Wealthfront, which makes software that acts as a financial advisor for its clients, hasn’t had the easiest road remaking the financial world in Silicon Valley’s image. But it after a name change, a pivot and some key new hires it appears to be growing rapidly.
Its reward? The company is announcing a $20 million investment led by Index Ventures, and joined by Greylock Partners and the Social+Capital Partnership. Angel investors include Matt Mullenweg of WordPress, Adam D’Angelo of Quora and Cipora Herman, CFO of the San Francisco 49ers. (Disclosure: Greylock is also an investor in PandoDaily.)
The company aims its product at young tech employees – frequently, people who have just made their first big chunk of money, but not enough to qualify for an account with one of the investment banking giants like Goldman Sachs or Morgan Stanley.
Essentially, the software automates the experience of having a financial advisor. Andy Rachleff, Wealthfront’s president and CEO, says that while a traditional bank might require a customer to put $2 million in a fund, Wealthfront lowers the entry point to $5,000. A user goes on the site, and the company generates a plan for him or her based on a questionnaire, and the service invests money against that plan. The product also manages tasks like automatic rebalancing or tax loss harvesting – a wonky investing term that Sarah Lacy explains well here.
Today the company also announced Elliot Shmukler, a former product manager at LinkedIn, as the new vice president of product and growth, and Avery Moon, a software architect also formerly of LinkedIn, as VP of engineering. This part of the post isn’t just press release regurgitation. That’s actually significant given where the company is in its life cycle and what it wants to do with the new funding. The moves may bear the fingerprints of Adam Nash, who Wealthfront hired as COO in December. Nash was previously an EIR at Greylock and before that he spent four years as vice president of product management at LinkedIn.
Disrupting the world of finance isn’t easy. Wealthfront started as the more Web 2.0 sounding kaChing with the focus of helping investors with as little as $10,000 work with public equity managers. The company then pivoted away in December 2011 to allow customers to have their entire portfolios managed online.
The move seems to be working. Wealthfront has been experiencing impressive growth of late: In total, the company manages $170 million in assets, since the company relaunched in December 2011. The percentage of clients’ assets that the company manages is up 70 percent in 2013 already, only about three months into the year.
It’s perhaps no surprise, then, that one of the company’s new investors is the Social+Capital Partnership, founded by Chamath Palihapitya, Facebook’s former vice president of user growth for mobile and international. He’s got some grand visions for the company, all of which stem from empowering the end user with a financial product he or she can directly control. “That’s a really big deal. Then you can re-envision how credit cards work. You can re-envision how loans and mortgages work,” he says.
Rachleff says the service could even be broader. The software is powerful enough to support accounts with even larger amounts, like $20 million. However, diversifying the audience doesn’t apply to both ends of the spectrum. Accounts can’t start any lower than $5,000 because Rachleff says you can’t get a good, diversified portfolio for less than that.
Part of the new funding will go to making the product itself more of a lightning rod for growth. Nash — who was known as a product growth expert at previous jobs — says the team will integrate ways to more easily share with friends that you are using Wealthfront, and make the social, word of mouth aspect more grounded in the product. He also said the company would explore developing a mobile app.
This is a fine line for Wealthfront to walk. With the name change, the company aligned itself more with a big substantial brand that money managers could take seriously. If it goes too far in the direction of social, local, mobile it risks looking more like a trendy fad.