“Eco is not a bank.” – a recurring message one sees on the website of the three-year-old startup building a personal finance app for saving and spending money. Yet Eco aims to offer many of the services of a traditional financial institution. It also doesn’t want to position itself as a cryptocurrency business, yet its revenue model directly depends on the volatile market.
“Sometimes the best way to explain what you are is to explain what you’re not. And when you’re building something new, like what Eco is, there aren’t always the best words for it,” says Andy Bromberg, Eco’s chief executive.
In March, the startup raised a $26 million investment round, led by a16z Crypto, the cryptocurrency-focused investment fund of venture capital giant Andreessen Horowitz, with participation from Activant Capital, Coinbase Ventures, and more than one hundred other venture and angel investors. Today, the company is announcing previously unknown celebrity investors from sports, entertainment and business, including Sean “Diddy” Combs, Kevin Durant and Justin Blau, known by his stage name 3LAU.
With the investment, Eco hopes to increase the feature set and merchant selection for the app, which has more than 170,000 people on the waitlist. An early version of the app is already available to some users, onboarded selectively through an one-on-one interaction, in private beta mode. Previously, Eco raised more than $8.5 million, primarily from Pantera Capital and Expa, a startup studio founded by Uber co-founder Garret Camp. One of the founding fathers of Eco, Camp still acts as an advisor to the firm.
What does Eco provide?
The primary service is a digital wallet that pays 2.5% yields on deposits, up to 5% with friend referrals, as well as 5% cashback at merchants including Amazon, Uber, DoorDash, and, most recently, Instacart. These yields are substantially higher than the national average interest rate of 0.07% for savings accounts as of March, according to Bankrate. Among banks, Citi and Marcus by Goldman Sachs offer highest annual percentage yields of 0.5%.
Customers can also make in-app ACH deposits from their bank account, similarly to many fintech products, or by connecting their payroll and routing a portion or all of their paycheck directly in. Wire transfers for large deposits are available as well.
Eco makes money and can afford to pay these high yields because it lends out customer deposits to crypto trading desks at even higher rates (though Eco’s CEO Bromberg declined to specify). While this is good business right now, it could force them to lower rates if loan demand drops or more competitors enter the picture. Eco has thought about this situation and is not worried right now. Bromberg told Forbes they don’t plan to do so (lower rates) and don’t anticipate such a need: “We’ve built out many scenarios and are comfortable offering these yields.”
Still, there is precedent of companies lowering yields on interest payments. For instance, both BlockFi and Coinbase have reduced payouts for crypto and stablecoin deposits at their discretion.
Bromberg had previously co-founded CoinList, a cryptocurrency platform facilitating token sales. He says his CoinList experience helps him educate Eco users about “what crypto is and why it’s powerful”, but he doesn’t want to burden clients with crypto terminology and convince them to invest in a “volatile” asset.
Commenting on the Wednesday crypto crash, Bromberg, an early cryptocurrency bull, says: “I’ve seen this movie before. At some point, it just stops phasing you. It seemed like about time.”