for teenage investors, that emerged from stealth last July, announcing it had reached 1 million downloads after launching in February 2022. Meanwhile in March, Miami-based Onyx Private, a Y Combinator-backed digital bank that provided banking and investment services for high-earning millennials and Gen Zers, announced it was terminating its bank operations and pivoting to a B2B model instead.
In a similar vein, and perhaps to a lesser degree when it comes to comparison, there’s Copper, which is really geared more toward teaching teens about finances, but which ran into trouble with its debit card offerings due to the BaaS-industry mess. There is also Step, a digital banking service geared toward teens and young adults backed by NBA star Stephen Curry, and Current, which began its life as a teen debit card controlled by parents but has expanded over time to offer other services.
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