‘Ship Now, Pay Later’ Startup Pomelo Raises $35M Series A From Secret Vy Capital, Founders Fund

Pomelo, a startup that combines international money transfer with credit, has raised $35 million in a Series A round led by Dubai venture capital firm Vy Capital, TechCrunch has learned exclusively. In addition, the company announces a $75 million warehouse expansion.

Founders Fund and A* Capital also participated in the funding, along with early investor Afore Capital and others.

The deal brings the total funds raised to date to $55 million in equity and $125 million for its warehouse. TechCrunch covered Pomelo‘s Founders Fund under the leadership $20 million in seed funding in 2022.

New backer Vy Capital is an under-the-radar investment firm that has grown to over $5 billion in assets and made headlines for supporting Elon Musk in the Twitter market. Notably, the raise was among Keith Rabois’ last deals before his departure from Founders Fund, as well as one of the few companies in which he retains his role as director of the board after moving to Khosla Ventures.

“Both Keith Rabois and Kevin Hartz went proportionally in this round,” Pomelo founder and CEO Eric Velasquez Frenkiel told TechCrunch, describing the Series A round as “precautionary.” He declined to disclose the valuation, saying only that it was “upper round”.

Harts serves as co-founder and general partner in A*. Previously, he also co-founded Eventbrite and Xoom, an online money transfer service that went public in 2013 and was acquired by PayPal for $1.1 billion in 2015.

In a written statement, Rabois said “Pomelo stands out through a radically different approach to remittances, using credit as a foundation.”

Credit card rail remittance product

Pomelo launched in the Philippines in 2022, allowing people in the United States to send money to the country while building their credit. In other words, Pomelo has created a remittance product on credit card rails.

Specifically, the startup has struck a deal with Mastercard to create what it describes as a product category called “Send Now, Pay Later” (SNPL), which it claims is “faster and fee-free” compared to traditional cross border movement of money.

Pomelo works by allowing a user to create an account that comes with credit cards. The account creator can set limits, stop cards and see spending habits.

Senders can give cash, in the form of credit, to family members — which the startup believes will help with instant access to funds, protection against fraud and chargebacks, and, for potential immigrants who might use it to to send money back home, a way to boost one’s credit score with more transaction history. If someone can’t pay, Pomelo charges a late fee, “so there’s no interest in the product,” Frenkiel said. The company makes money mainly through interbank transaction revenue and foreign exchange is a smaller component.

Since its launch in 2022, Pomelo has added new payment options, including the latest ability for users to send money to GCash, a popular e-wallet (similar to Venmo in the US) in the Philippines, in addition to cards. (According to a recent article by STL Partners, 67% of Filipinos use GCash.)

That ability is especially important in a country like the Philippines where proof of ability to pay may be required before medical treatment, Frenkiel said. It tells the customer’s story Danette Flores, a nurse who sends money to two family members in the Philippines with Pomelo.

“My mom had a heart attack and had to be taken to ICU, but the hospital asked for proof of payment for that. My brother used Pomelo’s card to get it accepted,” Flores said.

Pomelo offers customers two options: either an unsecured line of credit or a secured line of credit based on its current underwriting criteria. The non-revolving line of credit for unsecured customers allows them to carry up to $1,000 per month. On the safe side, a customer can post a bond. In other words, Pomelo can keep funds in the app that can be effectively used to open a line of credit.

The startup’s new capital will be used for product and market expansion. Pomelo’s next target country is Mexico.

“Mexico is definitely the biggest corridor for the United States — something close to $40 billion is sent to Mexico every year,” Frenkiel said.

Pomelo currently has 55 employees in the US and the Philippines.

As Christine Hall recently reported, cross-border fintech is hot right now. The cross-border payments market is projected to reach $250 trillion by 2027, according to Bank of England. And experts say fintechs are giving banks a run for their money (pun intended) here, especially in Greece business to business sector where artificial intelligence, machine learning and blockchain come into play — all emerging technologies love fintech.

But there are other startups focused on the consumer market, including Alza, a startup that aims to meet the various banking needs of Latin Americans or Central Americans who have moved to the US. They also have the ability to send cross-border remittances to more than 20 countries in Latin or Central America integrated into its application through three methods, depending on the recipient’s country: bank transfer, cash pickup or debit card transfer. That company quietly raised $6.6 million in a round led by New York-based Thrive Capital in late 2021.

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