We are very excited to announce our Series A investment in Brightside, a company focused on financial health, distributed through employers. Not only does Brightside improve financial wellness and literacy—helping both employees (less financial stress, more disposable income) and employers (less stressed, more productive employees)—but by being tied into paychecks, Brightside can fundamentally change how financial products are delivered and priced.
Let’s take a step back, though. Why is healthcare linked to employment? It turns out it’s a legacy of World War II. Price controls begot wage controls, and employers competed for employees by throwing in other benefits, like healthcare. It has stuck ever since—75 years later.
But does it make sense to tie healthcare to employment? Most people do not think so. You probably don’t want your employer knowing about your health condition, and your health outcomes aren’t improved by virtue of having your employer pay for them. Of course, employers want their employees healthy and showing up to work, but outside of that, linking healthcare to employment has little benefit.
But financial well-being is intrinsically tied to employment because it is employment that provides the bulk of the money that hits employee bank accounts. An employee with a flat tire—and without the savings to cover it—can’t come to work. The only option is to get an absurdly expensive loan, which is expensive because the lender doesn’t know if the person will pay back the loan. But the employer, as the source of salary, does know!
Here’s an example that hopefully shows how fundamentally disruptive linking financial products to employment can be. People pay hundreds of billions of dollars a year in interest on “unsecured” loans—unsecured, meaning not backed by any collateral (like a house or car). Where do people get the money to pay the principal and interest? Their employers!
What if the employer could route interest payments directly to lenders—with employees’ permission—taking the “risk” out of repayment? Since loans are priced around assumed ability and willingness to repay, this takes the risk completely out of “willingness” and almost entirely out of “ability” (ability = still employed). Interest payments would plummet and low income Americans would save hundreds of billions of dollars a year. This is one of many things Brightside is doing, and why we are so excited by this opportunity.
Brightside acts in the best interest of employees to save them money at every turn. Helping increase credit scores, refinancing debt, finding government and community benefits, eliminating fees—these are all services Brightside does for free, saving each employee $1,200 per year on average. And linking to paychecks can help employees automate behaviors like paying off debts and saving for a rainy day. Employers pay Brightside because these savings result in less financial stress and more productive employees—even manifesting in lower healthcare costs.
The team is one we know well, and is so well suited for this mission. Brightside’s CEO, Tom Spann, also started Accolade, an a16z portfolio company that provides a healthcare concierge to reduce healthcare costs. Tom has built Accolade into the leading company in its space. To do the same for financial health is a perfect fit for Tom, and we’re thrilled to support him and the rest of the team on this tremendous journey.