After a break focused on hitting a few key milestones in my role at a FinTech startup, I’m back to share thoughts on FinTech for 2017 and one exciting startup in particular.
2017 vs. 2016
As my first post in 2017, let’s first look back at what I predicted for 2016: I expected a year of consolidation, which proved the case with Lending Club and layoffs at firms like Avant and Prosper and the recent capitulation at Betterment.
But consolidation isn’t always such a bad thing. In many ways, the category is doing well with Stripe adding growth capital at double the private valuation (now $10B).
Betterment Breaks Down
But first, it’s worth reviewing some recent big news from Betterment.
Betterment built a brand and a reputation for innovation, but I grew worried as gurus such as Michael Kitces pointed out the challenges to growth, high CAC and difficult to ever get to a breakeven level of scale ($40-50B AUM).
Last week, Betterment finally “blinked” at conceded it couldn’t succeed as a so-called digital wealth management company (or roboadvisor).
Nerd’s Eye View, the best blog for independent financial advisors, has great insight worth reading about Betterment, but for this first post of 2017, I’d like to focus on Stash.
Stash Springs Forward
I’ve been following a FinTech startup, Stash, which recently announced a breathtaking $25M Series B, less than a year after raising a $9M Series A round from a group of investors including a fund co-founded by Peter Thiel.
Customers choose where to invest their money, starting with as little as $5, and receive ongoing guidance. Based in New York, Stash was started in February 2015 by Wall Street veterans Brandon Krieg and Ed Robinson.
For those who don’t know them, Stash seeks to serve a new generation of investors by providing wider access to investments to less affluent investors.
I spoke with Ed intending to write about them for Money 20/20, but I’m glad I waited given its big funding round news in Q4.
Underserved Market = Competitive White Space
Stash has hit upon an underserved market with a timely and innovative offering that’s winning customers quickly. With 150,000 clients by mid-2016 after launching in 2015, Stash is well on its way to helping the underserved to invest.
Robinson came from an institutional background but has the energy of a startup CEO. He told me, “I want to be the wave of change coming to finance and serve people who are not served and new to investing.”
He’s passionate about investor education. Although Stash seeks those “who’ve never invested before or might be intimidated by investing” to invest is starting off with ridiculously low balances for those might be earning $30K or less, its goal is to grow by educating clients and helping them succeed.
Robinson told me Stash was not at all put off by becoming regulated, which is surprising since a lot of FinTech firms take pains to avoid it. Smart decision by Stash.
Stash, in fact, decided early on to become a Registered Investment Adviser (RIA).
How Did Stash Grow So Rapidly?
Simple: By targeting an underserved market who can commit only to $5 minimum to get started. Stash also makes investing intuitive by offering groups of ETF’s that are “as personal as you”, such as Clean & Green or The Techie.
From a marketing standpoint, Stash has been smart at relationship marketing and word-of-mouth. Stash uses offers, such as three months fee and referral bonuses.
They do spend a fair bit on marketing which runs the gamut from online advertising, social media (e.g. Facebook), affiliate marketing, and content marketing.
From here, Stash plans to have clients move up a ladder expanding from its core product of ETFs and low pricing of $1/month to a suite of products, coupled with higher balances.
Check out Stash’s website or download its app to learn more about its mission of serving a more diverse group of investors, bringing some fun and lack of pretense to the world, as part of their mission of serving the next generation of investors.