Rain, an earned-wage access company, gets a $250M valuation

Rain, a Los Angeles-based earned-wage access company, announced it raised$66 million at a $250 million valuation. QED Investors and Invus Opportunities led the round.

Why it matters: Investor interest in earned wage access, billed as an alternative to predatory payday loans, has grown, along with regulatory scrutiny aimed at the product.

Of note: Other investors in the round included WndrCo, Tribe Capital, and Dreamers VC. Rain also raised $50 million in debt.

Context: Earned wage access companies have come under the microscope in the Biden administration.

• Much of the debate centers on whether some products should be considered credit and therefore subject to more onerous rules.
• California regulators, meanwhile, are expected to call on earned-wage access firms to register with the state and come under its consumer financial protection laws.
• Other players in the space include Earnin, Wagestream, and Payactive. The neobank Chime notably made an offer to buy DailyPay for $2 billion last year, per the Information.

Details: Rain charges $3 per instant withdrawal and doesn't allow employees to withdraw over 50% of its gross earned wages per pay period.

• When asked about the increased scrutiny, Rain CEO Alex Bradford responded: "Our product structure and fees are consistent with the CFPB's guidance."

Bottom line: Earned wage access is VC's chance to prove this isn't a repeat of their mistaken foray into payday lending. Payday lending, too, had an ostensibly noble cause: helping low-income workers get liquidity. High fees and punishing terms however made the category toxic.