US-based Promise is changing the debt collection business with compassion

Promise CEO Phaedra Ellis-Lamkins Image: Cody Pickens for Forbes

April Bingham, director of Richmond, Virginia’s Department of Public Utilities, was worried. During the pandemic, as consumers struggled to pay their utility bills, the city’s unpaid accounts had soared to $41 million by November 2022, up nearly threefold from roughly $15 million in February 2020. The steep increase raised questions about how the US city would fix its aging infrastructure, including maintaining a century-old water main. Collecting on those unpaid bills was vital: They added up to 13 percent of the city-owned utili­ty’s annual billing. 

In February 2023, Richmond turned to Promise, a software startup based in Fairfield, California, that manages payment plans for state and local governments and that had already helped the city distribute federal aid. The result: While bills 90 days past due have continued to rise, 11,000 people have signed up for a payment plan, and 93 percent are making payments on time, thanks to Promise’s consumer-friendly app, zero-interest plans and ability to pay by credit card, Venmo or just about any other method. 

“When we had in-house payment plans, [customers] would make one payment to stop the disconnection and then break the payment plan and start the cycle over again,” Bingham says. “Promise allowed people to feel human again, to take control of their finances and to be secure in making a decision about what they can and cannot afford.” 

For Promise co-founder and CEO Phaedra Ellis-Lamkins, trea­ting with respect people who are struggling financially is what it’s all about. A 48-year-old Black woman who grew up on welfare and worked as a labour organiser in her 20s, Ellis-Lamkins also did stints as a nonprofit executive and pop star Prince’s business advisor before she turned her focus to helping folks pay their bills. But Promiseis not a charity or a nonprofit. Instead, Ellis-Lamkins is out to prove that a fast-growing, venture-backed company can be successful without being exploitative. “We’re all trying to use capi­talism to do things we believe in,” Ellis-Lamkins says.
 
Promise’s focus on state and municipal governments and utilities, for which it provides dashboards with real-time updates about payments and relief programs, differentiates it from the larger group of fintech startups that help consumers pay their bills. Most of those firms simply offer hard-pressed customers high-interest-rate loans, which is the last thing they need. Promise makes money from the other side of the equation. It’s the governments and utilities that pay, not the custo­mers: Municipalities typically pay a minimum of $1 million per year; states up to $10 million. But it’s a good deal for them too. After signing up with Promise, recoveries from delinquent accounts can soar to 85 percent or more. “For the municipalities, this was found money, money they never thought they’d get,” says investor Mitch Kapor. “It created this huge momentum of not just cities but entire states signing up.” 

“When we first started, the counsel from everyone was to become a lender. The reality is the economics do not work for short-term, high-risk loans,” Ellis-Lamkins says. “We are committed to zero interest. You have to make a decision. Are people not paying because they don’t want to or because they can’t? If you fundamentally believe people aren’t paying because they can’t, you can’t charge them 30 percent interest rates. Thirty percent interest rates are punitive. Who wants to charge interest to someone in pain or struggling?” 

Last year, Promise’s revenue reached approximately $20 million, more than triple what it brought in for 2022. The company expects revenue to more than double this year and again next, reaching roughly $100 million in 2025—and $300 million in 2027. That’s thanks to dozens of contracts with utilities and municipalities in states such as Virginia, Mississippi, Hawaii and Washington. It’s also profitable—by any measure, says Ellis-Lamkins. With $51 million raised from investors that include Kapor Capital, First Round, XYZ Capital and 8VC, Promise reached a valuation of $520 million at its most recent equity funding in 2021. 

Those numbers helped Promise make the cut for this year’s Next Billion-Dollar Startups list, Forbes’ annual showcase of the 25 companies we think most likely to reach a $1 billion valuation. 

Fixing government financial systems isn’t a sexy space, but it touches just about everyone. It’s also an increasing focus for investors who have seen successes like budgeting-and-accounting software firm OpenGov (recently valued at $1.8 billion) and publicly traded payments firm Paymentus (market cap $2.4 billion). But building technology for slow and bureaucratic local governments is also a challenge. “It can be difficult to design such services well and in ways that are intuitive and easy to use,” says Beth Noveck, a professor at Northeastern University and director of The Governance Lab.

For Ellis-Lamkins, that’s the point. “I want it to be beautiful and easy,” she says. “Our clients care because it’s efficient... At the end of the day, government wants to know they’re going to collect the money.”

Ellis-Lamkins grew up in Suisun City, California, a small town across the railroad tracks from the company’s current headquarters in Fairfield. It was mostly known for its oil refinery and pollu­ted waterfront. The San Francisco Chronicle deemed it the worst place to live in the Bay Area in 1988. 

Ellis-Lamkins was raised by a single mom who worked as a waitress; the family received food stamps and other government assistance. When she was 12, her mom got a union job working for Solano County, and Phaedra was able to leave the free lunch line at school. As one of the few poor students in her school’s gifted program, she also got a glimpse of what a different, wealthier world looked like. Her mother is white, her father Black, and she recalls seeing stark differences in how her mom and her paternal grandmother, with whom she was close, were treated. “It was all these small things that just dehumanise you,” she says.

Also read: The FREED model to becoming debt free

Even before graduating from Cal State Northridge, she worked as an organiser for SEIU Local 715, which represents service workers, knocking on doors of home health care workers, urging them to vote for a union contract. By the time she was 27, she was executive director of the South Bay AFL-CIO Labor Council, representing over 100 unions and 100,000 workers. 

Her first career twist came in 2009, when she took over from activist and TV commentator Van Jones as CEO of Green for All, an Oakland, California–based nonprofit working to bring clean-energy jobs to low-income communities. Jones later introduced her to Prince, and while backstage at the superstar’s concert, the two hit it off and Prince hired her as his business advisor. In 2014, she helped him win an epic battle to secure ownership of his master recordings. “Phaedra forced the powers that be to relent,” Jones wrote in a eulogy for Prince after his 2016 death.

In 2017, Ellis-Lamkins and her friend and longtime colleague Diana Frappier, a 52-year-old lawyer, started Promise. Image: Cody Pickens for Forbes

Ellis-Lamkins was approaching 40 when she got her first tech job in 2015. She joined Honor, which uses technology to match caregivers—mostly Black and Latina women—with older adults who need help. While she was brought on to recruit home health care workers, she soon began overseeing revenue and fundraising for the San Francisco–based startup.

In 2017, Ellis-Lamkins and her friend and longtime colleague Diana Frappier, a 52-year-old lawyer, started Promise. They originally focused on bail reform. Their idea was to use technology to make the bail process more efficient—an idea that solidified after Ellis-Lamkins received a call from a friend who said bounty hunters were at his door because he had misread a slip of paper about when to return for a court date on a minor charge. “She is the vision person, and I am behind the scenes,” Frappier says.

They raised funds from investors, most of whom they already knew from Honor, and took their startup through the Y Combinator accelerator in the winter of 2018. “Govtech was basically dead when we fun­ded Promise,” says Y Combinator’s Michael Seibel. “The things that intimidate other founders, [Phaedra] enjoys.” While Black women typically struggle to secure venture funding, Ellis-Lamkins’ experience at Honor made her a known quantity. “I had run revenue,” she says. “People knew I knew how to make money.” 

From a windowless office in a former Oakland recording studio, Ellis-Lamkins sold the idea to county officials around the country. Her software reminded offenders of court dates and other mandatory appointments, and could also help jails manage drug testing. She had already signed up Alameda County and a few municipalities when she learned how her software might be used during a meeting at a county jail. “They were bragging about keeping someone in jail for seven years for a marijuana arrest,” she says. “I walked out of the meeting and said, ‘This isn’t where I want to be.’ ” She offered her investors their money back, but they urged her to do what startups do all the time: Pivot. 

From Promise’s work with the criminal justice system, Ellis-Lamkins knew that if someone couldn’t afford to pay a parking ticket or municipal fine, they would generally need to take a day off work to go to court in person, documents in hand. Those who didn’t jump through hoops might face an arrest warrant. “That is a broken system for the level of debt people have,” she says. “That is something technology is capable of fixing.” 

To test that idea, she chose three cities—Oakland, Philadelphia and Dallas—that had lots of parking tickets, and offered those who were delinquent no-interest loans. Ninety percent paid Promise back. She set out to convince local governments that she could help them increase debt collections, from as low as 13 percent to as high as 95 percent, by using carrots instead of sticks. 

Louisville, Kentucky, was among the first municipalities to sign up in 2021. Over 18 pandemic-scarred months, delinquencies had ballooned fourfold to $16 million from a more typical $4 million. And only 20 percent of customers with payment plans were current. “We were seeing such an alarming amount of delinquencies and bad debt. We knew we couldn’t sit and wait because of the financial risk it brought to the utilities,” says Tony Parrott, executive director of the Louisville and Jefferson County Metropolitan Sewer District. 

Louisville’s experience was typical. Juliet Ellis, who joined Promise in December 2020 as head of utilities after working as chief strategy officer at the San Francisco Public Utilities Commission, recalls how utility execs were having worried discussions about customers falling behind on payments. “The payment plans we were using didn’t work. We couldn’t reach customers, and if we could sign them up for a payment plan most of them were going to break it anyway,” she says.
 
Soon, local officials were seeking out Promise rather than the other way around. There was no sales team beyond Ellis-Lamkins and Juliet Ellis.



“Someone asked us, ‘How much is your marketing spend?’ I was like, ‘Oh, let’s see, zero plus zero, so that would be zero,’ ” Ellis-Lamkins says. The upside is frugality, but the downside is that she’s still personally doing much of Promise’s selling. (She’s currently hiring salespeople to meet the startup’s aggressive revenue goals.) “It reminds me of Palantir early on, where her particular brand of genius is crucial to making these things happen,” says Joe Lonsdale, a co-founder of Palantir and managing partner of 8VC. 

Today, utilities are the core of Promise’s business, which spans red and blue states. Regardless of who wins the presidential election this November, Ellis-Lamkins figures state and local governments will continue to invest in technology. 

The problems utilities are facing “aren’t going to go away,” Ellis says. She ticks off the issues: Aging infrastructure, not enough federal fun­ding, the need to strengthen the energy grid because of climate change. Rates are inevitably going up, but customers are already squeezed by rising rents and other costs. 

Beyond utilities, Promise sees potential in everything from parking tickets to local taxes. It’s also looking at offering identity and income veri­fication, which it already does for its own payment programs, as a separate product to sell to local governments dealing with aging technology. The startup is also experimenting with machine learning so that someone already certified for, say, food stamps could qualify for other low-income assistance without additional paperwork. 

“I am drawn to the work because I have a strong sense of justice, but people buy the product because it works better,” Ellis-Lamkins says. “I deeply want to beat other companies, and show that being predatory is not the path forward.”