Pittsburgh’s fintech sector just received a $6 million boost, and those funds could transform the number of small businesses offering health benefits.
StretchDollar, an insurance fintech startup with dual headquarters in Pittsburgh and San Francisco, announced a $6 million seed funding round on Tuesday led by Fika Ventures and Oscar Health. The company, whose valuation was not disclosed, says it will use the funds to improve its platform and potentially strengthen its presence in Pittsburgh after CEO Marshall Darr moved to the city earlier this year.
“Right now, we’re focused on expanding our marketing and engineering teams, with more positions likely to open after the new year,” Darr told Technical.ly. Although the small company is committed to remote work, “I would like to have more colleagues nearby, so even if there’s nothing concrete, an office in Pittsburgh is definitely a possibility,” he said. he declared.
Launched in September 2023StretchDollar provides a platform for small businesses to directly contribute to pre-tax premium funding for employee-owned health plans. Last month, the company grew its customer base by 25% and is on track to end 2024 with more than 200 small businesses using the platform, according to Darr.
The huge increase of $6 million also demonstrates the rise of the platform. In 2023, median increase in funding round it was just $1 million and climbed slightly to $1.3 million in the first half of 2024, according to startup data website Crunchbase.
“We are growing rapidly because there is a gap in the market,” Darr said.
The decision to make Pittsburgh one of StretchDollar’s homes prepares it for growth — but was originally a personal decision, Darr said. His wife accepted a position as a physician with health care provider UPMC, and they moved to the area from Philadelphia in May, when the company’s presence in Pittsburgh officially began.
Pittsburgh’s fintech market is both diverse and dynamic, including large multi-billion dollar institutions like PNC and BNY Mellon, as well as growing local startups like payment services Affirm and Pineapple Payments. The industry plays an important role in the local economy, supporting more than 60,000 jobsaccording to the Pittsburgh Regional Alliance.
New State and Federal Insurance Laws Open Market Opportunity
For two years, only 39% of the 5 million U.S. small businesses with fewer than 10 employees offered health benefits, a significant decline from 49% just two years ago, according to the independent health policy organization KFF.
Among small businesses that provide health benefits, the increasing cost of group plans can create an unsustainable financial burden. So some companies are exploring alternatives, such as providing their employees with funds to purchase their own individual health insurance. This is where a startup like StretchDollar comes in.
StretchDollar relies on a relatively new IRS rule that has formed individual health coverage reimbursement arrangements. This new rule allows employers to use pre-tax money to cover their employees’ healthcare expenses. StretchDollar is also a licensed insurance broker, allowing it to connect employees with insurance policies.
“Small business owners didn’t start their businesses with the goal of managing health benefits,” Darr said. “I have yet to meet a small business owner who likes to choose which hospitals their employees can go to or which medications they will have access to.
Darr attributes part of StretchDollar’s success in Pennsylvania to Pennie, the Commonwealth’s official health insurance marketplace.
Established under the federal Patient Protection and Affordable Care Act, Pennie allows eligible Pennsylvania residents to purchase private health insurance at federally subsidized rates. The popularity of the service indicates a strong customer base in the area, according to Darr.
Some of the nation’s largest individual health insurance companies have also noticed StretchDollar’s market opportunity, such as investor Oscar Health, the fifth health insurer in the country by market share.
“Many companies, especially those with fewer than 50 employees, do not have the resources to address the skyrocketing costs of employer plans,” said Mark Bertolini, CEO of Oscar Health, in a recent press release. “The individual market fills this gap: employers have an efficient way for their employees to purchase health insurance and employees choose the plans that best meet their needs.”
Funds build on StretchDollar’s previous pre-seed funding fundraising of $1.8 million last fall and will help expand the startup’s self-service platform, among other updates, according to Darr.
“With new partnerships and product enhancements on the horizon,” Darr said, “2025 is shaping up to be a transformational year for StretchDollar.”