Note: We update the list of U.S. small business challenger banks monthly here.
Approximately 1 in every 4 U.S. households owns some type of business. Most are small, one-person operations. But that doesn’t mean they don’t need specialized banking services. In fact, the less sophisticated the business the MORE they need financial help.
Finally, 25 years into the digital banking era, there are a half-dozen challengers focused entirely on serving small businesses and freelancers. Seven are/were venture-backed and one is an independent brand from a large traditional bank (we include it here because they are positioning themselves as an independent “startup” brand).
We don’t know much about their traction other than they’ve raised a total of $190M, two-thirds of that by the only independently chartered institution, Grasshopper Bank. And we have estimated website traffic from Similar Web, but it likely to be highly imprecise given the relatively small footprint of the group (other than AZLO).
In order of website traffic:
| Company | Founding | HQ | Traffic | Funding |
| AZLO (BBVA) | 2017 | SF | 410,000 | N/A |
| NOVO | 2016 | NYC | 52,000 | $4.8M |
| NorthOne | 2016 | NYC | 33,000 | $23.3M |
| Lili | 2018 | NYC | 7,100 | $10M |
| Grasshopper Bank | 2016 | NYC | 5,400 | $131M |
| Seed (Cross River Bank) | 2014 | SF | 4,600 | $5.2M |
| Joust | 2017 | Austin | 2,200 | $11.0M |
| Oxygen | 2018 | SF | ina | $5.5M |
Azlo
Operated as an autonomous unit of BBVA. Azlo is the clear leader in the USA in terms of web traffic with 4x the traffic of the other 5 challengers combined. Here is its founding CEO, Brian Hamilton,* explaining it in a 4-minute interview in 2017 (no demo).
*Note: Brian Hamilton left Azlo in Feb 2019 to start One, a challenger bank in the consumer sector. He was replaced by Cameron Peake.
Novo
NYC-based Novo launched in 2016 and with $5M raised has achieved some measure of success, at least in terms of website traffic recently estimated at about 50,000 per month. Below, Founder/CEO Michael Rangel presents at CB Insights Future of Fintech last June (2019).
NorthOne
NYC-based NorthOne is another challenger from the class of 2016. It targets freelancers and solo business owners with banking powered by Radius Bank. The bank raised 6x as much as Bank Novo ($23M) but trail in website traffic 33k to 52k. But that’s a vanity metric. More importantly, according to the counter on its homepage, NorthOne has attracted 133,000 customers (aka “Business builders”), an impressive number for any 4-year old SMB provider. Here’s a 27-second explainer video on Facebook.
Lili
The newest startup, Lili is also based in NYC, is a product of the pandemic, having raised its initial $10M seed round in June (2020). The startup is targeting freelancers. Banking is powered by Choice Financial Group. Here’s the startup’s 45-second explainer.
Grasshopper Bank
The third challenger born in NYC in 2016 is Grasshopper. It becomes the first newly chartered bank in the Northeast, and just ninth in the United States, since 2009. The bank has raised $133M, more than double the other 5 combined. Yet, they are just getting started on the web with just over 5,000 visitors per month. Below, 11FS’s Sam Maule interviews Grasshopper Founder/CEO Judith Erwin about the orgins of the bank (20 minutes).
Seed (acquired by Cross River Bank)
San-Francisco-based Seed appears to be a bit stalled by the pandemic and/or acquisition delays. The company began in 2014 and was part of the prestigious YC accelerator (W15). It had raised a relatively modest $5.2M prior to being acquired by Cross River Bank a year ago (24 June 2019). But Seed hasn’t updated its blog, job listings, terms & conditions, or press page since the acquisition. And website traffic has fallen to about 4,000 per month.
However its new parent, Cross River Bank, is an important banking-as-a-service provider counting Stripe, Transferwise, Affirm and Coinbase as clients. And recently it made national news by setting up more than 100,000 PPP loans. So, it appears the combined Seed/Cross River group to be a major SMB player. Here is CEO Gilles Gade interviewed at CB Insights Future of Fintech last year (June 2019), just prior to acquiring Seed (20 minutes).
Our lone non-SF/NYC entrant is Joust founded in 2017 with funding of $11M. The Austin-based bank has only 2,200 monthly visitors, so doesn’t appear to be in major scaling mode just yet. The company is a Techstars 2019 alum. Joust targets the self-employed and offers the most unique banking benefit of the challengers, PayArmour, an invoice-financing program that guarantees payment within 30 days for a 1% fee ($20/mo premium account required).
Update (25 Aug 2020): Joust was acquired 30 July by ZenBusiness for an undisclosed amount (press release). The name will be changing to ZenBusiness Money.
Its 60-second explainer is below (also see Dec 2019 non-financial deck):
Oxygen
San-Francisco-based Oxygen is a mobile-only bank aimed at freelancers and small businesses. Banking is powered by The Bancorp Bank. The startup was in the Summer 2018 YC accelerator and has raised $5.5M. Following is a recent 90-second promo video (no demo):
