When I first came across the 2010 Freakonomics podcast episode “Is America Ready for a ‘No-Lose Lottery’?”, I was intrigued. The concept of a prize-linked savings (PLS) account was new to me yet strikingly simple: invest in a savings program where the interest is aggregated and randomly rewarded as prizes to a subset of users.
More than a theory, adoption of this idea began to proliferate in successful programs in the United Kingdom and South Africa—PLS accounts led to a 38% increase in the average savings level in the UK! As Charlie Munger famously said, “Show me the incentive, and I will show you the outcome.” Perhaps it should come as no surprise that people respond well to the possibility of skewed payouts, which helps explain the $91 billion U.S. lottery market.
It’s well-documented that Americans struggle to save: 40% of U.S. adults cannot cover a $400 emergency with cash, savings, or a credit card that they could quickly pay off. Compound that with the economic and health impacts of COVID-19, and the issue has only become more dire.
Introducing a more rewarding way to save
While the four largest U.S. banks oversee $4 trillion in deposits, consumers have little emotional connection to these institutions. So when PrizePool launched in 2020 with a focus on helping consumers save to win, I knew they were onto something: PrizePool is transforming how Americans save in order to help them build a better financial foundation.
How it works: PrizePool provides FDIC-insured savings accounts where consumers are automatically entered into weekly drawings to earn thousands of cash prizes. At the end of each month, one grand prize—currently $25,000—is up for grabs.
In a world of low interest rates where consumers are searching for yield (think GameStop and Dogecoin), PrizePool provides a trustworthy opportunity to participate in the possibility of winning the grand prize while building one’s savings. In other words, the “why now?” is obvious.
Frank Chien (right) and Joe Woo are the founders behind PrizePool, and they understand the opportunity to help consumers by building a financial services business around prize-linked technology. The two have worked together for years—they started as co-founders of edtech company LearnSprout, which they sold to Apple and where they then stayed on as product and engineering leaders. Earlier in their careers, Frank worked at Facebook and Joe at Microsoft, so they have deep backgrounds in building products that consumers love.
Fortunately for us, we have the opportunity to partner with PrizePool by leading their $10 million Series A. We are excited to join the team and their amazing investor roster that includes Accomplice, Bling Capital, and Coatue.
Frank, Joe, and the rest of team PrizePool—welcome to the M13 family. We cannot wait for the journey ahead!