Exclusive: Employee crisis fund startup Canary raises $2.9M

Fintech Canary, which helps employers set up emergency relief funds for workers, raised $2.9 million in seed funding from investors including Capital One Ventures.

Why it matters: Americans' lack of emergency savings came to the fore during the pandemic, leading to a wave of employers offering crisis funding benefits. Venture investors have taken note.

How it works: Companies like eye-care chain Visionworks and Walmart have pools of funds for employees to use in times of hardship. But setting it up can be complex.

• Founded in 2019, Canary takes care of the administrative and legal paperwork required to create such a benefit, says CEO and Founder Rachel Schneider.
• Proponents say such this type of program is not only beneficial to companies because it boosts retention, but also because it's tax-deductible. Canary takes care of the latter by having the company put the funds in Canary's sister nonprofit, making it a charitable donation.
• Canary then metes out the grants to eligible employees from that nonprofit.

Of note: Canary is largely focused on small to mid-sized companies, as larger businesses typically have the resources to construct the pool on their own, says Schneider. Visionworks is a customer.

The big picture: Canary’s approach differs from employer-sponsored emergency savings accounts, in that it handles a pool of capital contributed largely by the employer. ESAs meanwhile act more similar to a 401(k), which come at least in part from the employee's paycheck.

• Social Finance, Even, T. Rowe Price, and Fidelity are all offering (or in the process of offering) employer-sponsored ESAs. SecureSave raised $11 million in June in a round led by Truist.

Bottom line: Americans are poorly prepared for an emergency, the CFPB says, citing nearly a quarter of the U.S. with no income saved for such an event.