New fintech startup PrizePool, which combines online banking with a monthly sweepstake designed to incentivize personal savings, has picked up $4.25 million in seed funding.
The company is taking aims at the low saving rates among Americans, nearly half of whom could not afford a sudden $1,000 expense before the pandemic, according to a survey from Bankrate.
"It's a new way to save money, and hopefully incentivize folks to save money, for those unexpected expenses," CEO and co-founder Frank Chien told Cheddar.
PrizePool will guarantee $50,000 worth of prizes each month, including at least one $25,000 sum given out to a single winner. The rest of the prizes begin at $2 and go up.
"The way you enter is simply by saving money," Chien said.
The entrepreneur stressed that user deposits will be held by Evolve Bank & Trust, a commercial bank with a footprint in Arkansas and Tennessee.
"So your money is FDIC insured and risk-free completely," he said. "We actually run the entire program under sweepstakes law, so we're completely compliant and eligible in all 50 states."
The startup is also promoting how users can further incentivize each other to save through a system that rewards referrals with a 10 percent bonus on the new user's winnings.
"We're making savings a more shared experience," Chien said. "Every friend or family member that refer to PrizePool gives you more chances to win."
The seed funding will help PrizePool develop its software and pay for a marketing push, he said.
Chien was also behind the education-technology startup LearnSprout, which Apple acquired in 2016. The tech giant at the time was developing educational tools on its iPad product to compete with Chromebook in serving classrooms.
LearnSprout appears to have since been absorbed into the larger company.