Splitwise Secures $20 Million in Series A Funding

Splitwise, a startup headquartered in Providence, Rhode Island, has announced the completion of a $20 million Series A funding round this morning.

Core Functionality and Differentiation

The company develops consumer financial technology designed to simplify expense sharing. However, Splitwise distinguishes itself from platforms like Venmo or Paytm. Rather than facilitating direct monetary transfers, Splitwise focuses on tracking and clarifying debts, leaving the actual payment process to the users themselves.

CEO Jon Bittner explained to TechCrunch that the primary goal is to alleviate the stress and potential friction that financial matters can introduce into various relationships.

Addressing a Universal Need

Shared expenses are a common occurrence for roommates, couples, friends on trips, and partners with separate finances. Tracking these costs and requesting reimbursement can be an unpleasant task. Splitwise’s software streamlines this process, making it easier to manage and settle shared financial obligations.

By maintaining transparency regarding expenses and outstanding balances, the application aims to prevent misunderstandings and awkwardness related to money.

Significant User Base and Growth

The platform has resonated with a global audience. According to Bittner, Splitwise has amassed tens of millions of registered users who have collectively managed approximately $90 billion in shared expenses since its inception in 2011.

While the startup did not disclose the number of active users, its early-stage funding round allows for some leniency regarding detailed usage statistics.

Revenue Model: A Subscription Approach

Unlike platforms that profit from transaction fees or holding user funds, Splitwise generates revenue through a subscription model. Users can access a more feature-rich experience with the Pro service, priced at $3 per month. Essentially, Splitwise provides a premium subscription for enhanced cost-sharing capabilities.

The company’s conversion rate from free to paid users has remained stable despite the growth of its free user base, according to Bittner. This suggests a healthy and expanding subscriber base, which likely contributed to Insight Partners’ decision to lead the $20 million investment.

Funding History and Organic Growth

Prior to this Series A round, Splitwise had raised approximately $9 million, as reported by Bittner to TechCrunch.

The company has historically relied on organic growth, attracting users without significant marketing expenditure. This strategy allowed it to maintain low operating costs and delay seeking substantial venture capital.

However, limited fundraising also meant careful resource allocation.

Future Plans: Product Development

The newly acquired capital will be used to accelerate the pace of product development, according to the CEO.

Maintaining a User-Friendly Experience

Splitwise intends to ensure its free version remains valuable enough to encourage users to invite their contacts without encountering aggressive commercialization. The company prioritizes a positive user experience.

Investor Confidence and Freemium Strategy

Insight Partners’ Boris Treskunov expressed enthusiasm for Splitwise becoming the leading platform for effortless cost-splitting among friends and family. Widespread adoption necessitates a robust free offering, indicating continued investment in the freemium model.

Providence's Tech Scene

Splitwise is a prominent startup in Providence, though Pangea, a recent Y Combinator graduate, is gaining recognition. These companies demonstrate the potential for building successful tech businesses outside of traditional startup hubs.

It will be interesting to observe how Splitwise utilizes its new funding and the balance between remote and local hiring in relation to its Providence headquarters.