Facing extinction, Sezzle chopped costs and hit on a strategy for making money from the heaviest users. The stock market noticed.By Hank Tucker, Forbes Staff
The future looked grim in mid-2022 for Minneapolis-based Sezzle, an also-ran in the fast-growing buy-now, pay-later fintech business. It had burned through most of the $115 million it had raised in a 2019 initial public offering on the Australian stock market and two subsequent offerings. A rescue deal it had struck to be acquired by a competitor was collapsing, along with both companies’ stock prices. And when tiny Sezzle tried to sign up big retailers, it had to make too many concessions to ever turn a profit—a problem because the typical buy-now, pay-later transaction, which allows online shoppers to pay for purchases in four installments at 0% interest, relies on subsidies from merchants.
Meanwhile, investor enthusiasm for money-losing fintechs, which surged during the early days of the pandemic, was evaporating. Venture capital funding for the sector fell from a record $141 billion worldwide in 2021 to $39 billion in 2023, per CB Insights.
“We were reaching a tech-pocalypse with interest rates rising, and [investors were] thinking ‘We’ve got to look at the fundamentals of companies,’ and our fundamentals were not great,” remembers Charlie Youakim, Sezzle’s 47-year-old CEO and cofounder.
To survive, he started chopping. He shuttered the company’s operations in Europe, India and Brazil, cut worldwide staff from 580 to 240 and began shedding unfavorable partnerships. He even trimmed headcount in the U.S.—the heart of Sezzle’s business—by 10% and made symbolic changes like canceling the $500-a-month contract for a fancy Bevi machine that dispensed carbonated and flavored water at headquarters.
Up against much bigger and better-funded competitors such as San Francisco-based Affirm and Sweden’s Klarna, Youakim couldn’t simply cut his way to survival, let alone profitability. He needed a new revenue source and strategy. He found both by focusing on the niche of heavy users, chronic buy-now, pay-later addicts.
In 2022, Sezzle launched a $12.99-a-month subscription service aimed at these frequent fliers, with benefits including access to more retailers and flexibility in rescheduling payments. Those opting for the premium “Sezzle Anywhere” (introduced in June 2023) pay $17.99 a month and can use 0% installment buying at physical stores and restaurants too by loading a virtual Visa card onto their phones. In all, Sezzle has 529,000 subscribers.
That $17.99 monthly charge works out to $216 a year. That’s expensive when a host of credit cards charge no annual fees andpay cash back on all purchases. But many buy-now, pay-later users don’t qualify for the best credit card deals. A recent study by the Consumer Financial Protection Bureau found that most buy-now, pay-later loans are made to borrowers with subprime credit scores and that heavy users are more