Financial services tech could not be more hot right now. The industry that saw almost no innovation on the consumer-facing side for the last decade, has exploded in the last year, and the dollars are starting to follow – both from consumers and VCs.
Just one month ago, Motif introduced its social, do it yourself thematic stock investing tool. Today, the company is announcing a $25 million Series C financing led by Goldman Sachs & Co. with participation from existing Motif investors Foundation Capital, Ignition Partners, and Norwest Venture Partners.
The makeup of the new round could not be more strategic for Motif. The startup will gain access to some of the best minds on Wall Street, while also gaining credibility that comes with the backing of the world’s most revered investment bank. Notably, the investment is not being made by an internal venture fund focused on backing hot startups in any category, but rather by the firm’s “Principal Strategic Investments” group, which signals that the firms could likely grow significantly closer in the future. Darren Cohen, a managing director of this group, will join Motif’s board as an observer.
Picking stocks can be like trying to get dressed in the dark. Motif allows everyday investors to quickly and easily create themed portfolios based on areas of personal interest or expertise. Research tools allow the consumer to identify stocks that fit within a chosen theme and to make allocation decisions based on additional data. The motifs can be kept private, or can be shared either within a group of trusted friends, or publicly across the Motif community.
For example, a cardiothoracic surgeon might want to invest in companies that are innovating in the cardio-pharmaceutical space, and to weight the concentration of his custom exchange traded fund (ETF) to the companies’ proximity to receiving FDA clearance. That investor might share this portfolio concept with his family members and close colleagues. Similarly, someone who lives in the Gulf Coast might have invested in companies tasked with rebuilding after Hurricane Katrina and choose to share the motif with the world. Other themes have involved investing according to the social network followings of mass retailers, or based on companies that sell primarily to the fastest growing Asian economies.
In the seven weeks since rolling out its Build Your Own (BYO) theme-based investment tool, more than 7,500 such Motifs have been built, according to CEO Hardeep Walia. Growth has been driven almost entirely by social referral model, according to the company, with the tool being used by consumers, investment advisors, and even brands. The company also employs an in-house research team that constructs its own themes which are available for $9.95 and can be modified to suit an individual’s personal needs and preferences.
Later this year, the company will allow consumers to market and sell their own BYO motifs to one another and receive compensation through a royalty structure. The company will also roll out additional investment advisor-focused tools and products.
Motif wasn’t actively fundraising, according to its CEO. Rather, it began receiving inbound interest from Goldman and other parties, both on Wall Street and on Sand Hill Road. After spending some time attending Goldman conferences and events, and getting to know the firm’s leadership, Walia couldn’t turn down an opportunity to access the world’s best and brightest financial minds.
The startup has built a 40 person team which includes founding members and former senior executives of E*TRADE, Mint, Amazon, Microsoft, Intel, Intuit, Barclays, and Wells Fargo, among other companies. Now it has a board and advisory team that heavily features Goldman Sachs. Prior to this latest round, the company had raised $26 million across two rounds of financing with the most recent round closing in July 2011.
Motif is one of the first social investing tools I’ve encountered that targets the everyman. The software would seem to appeal to consumers for its simplicity and the fact that one doesn’t need to be overly sophisticated to benefit from its tools. But the company is part of a broader trend that is bringing technology to bear on the consumer investing space. On the other end of the financial services tech spectrum is Quantopian, a quant-trading platform that challenges the best and brightest math and computer whizzes to outsmart Wall Street hedge funds. Somewhere in the middle is Personal Capital which offers personal wealth management and portfolio visualization tools to high net worth individuals.
Following today’s announcement, Motif will find itself on a bigger stage, with brighter lights. The company has rolled out some compelling tools and attracted the interest of a large number of curious users. The challenge now is to deploy this new capital to make its platform even more compelling and user friendly. With Goldman Sachs in its corner, Motif has the attention and endorsement of Wall Street. Now the company needs to attract the same love on Main Street.