New York’s Rho Business, which wants to create a digital business banking system for early-stage and high-growth startups, has raised a $4.9 million seed round led by Inspired Capital.
In simple words, Rho wants to work as basic operational banking infrastructure for startups. What exists in the market today can prove a challenging fit for young companies. Founded by Everett Cook and Alex Wheldon, Rho wants to help startups “be up and running quickly […] and not worry about the act of banking.”
“There’s nothing [tailored in traditional banking] in support of startups and small businesses. It is still archaic to even obtain a bank account,” said Wheldon in an interview with Crunchbase News.
Cook added: “General banks don’t invest in technology, they prioritize physical presence.”
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Of course, there’s a $2.6 billion dollar elephant in the room: Brex, a San Francisco-based startup that is working to create a financing alternative for other startups, which has raised $382.1 million in venture capital.
With investors like Y Combinator Continuity, Kleiner Perkins, DST Global, and more, Brex offers a business credit card for startups as well as a “Brex Cash,” a sort of banking alternative.
The last time I chatted with Henrique Dubugras, the co-founder of Brex, he told me that “building a bank is difficult, so we built something better.”
When I asked Rho about Brex, it said that it doesn’t view the San Francisco startup as a direct competitor, but commended its innovation within the sector. Rho integrates with commercial cards as well as cash management tools.
However, Cook told me that “with Brex Cash, they are now a bit closer to our core value operation.” More specifically, Brex Cash offers a yield on cash accounts, which is similar to Rho.
Cook added that unlike Brex, Rho provides up to $10 million in insurance coverage and is FDIC insured (which means that if Rho fails, the FDIC will give back any losses you incur up to $10 million). Brex insures up to half a million dollars. Brex’s Dubugras described the need for a wide array of financial options for young companies, per a statement in response to Rho Business’ launch.
Rho’s main competitors, instead, are traditional legacy banks, per Cook.
Per the co-founders, Rho isn’t currently working on tapping into underbanked consumers; right now, its focus is on U.S.-based startups.
“We think that the U.S. banking infrastructure is far being a lot of other countries paradoxically,” said Cook. “We think [the market] is the largest opportunity for impact and change.”
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