Why We Invested in Greenlight
From a 4.8 star rating in the App Store to a Super Bowl commercial with Ty Burrell, it’s easy to see today why more than six million parents and kids trust Greenlight with their family finances.
But when Tim Sheehan and Johnson Cook floated their idea of a debit card for kids back in 2017, it was early days for the company that would become one of the country’s most beloved and trusted financial brands for families.
We’re often asked how we can tell that a company is going to be a winner when it’s just a pitch deck and a software demo. The truth is that while we’ve honed our questioning, research, and instincts over the years, there are still some success stories that surpass our most bullish predictions. Greenlight is a great example of that.
We made our initial investment based on the factors that we always consider: business model, product-market fit, and founding team. In terms of the business model, we really liked that Greenlight made their offering subscription-based. This meant they didn’t need to rely solely on interchange fees, and it enabled them to focus on financial literacy and become a trusted educational partner for families. A recurring subscription eliminated the need for Greenlight to incentivize kids’ spending in order to generate revenue. Second, since smartphones were prevalent, Greenlight didn’t need retail distribution to get their product in the hands of families and kids; an app would accomplish the same goal and could potentially be more cost-effective.
In Greenlight’s case, we were also intrigued by the idea of households as an enterprise. Within each family unit, there are myriad financial transactions that fall under the categories of saving, spending, and giving; just like any other enterprise, families need help budgeting, tracking, and distributing these funds. Moreover, we were experiencing this problem firsthand as parents – we never had cash when our kids needed it, and our families were running into other money questions, too. What should we do with the funds that our children received as gifts from family members? How could we encourage them to save their allowance? How do we teach them to stick to a budget? Observable events are a big factor for us when deciding whether to invest, and at the time, our families were living through the pain points on a regular basis.
We invested in Greenlight because they were solving a common sense problem: converting cash to online banking and digital payments. But we also invested because we always believed that the company’s true potential would lie in creating customer acquisition opportunities for banks.
On average, banks spend hundreds of dollars on marketing to win a single consumer account. If parents were already using their bank’s platform to manage family finances, it would be seamless to transition their children to an individual account at the same institution once they turned 18 years old. From that perspective, banks could benefit tremendously by investing in Greenlight’s technology, as it would solve the customer origination challenge much earlier in the process, and dramatically reduce acquisition costs. We’re already seeing major banks, as well as regional and community banks and credit unions, adopt Greenlight for these reasons. Financial institutions from JPMorgan Chase to United Community Bank to PSECU are using Greenlight’s technology to help parents teach their kids to be smart about money and personal finance.
We believe that Greenlight is well-positioned for additional growth through partnerships with financial institutions that see the value in providing customers with tools to manage their children’s money, teach financial literacy, introduce the concept of investing, and more. With Greenlight, banks and credit unions can ingrain themselves as an instrumental part of a family’s fabric and earn customers for years to come – and that’s a win-win for everyone.
