Pomelo, a startup that combines international money transfer with credit, has raised $35 million in a Series A round led by Dubai venture firm Vy Capital, TechCrunch has exclusively learned. Additionally, the company is announcing a $75 million expansion of its warehouse facility.

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

The deal brings total funds raised to date to $55 million in equity capital and $125 million for its warehouse facility. TechCrunch covered Pomelo’s Founders Fund-led $20 million 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 backing Elon Musk in his purchase of Twitter.

Pomelo’s new round was among Keith Rabois’ last deals before recently leaving Founders Fund for Khosla Ventures, and he continues to sit on its board.

“Both Keith Rabois and Kevin Hartz went super pro rata on this round,” Pomelo founder and CEO Eric Velasquez Frenkiel said in an interview with TechCrunch, describing the Series A round as “preemptive.” He declined to reveal valuation, saying only it was an “up round.”

Hartz serves as the co-founder and general partner at 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 that “Pomelo stands out through a fundamentally different approach to remittance transfer by using credit as its foundation.”

Remittance product on credit card rails

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

Specifically, the startup has struck up an agreement with Mastercard to create what it describes as a product category called “Send Now, Pay Later” (SNPL), which it claims is “faster and with no transfer fees” as compared to traditional cross-border money movement.

Image Credits: Pomelo

Pomelo works by allowing a user to set up an account that comes with credit cards. The creator of the account can set limits, pause cards and view spending habits.

Senders can give cash, in the form of credit, to family members — which the startup thinks will help with instant access to funds, fraud and chargeback protection and, for potential immigrants that may use this to send money back home, a way to boost one’s credit score with more transaction history.  In the event that someone cannot pay, Pomelo charges a late fee, “so there is no interest on the product,” Frenkiel said. The company makes money mostly through interchange revenue, and foreign exchange is a smaller component.

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

This ability is particularly important in a country like the Philippines where proof of ability to pay can be required before medical treatment, Frenkiel said. He relates the story of customer Danette Flores, a nurse who sends money to two family members in the Philippines with Pomelo. 

“My mom had suffered a heart attack, and she needed to be transferred to the ICU, but the hospital required proof of payment for that. My brother used his Pomelo Card to get her admitted,” Flores said.

Pomelo offers customers two options: either an unsecured credit line or a secured credit line based on its underwriting criteria at this time. The non-revolving credit line for unsecured customers gives them the ability to transfer up to $1,000 a month. On the secured side, a customer can put in a security deposit. In other words, Pomelo can hold funds in the app that effectively can be used to open a credit line.

The startup’s new capital will go toward product and market expansion. Pomelo’s next target country is Mexico.

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

Presently, Pomelo has 55 employees in the U.S. and Philippines.

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

But there are other startups focused on the consumer market, including Alza, a startup aimed at helping meet the various banking needs of Latin or Central Americans who have moved to the U.S. With Alza, users get an FDIC-insured checking account and debit card. They also get the ability to send cross-border remittances to more than 20 countries in Latin or Central America embedded in its app via three methods, depending on the recipient country: bank transfer, cash pickup or transfer to a debit card. That company quietly raised $6.6 million in a round led by New York-based Thrive Capital in late 2021.

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