- Step, a banking app designed for teenagers, said Tuesday it has raised $300 million in debt.
- The fintech also announced the start of investing in crypto.
- Step has now raised $500 million in equity and debt from a number of venture and celebrity backers.
A banking app aimed at teenagers is now embracing the crypto market — and it just raised hundreds of millions in new funding to help it.
On Tuesday, financial technology startup Step announced a $300 million debt financing led by business debt specialist TriplePoint Capital, with participation from Step’s banking partner Evolve Bank & Trust. Step also announced the launch of a new investment service through which crypto — and eventually stocks — will be available on its app, as well as a financial literacy course designed to promote responsible investing.
Step, which has more than 3.5 million accounts, according to CEO and co-founder CJ MacDonald, has a value proposition focused on becoming a popular banking app for teenagers and their parents. Existing offerings include a savings account, a secure spending card that Step says can help younger customers build credit, and cash back rewards on charges.
The startup has previously raised $200 million in equity funding since launching in 2018. The Palo Alto-based startup last raised equity in April 2021, when it announced a $100 million Series C round led by General Catalyst . That raise has seen several high-profile investors, including Stripe, Coatue and TikTok star Charli D’Amelio, return to the table, along with a new investor – Golden State Warriors star Stephen Curry.
Step declined to disclose the valuation achieved by its latest debt increase.
More startups are turning to private debt markets for fresh capital as equity funding in fintech slows — and as rising interest rates promise higher returns for debt investors. This September, Pitchbook reported that US venture debt activity topped $22 billion in the third quarter, a share on pace with the nearly $33 billion raised last year. Venture funding overall in the third quarter, meanwhile, was nearly 60% below its peak in 2021, CB Insights reported in early October.
MacDonald told Insider that the company is “very well capitalized” amid a year of broader public market volatility, but that tapping into debt markets has given Step “additional flexibility and optionality.”
“Over the last couple of years, what you’ve seen us do is prove that we can build product and we can build brand and we can attract millions of customers to our product and our platform. Now what we need to do is go build a business,” MacDonald added.
Step now has around 100 employees. Proceeds from the fundraising, MacDonald said, will go toward three areas: Continued staffing in product, design and engineering. developing Step’s infrastructure, operations and customer support as it continues to add customers; and product development — including the planned launch of equity investments later this year.
Step now offers encryption
From Tuesday, Step customers under the age of 18 will be able to invest in crypto through the app – with safeguards set by parents or guardians approving account openings and activity – and earn crypto rewards for purchases made through the card issued by Step. In the US, brokerage accounts are restricted to people over the age of 18, although there are custodial accounts through which adults manage investments in a child’s name.
Step first announced plans to offer crypto investments to clients this April. At the time, the startup said it would eventually partner with crypto exchange Zero Hash to offer access to around 50 vetted crypto tokens, along with individual wallets. Currently, Step offers access to bitcoin, which has seen its value drop by about 60% year-to-date, to its customers through Zero Hash.
“In just a few of the last couple of years, there’s been a lot of volatility” in cryptocurrencies, MacDonald said. However, he added that Step sees investment opportunities in crypto and blockchain over a longer time horizon. “There’s going to be cycles in the market. For us, we’re just excited about the long-term opportunity to provide financial access and financial inclusion and education to this next generation.”
Broader equity investments will begin in Step by the end of the year, MacDonald said.
Fintech focuses on financial literacy
As a company marketed to teenagers and their money habits — with the help of 18-year-old D’Amelio’s nearly 148 million TikTok followers — MacDonald has faced what he sees as a lack of available financial education.
Fifteen states in the US now require high school students to take a financial literacy course to graduate – Florida was the latest and largest to pass a bill to make the course mandatory, ahead of others like Virginia and Michigan.
“It’s always bothered me that schools don’t teach kids about money and families don’t talk about money,” he said.
Starting Tuesday, Step users will have access to a free six-part course called Money 101 that aims to teach the basics of personal finance. Some of his classes include topics like investing and budgeting, MacDonald added.
While the course is available online, MacDonald said Step has partnered with more than 100 high schools across the country, from California to Illinois to Alabama, to teach Money 101 on campuses.
“I wish I knew then what I know now,” MacDonald said of the financial upheavals of his own youth. “A big part of what we’re doing as a company is trying to enable that next generation, teach that next generation, responsibly provide access to that next generation so they can grow and be smarter with money.”