Charli D’Amelio-endorsed fintech Step borrows $300M to bring crypto to teens

The last bull market created a new wave of investors as more and more people decided to make their first foray into the markets. Step, a digital banking service geared toward teens and young adults, is one of the many companies that set out to make money by serving those new investors. And although fates have taken a turn for the worse in the equity and crypto markets in recent months, Step is doubling down on its growth plans.

The company just launched a crypto investing feature to the nearly 4 million users on its platform, CEO and founder CJ MacDonald told TechCrunch in an interview.

Step also announced today that it has borrowed $300 million in a debt financing led by Triplepoint Capital and Evolve Bank & Trust. The new funding represents a substantial portion of the $500 million total Step has raised to date, most recently in a 2021 Series C equity round from investors including Coatue, Stripe and angels such as Charli D’Amelio and Jared Leto.

“We launched September 30, 2020, during the pandemic, so we’ve literally just crossed our two-year mark,” MacDonald said.

While MacDonald declined to share any detail around the company’s revenue, he said it has “grown substantially since we’ve launched,” and noted that the crypto launch demonstrates how Step is introducing additional revenue streams to its business beyond its core revenue source of interchange fees from its credit card product.

Step is first launching bitcoin access on the platform and expects to have added roughly 40 different cryptocurrencies by the end of the month, according to MacDonald. Eventually, the plan is to add NFTs and DeFi tools such as staking, MacDonald told TechCrunch in an interview this April.

The offering will also launch in conjunction with a financial literacy platform providing educational content for the kids and parents on Step’s app, MacDonald said. For kids under 18 on the platform, parents have the ultimate say over how they allocate their money, though for Step customers over 18 there will be no restrictions or limitations on how much of their portfolio they can invest in crypto, he noted.

The company chose to launch its crypto offering before a stock investing feature, the latter of which MacDonald said is currently in the works for Step customers and will likely launch before the end of the year.

Step is one of many investing platforms that have recently waded into the cryptosphere. Roboadvisor Acorns added crypto to its platform this year, and fellow startup Stack raised $2.7 million for its crypto trading and education app for teens in September.

MacDonald said Step plans to use the fresh funds to invest further in two areas — product and people. The company employs more than 100 people today, according to MacDonald.

“We’ve got some other products that we’re going to be launching and having additional capital helps set us up for long-term success … So timing-wise it worked out and we’re thankful for the opportunity. It allows us to basically extend the runway for the business to really set out to [achieve] our mission,” MacDonald said.

When asked about why Step raised debt instead of equity, particularly in today’s rising-rate environment, MacDonald said the company is “very well-capitalized today,” and noted that equity capital is dilutive whereas debt is not.

“We went from zero to one very quickly, and now we need to go from one to 10 and 10 to 100 and just scale the business,” MacDonald said of the decision to take out the debt. He added that he believes economic conditions may force companies that aren’t able to raise new capital in the next 12 to 18 months out of the market, noting that Step’s new capital will help the team “put our heads down and build and control our own destiny.”

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