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StretchDollar, a fintech startup providing insurance solutions to small businesses, has closed its seed round at $6 million, led by Fika Ventures and Oscar Health. It did not disclose the company’s valuation. The new funds will be used in enhancing its platform and its operations, focusing on growing presence in Pittsburgh, where Marshall Darr relocated as its CEO earlier this year.
StretchDollar is a platform that enables small businesses to contribute pre-tax funds directly to employee-owned health insurance premiums. Founded in September 2023, the company has witnessed massive growth. In one month, the customer base grew by 25%. The company expects more than 200 small businesses to use its platform by the end of 2024.
The $6 million funding round is notable in the current startup landscape, where the median seed round raised in 2023 was only $1 million, with a slight increase to $1.3 million in the first half of 2024, according to Crunchbase. StretchDollar’s ability to raise such a large amount highlights the increasing demand for its innovative platform, which addresses a gap in the small business market.
Darr attributes the rapid growth of the startup to the significant gap in the market for affordable and efficient health benefits solutions for small businesses. Many small companies face difficulties in offering healthcare benefits to their employees, especially with the rising costs of group health plans. StretchDollar’s platform offers an alternative by enabling small business owners to provide employees with funds to purchase individual health insurance, rather than offering traditional group plans.
The startup utilizes a relatively new IRS rule that allows the use of pre-tax dollars for health insurance expenses through Individual Coverage Health Reimbursement Arrangements (ICHRA). This enables small businesses to offer more flexible and cost-effective health benefits options for their employees. Apart from being a licensed insurance broker, StretchDollar can also assist employees in finding the right health insurance plans that suit their needs.
“We have seen small businesses feel overwhelmed by the intricacies of health benefits,” said Darr. “Most small business owners didn’t start their companies to manage healthcare, and they certainly don’t enjoy dealing with hospital networks or medication plans. StretchDollar helps alleviate this burden by giving employees more control over their health benefits.”
Darr also points out that the company’s success during its early years in Pennsylvania can be attributed to the health insurance marketplace, Pennie, introduced under the Affordable Care Act. Pennie provides affordable private health insurance options for eligible Pennsylvania residents, buying into the marketplace at below-market rates. The company enjoys a robust customer base across the state, providing the perfect location for the company’s initial setup.
The $6 million financing will be used to further the development of the StretchDollar platform, enhancing features, as well as to provide additional marketing and engineering in furthering its efforts, Darr said. Staff additions are expected in 2025. Darr mentioned that he is “seriously considering opening a small physical office in Pittsburgh in a year or two or when the staff grows.”.
Besides growing its team, StretchDollar will be looking to enhance its self-service platform and build out features for new products. Darr talked about strategic partnerships as having a great deal of importance by saying that some of the largest individual health insurance carriers in the nation, Oscar Health among them, understand the opportunity in StretchDollar’s approach to the small business health benefits market.
Oscar Health, which is one of the biggest health insurers in the US, has also supported the startup through its seed round as a testament to StretchDollar’s potential for growth in the market. “Many businesses, particularly those with fewer than 50 employees, don’t have the resources to keep track of the increasing cost of employer-sponsored health plans,” according to Mark Bertolini, CEO at Oscar Health. The individual health insurance market fills in this gap, allowing the employer to offer benefits while allowing the employees to decide for themselves which plan best represents their needs.
StretchDollar is approaching an important and major challenge faced by small businesses: making health care as affordable and flexible as possible. The startup is at a very high growth prospect with new funding. So, StretchDollar’s key focus will be on crafting a full-fledged comprehensive solution for helping small businesses navigate the really complex world of employee benefits.
In addition to expanding its customer base in Pennsylvania, StretchDollar has plans to expand into other regions. The seed funding will be used to further develop the platform and create a solid foothold in the U.S. market. By providing a seamless way for small businesses to manage health benefits, StretchDollar is positioning itself as a game-changer in the rapidly evolving insurance fintech space.
Looking ahead, Darr is optimistic about StretchDollar’s potential in transforming the small business health benefits landscape. “2025 will be a transformative year for StretchDollar,” he said. “We have a clear vision for where we want to go, and with the support of our investors and team, we’re excited about the future of the company.”
