Neobank for SMBs Hatch launches with $20m funding

Small business financial services platform Hatch launched its Business Checking product to solve the woes of small businesses in the US.

Launched by predictive analytics company Framed Data founder Thomson Nguyen, the firm secured a total of $20m across two funding rounds from investors like Kleiner Perkins, SVB and Plaid’s founders.

The startup raised a $5m seed round from Kleiner Perkins, Abstract Ventures and former Square executive Gokul Rajaram in January 2019. It was then followed by a $14m Series A round from Foundation Capital, SVB and Plaid founders William Hockey and Zack Perret in February 2020.

The firm aims to capitalise on the funding by building products for the estimated 40 million small businesses in the US.

The startup uses machine learning to automate Business Checking’s online sign-up process, know your customer and know your business requirements. This includes confirming business incorporation paperwork, social security and regulatory compliance like Office of Foreign Asset Control checks. After the process which the firm said takes less than five minutes, customers get a Mastercard virtual number and can link external bank accounts.

The business checking account comes with a Mastercard debit card allowing its 4,000 business users to send money through ACH, billpay or via digital checks from the Hatch dashboard.

While it charges a monthly fee of $10 it offers a host of features including overdraft protection and up to 5% debit cashback at gas stations, restaurants, and other businesses. Clients also benefit from no NSF fee and get up to $50 if their balance goes negative with Hatch Cover. Eligible account holders can also enrol in Hatch Cover, which covers overdrafts up to $100.

Furthermore, Hatch also offers small businesses a line of credit. Should a Hatch Business Checking client need more working capital, it can apply for a Hatch Business Line of Credit or loans between $200 to $5,000 at an APR of 18% to 24%.

Nguyen, who worked as Square Capital’s head of data science before becoming an entrepreneur-in-residence at Kleiner Perkins in 2018, found that immigrants and people without credit histories were paying the majority of bank fees. He told TechCrunch, “My parents immigrated here from Vietnam after the war and were like so many immigrants to the States to start small businesses. Figuring out how to use whatever talents I had to try to make it easier to start small businesses was definitely something I wanted to pursue.”

Commenting on the new launch, Kleiner Perkins partner Ilya Fushman said, “Small businesses account for nearly half of all economic activity in the US but are often hamstrung by the banking ecosystem today. Hatch is democratizing access to the financial resources that small businesses need to start out and grow. Thomson and team are already working with thousands of SMBs and are uniquely suited with the technology and industry expertise to help them grow with the financial resources they need to be successful.”

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