Building a Legitimate, Profitable FinTech Unicorn Using AI: Cynthia Chen, Founder of Kikoff (Part 5)

Sramana Mitra: How much did you raise in your first round?

Cynthia Chen: First round was $2.5 million.

Sramana Mitra: What milestone did that get you to?

Cynthia Chen: It got me to tens of thousands of active users.

Sramana Mitra: Free users or paid users?

Cynthia Chen: Mostly free. It was mostly word of mouth in the Beginning.

Sramana Mitra: Mostly word of mouth and free users? What were they using? What were they doing on the website?

Cynthia Chen: They were standing up for a microloan that was helping them build credit, and we also provided some mini courses in credit education to help them understand how credit scores were calculated, how credit reports work, and what they can do to improve their credit health.

Sramana Mitra: When you went out to raise your next round of financing with these free users, and since you also understand venture capital somewhat, what conclusions were the VCs drawing that you would be able to monetize this?

What kind of conversion rate assumptions were they making from free to premium, et cetera?

Cynthia Chen: In the beginning, we did not charge anything. Our first product was absolutely free. It’s just zero fee, zero interest. For Series A, it’s all about getting to some product-market fit for showing that people want to use your product. But post Series A before you reach Series B, you definitely want to show that you can generate revenue to make it a sustainable business.

Sramana Mitra: For Series A, you need to generate revenue.

Cynthia Chen: Right. You need to show that. So, for that purpose, we switched to a subscription model.

Sramana Mitra: How much money did you raise for Series A?

Cynthia Chen: In Series A, we raised $10 million.

Sramana Mitra: So, you were able to raise $10 million on these tens of thousands of free users?

Cynthia Chen: Yes.

Sramana Mitra: How much of that converted to paid users after series A?

Cynthia Chen: After series A, I would say probably 40% of them converted to a subscription model.

Sramana Mitra: That’s amazing. 40% premium conversion is exorbitantly high. So, tell me what happened.

Cynthia Chen: I think we just accumulated a lot of goodwill with customers over the first year. They really believed in the product. They saw that it really helped them improve their credit, and we really handled our customers with a lot of care and compassion. So, they liked us. So that’s why when we introduced a new product of subscription base, they were very excited about it and signed up immediately.

Sramana Mitra: That was the $5 a month subscription fee product?

Cynthia Chen: Yes.

Sramana Mitra: So, in terms of customer acquisition, was it still word of mouth or were you going back to your Facebook advertising? How are you acquiring customers?

Cynthia Chen: Word of mouth is still our largest channel, but of course as a company scales, you will want to diversify your channel and you add paid acquisition, including Facebook, Instagram, TikTok, and Google.

Sramana Mitra: Can you tell me, in terms of actual calendar year, when you started the company, when did you do the seed, and when did you do the series?

Cynthia Chen: Sure. We started the company in November 2019 and seed round was closed in November 2019. Then in May or June, or late Q2 2020, we closed our series A.

Sramana Mitra: In the middle of 2020?

Cynthia Chen: Yes, in the middle of 2020 in May or June. Then in May 2021, we did our series B.

Sramana Mitra: Series A or Series B?

Cynthia Chen: Series B. Series A was 2020. Series B was 2021.

Sramana Mitra: How much did you raise for series B?

Cynthia Chen: Series B was pretty large. Series B was $30 million roughly.

Cynthia Chen: And what kind of revenue run rate were you doing when you raised series B?

Cynthia Chen: That was more than four years ago. I can’t remember exactly, but single digit million.

Sramana Mitra: Single digit million, but several million dollars run rate.

Cynthia Chen: At least several, yes.

This segment is part 5 in the series : Building a Legitimate, Profitable FinTech Unicorn Using AI: Cynthia Chen, Founder of Kikoff
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