Most people have a negative association with debt collection.
A startup called January is here to change that with a new $10 million fundraiser.
Founder Jake Cahan says most debt collectors fall into a category of “predatory agencies exploiting vulnerable borrowers.”
It is estimated that 70 million Americans have debts in collection. At least a quarter of these people, according to Cahan, are threatened by collectors in one form or another – whether in the form of threats of arrest, wage garnishment or general harassment.
January – formerly called Debtsy – was founded in January 2016 on the premise that lenders, and creditors more broadly, were increasingly concerned about putting their reputations at risk by using traditional debt collectors. They also expose themselves to the risk of being slapped with regulatory fines, notes Cahan.
“What I’ve seen is you have debt settlement companies on one side of the table that are really creditor unfriendly, and then you have collection agencies on the other side of the table, which are very consumer-unfriendly,” he told TechCrunch. “And so I was looking to see ‘How do we fix what is objectively one of the most broken and antiquated parts of consumer finance? And that led me to want to start a business in that space.
January has built relationships with creditors to help them provide struggling borrowers with “simplified” ways to pay off their debt.
“Creditors do not intentionally try to put their borrowers in a position of harassment. Ultimately, they try to maximize the net present value of their past due or written off debts,” Cahan said. To maximize that value, he added, they can improve how they collect internally. Their other alternatives are to outsource collections to third-party agencies or sell their accounts to entities known as debt buyers, who then place the accounts with agencies and lawyers.
Ultimately, January’s goal is “to be the single platform that meets all of these collection and retrieval needs,” Cahan said.
“We started by solving the really, really difficult problem of how to collect at scale in a really compliant way or in a really compassionate but still very effective way, and that allowed us to solve some of the biggest problems in the industry,” said he declared. noted. “We need to stop treating people like criminals and start making the system work, because the debt doesn’t go away.
Even more simply, January strives to be a technological collection agency service that collects debt on behalf of creditors in a civilized manner. It charges contingent fees for every dollar it collects.
The model seems to work. In 2021, the company tripled its ARR and more than doubled its headcount, which now stands at around 37, with the hope of reaching 70 by the end of the year.
Besides hiring, January plans to use her new capital to continue expanding her product line.
“Every institution needs to have good systems around collections to function,” Cahan argues. Among the company’s customers are “some of the biggest logos in credit unions, debt buying and fintech verticals,” he said, including Baxter Credit Union, a multi-billion dollar credit union; fintech lender Octane; ally a credit union with $14 billion in assets and RBFCU, another credit union with $14 billion in assets.
January says it is unique in its approach to aligning incentives and software in that it “guarantees” compliance and performance. And in the name of transparency, it allows lenders to see statistics as well as a “complete record of every consumer interaction, across all channels, from the time a debt went unpaid,” according to Jesse Beyroutey, General Partner at IA Ventures.
The investor went on to say that his company backed January because he believes “it solved the root cause of all debt collection problems: trust. »
“Before January, indebted consumers were one of the most harassed groups in consumer credit. The refund process was terribly disrupted,” he told TechCrunch. “January turned the script around, reaching people through trusted channels and being proactively transparent with consumers and lenders…Its communications with consumers are based on respect for the person who originated the debt.
Brewer Lane Ventures led the company’s latest funding, bringing the total raised in January to $16 million. Also participating in the round were existing backers IA Ventures and Third Prime Capital and new investors such as Tribe Capital and Reciprocal Ventures. Angels also poured money into the funding, including the former CEO of Credit Suisse and the founders of Braze, Bread, GLG and TrialSpark.