Tag: 401k

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This fintech startup ideally wants to be ‘a lot more boring’ than Robinhood

Soon after launching Ocho, a startup offering personal finance support for business owners, Ankur Nagpal realized that the company’s debut product – a solo 401(k) retirement account – “is not a venture-backed business” in and of itself. Despite landing nearly 300 customers with that initial wedge, the entrepreneur is already focused on broadening the service to become more holistic, and for business owners just trying to figure out how to think about money, more realistic.

“We still haven’t found a single user that feels confident or comfortable with their financial knowledge,” Nagpal said. Alongside solo 401(k) services, Ocho is now a brokerage that allows people to invest in a variety of ETFs and stocks, has financial advisor support services, and is working on offering other types of accounts such as IRAs and health savings accounts.

Robinhood, he says, is often an app associated with buying and selling. He hopes that Ocho, because it’s for retirement, is all about “buying and holding.” Ocho is extremely focused on education and conservative bets. There will never be options trading the platform. “We’re being very conservative – for example if someone wants to buy Apple shares on our platform, of course they can. But we’ll also ask them to consider buying an index fund before doing that just because historically that’s been a safer option.”

“Ideally we’re a lot more boring,” Nagpal said, compared to Robinhood. “In an ideal world I would love with someone you know, set up a bunch of like automations to like, automatically invest some percentage of their paycheck and we will handle the rest. There’s not a lot of active trading.” The company only makes money from a $299 per year annual subscription fee.

The refrain of being an “all in one solution” is all too common in the fintech world, as companies pivot and broaden their services to land a bigger scale. Ocho wants to avoid some of that rate race, especially around customer acquisition costs.

Ocho is also having discipline around one very specific budget: the company has spent $0 on paid marketing, and plans to keep it that way for the next few years. Nagpal also added that the 9-person team likely won’t hire anyone new this year, and they continue to work with freelancers and contractors to manage demand without overspending.

For now, is looking to land customers and brand trust through offering equity to some of the biggest tech influencers and builders in the space. Nagpal tells TechCrunch that Ocho has raised a $4.5 million seed round led by Vibe Capital, which is Nagpal’s own venture fund. He says he got approval from all of his LPs and the round was closed at a $12 million valuation. The round also includes investments from over 200 techies, including Mercury’s Immad Akhund, AngelList’s Avlok Kohli and Elizabeth Yin’s Hustle Fund. Each investor was only allowed to contribute up to $10,000 maximum, which Nagpal says was key in helping them create an “army of stakeholders and supporters and people that are vested in our success.”

Vibe Capital is a new venture firm built for scrappy international founders

If you have a juicy tip or lead about happenings in the venture world, you can reach Natasha Mascarenhas on Twitter @nmasc_ or on Signal at +1 925 271 0912. Anonymity requests will be respected.  

This fintech startup ideally wants to be ‘a lot more boring’ than Robinhood by Natasha Mascarenhas originally published on TechCrunch

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BlackRock acquires minority stake in SMB 401(k) provider Human Interest

Investment giant BlackRock announced Friday it is taking a minority stake in venture-backed fintech startup Human Interest.

Terms of the deal were not disclosed.

Human Interest’s digital retirement benefits platform allows users “to launch a retirement plan in minutes and put it on autopilot,” according to the company. It also touts that it has eliminated all 401(k) transaction fees. The startup told TechCrunch previously that it works with “every kind of SMB” — from tech startups to law offices, to dentists to dog walkers, to manufacturing firms, to social justice nonprofits.

The San Francisco–based company has raised a total of $336.7 million in funding since it was founded by Paul Sawaya and Roger Lee in 2015. The Rise Fund, TPG’s global impact investing platform, led a $200 million round for Human Interest in August 2021 that propelled it to unicorn status. Other backers include SoftBank Vision Fund 2, Crosslink Capital, NewView Capital, Glynn Capital, U.S. Venture Partners, Wing Venture Capital, Uncork Capital, Slow Capital and Susa Ventures, among others. Since the initial closing of that round, Human Interest said in a blog post that it has seen has over 400% growth in the number of customers and revenue. At the time of that raise, execs told TechCrunch that the company was targeting a traditional IPO sometime in 2023, hoping to have “$200 million+ in run-rate revenue before going public.” In August of 2021, it was at “tens of millions of run-rate revenue, and adding millions of new revenue each month, according to execs.

“BlackRock has an amazing team focused on providing high-quality retirement saving and investment options. We are excited to work with BlackRock to find ways to bring retirement within reach of millions of additional workers in the coming years,” said Jeff Schneble, CEO of Human Interest, in a written statement.

“We look forward to helping Human Interest close the access gap,” said Anne Ackerley, head of BlackRock’s Retirement Group, in a statement.

Human Interest co-founder Lee moved on years ago, recently founding another startup, Comprehensive.io and launching layoff tracker Layoffs.FYI soon after the COVID-19 pandemic hit.

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401(k) provider Human Interest doubles valuation with $55M fundraise

BlackRock acquires minority stake in SMB 401(k) provider Human Interest by Mary Ann Azevedo originally published on TechCrunch

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Ocho wants to rethink (and rebrand) personal finance for business owners

When Ankur Nagpal sold Teachable for a quarter of a billion dollars, he felt lucky. Then, he quickly felt lost when trying to navigate the financial systems of a country he wasn’t born in and learn the institutional language often only spoken fluently by the historically wealthy.

It would be a few years of self-employment, and building a venture firm later, before Nagpal returned to the moment as one of the early catalysts for his newest startup, Ocho. The company, launching publicly today, wants to make it easier for business owners to set up and manage their own 401(k) retirement accounts.

Personal finance is hard – and that’s a tale as old, and difficult to disrupt, as time. And while Nagpal agrees that there’s no “north star” company that has shown how to tackle finance literacy at scale, he’s hoping that Ocho’s 10-person team may just have a not-so-boring wedge that changes that.

Ocho is joining the several fintech companies out there that aim to modernize, and really rebrand, the retirement account away from traditional providers like Charles Schwab or Fidelity, or expensive solutions like lawyers and consultants.

“I’ve started exploring the space, and we realize everyone – like Robinhood to Coinbase – is just spending unsustainable amounts of money to acquire customers, but are making no money themselves and continually sort of need these large funding rounds just to exist,” Nagpal said. “I’m actually expecting there to be a very rough 6, 12 or 18 months for fintech companies specifically.”

Ocho’s twist from competition, he thinks, is in its market focus. “There’s so many companies targeting startup founders and their wealth – there’s literally a new one launching every month or two all backed by big name VCs, but no one is focused on the business owner that is otherwise doing well but is not a startup founder or a startup employee,” he said.

Instead, Ocho is leaning into Nagpal’s background of working with creators when he was building Teachable. Teachable helped creators build revenue streams, Ocho wants to help those same creators take their earnings and invest, harvest and scale them in a smart way.

“At Teachable, we helped these people make money online and now there’s lots of places for creators, freelancers and entrepreneurs to make money online – but how do we help them think about building wealth?” Nagpal said. The long-term vision for Ocho is to offer products, beyond solo 401(k)s, that help business owners build wealth.

Human Interest is one of Ocho’s closest competitors; raising $200 million at a $1 billion valuation last year. Nagpal says that Ocho differentiates itself because its focused more on individuals, freelancers and creators, instead of Human Interest’s target of small and medium-sized businesses.

For now, Ocho is charging a flat $199 annual fee to help individuals start their retirement account. It takes about 10 minutes to set up, and 48 hours to get final confirmation.

The big challenge for the startup is getting the right solopreneurs to care about their retirement accounts. Its look for people who have income-generating businesses, but don’t have any full-time employees. If you have a side gig alongside your full-time job, you can create a 401(k) just for the side hustle, but can’t put full-time income into the retirement account.

ocho-interface-fintech

Image Credits: Ocho

Nagpal thinks he can nail early adoption through smart education material and outreach, referring to personal finance trends on TikTok as an example of consumer demand for more information. He says that 40% of the Ocho staff is working on marketing or education, and that the balance will be retained even as the company scales.

If education is so important to getting Ocho to work, one may wonder why it’s launching with a fintech product. The answer is simple: deadlines. Users need to make a retirement account by December 31, 2022, if they want one for 2023 – which puts the fintech in a relevant, but time pressed, position.

Nagpal isn’t worried about the seasonality of the 401(k) product because of the upcoming product roadmap, which includes the education product, investment flows into the retirement product like being able to invest in startups and ETFs, and even HSAs, often described as a 401(k) for healthcare.

To power that ambitious product spree, Ocho has raised $2.5 million from Nagpal’s own venture firm, Vibe Capital. The entrepreneur says that he raised the $60 million debut fund for Vibe Capital with the idea that he would incubate a startup or two out of the firm, which materialized today now that it owns 20% of Ocho.

Nagpal admitted that the idea of a founder using his own venture firm to seed his own startup may appear to be the “mother of all conflicts of interest” but reasoned that it was everything but. He emailed all LPs in his fund about the investment, got a unanimous yes, and ended up raising at a much lower price for the startup than if they had gone out into the fair market. It’s still uncommon to see founders sell a company, start a venture firm and then use that same venture firm to seed their next company.

Perhaps the unique connection between Nagpal’s first company, to his firm, to his newest startup, could hint at what his approach to personal finance may be: diversify across multiple vehicles, redefine what a supercharged investment could look like, and keep on learning.

Ocho-team

Ocho’s starting team.

Ocho wants to rethink (and rebrand) personal finance for business owners by Natasha Mascarenhas originally published on TechCrunch

Posted on

Ocho wants to rethink (and rebrand) personal finance for business owners

When Ankur Nagpal sold Teachable for a quarter of a billion dollars, he felt lucky. Then, he quickly felt lost when trying to navigate the financial systems of a country he wasn’t born in and learn the institutional language often only spoken fluently by the historically wealthy.

It would be a few years of self-employment, and building a venture firm later, before Nagpal returned to the moment as one of the early catalysts for his newest startup, Ocho. The company, launching publicly today, wants to make it easier for business owners to set up and manage their own 401(k) retirement accounts.

Personal finance is hard – and that’s a tale as old, and difficult to disrupt, as time. And while Nagpal agrees that there’s no “north star” company that has shown how to tackle finance literacy at scale, he’s hoping that Ocho’s 10-person team may just have a not-so-boring wedge that changes that.

Ocho is joining the several fintech companies out there that aim to modernize, and really rebrand, the retirement account away from traditional providers like Charles Schwab or Fidelity, or expensive solutions like lawyers and consultants.

“I’ve started exploring the space, and we realize everyone – like Robinhood to Coinbase – is just spending unsustainable amounts of money to acquire customers, but are making no money themselves and continually sort of need these large funding rounds just to exist,” Nagpal said. “I’m actually expecting there to be a very rough 6, 12 or 18 months for fintech companies specifically.”

Ocho’s twist from competition, he thinks, is in its market focus. “There’s so many companies targeting startup founders and their wealth – there’s literally a new one launching every month or two all backed by big name VCs, but no one is focused on the business owner that is otherwise doing well but is not a startup founder or a startup employee,” he said.

Instead, Ocho is leaning into Nagpal’s background of working with creators when he was building Teachable. Teachable helped creators build revenue streams, Ocho wants to help those same creators take their earnings and invest, harvest and scale them in a smart way.

“At Teachable, we helped these people make money online and now there’s lots of places for creators, freelancers and entrepreneurs to make money online – but how do we help them think about building wealth?” Nagpal said. The long-term vision for Ocho is to offer products, beyond solo 401(k)s, that help business owners build wealth.

Human Interest is one of Ocho’s closest competitors; raising $200 million at a $1 billion valuation last year. Nagpal says that Ocho differentiates itself because its focused more on individuals, freelancers and creators, instead of Human Interest’s target of small and medium-sized businesses.

For now, Ocho is charging a flat $199 annual fee to help individuals start their retirement account. It takes about 10 minutes to set up, and 48 hours to get final confirmation.

The big challenge for the startup is getting the right solopreneurs to care about their retirement accounts. Its look for people who have income-generating businesses, but don’t have any full-time employees. If you have a side gig alongside your full-time job, you can create a 401(k) just for the side hustle, but can’t put full-time income into the retirement account.

ocho-interface-fintech

Image Credits: Ocho

Nagpal thinks he can nail early adoption through smart education material and outreach, referring to personal finance trends on TikTok as an example of consumer demand for more information. He says that 40% of the Ocho staff is working on marketing or education, and that the balance will be retained even as the company scales.

If education is so important to getting Ocho to work, one may wonder why it’s launching with a fintech product. The answer is simple: deadlines. Users need to make a retirement account by December 31, 2022, if they want one for 2023 – which puts the fintech in a relevant, but time pressed, position.

Nagpal isn’t worried about the seasonality of the 401(k) product because of the upcoming product roadmap, which includes the education product, investment flows into the retirement product like being able to invest in startups and ETFs, and even HSAs, often described as a 401(k) for healthcare.

To power that ambitious product spree, Ocho has raised $2.5 million from Nagpal’s own venture firm, Vibe Capital. The entrepreneur says that he raised the $60 million debut fund for Vibe Capital with the idea that he would incubate a startup or two out of the firm, which materialized today now that it owns 20% of Ocho.

Nagpal admitted that the idea of a founder using his own venture firm to seed his own startup may appear to be the “mother of all conflicts of interest” but reasoned that it was everything but. He emailed all LPs in his fund about the investment, got a unanimous yes, and ended up raising at a much lower price for the startup than if they had gone out into the fair market. It’s still uncommon to see founders sell a company, start a venture firm and then use that same venture firm to seed their next company.

Perhaps the unique connection between Nagpal’s first company, to his firm, to his newest startup, could hint at what his approach to personal finance may be: diversify across multiple vehicles, redefine what a supercharged investment could look like, and keep on learning.

Ocho-team

Ocho’s starting team.

Ocho wants to rethink (and rebrand) personal finance for business owners by Natasha Mascarenhas originally published on TechCrunch

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Does it smell like teen spirit, or teen bankruptcy?

Hello and welcome back to Equity, a podcast about the business of startups, where we unpack the numbers and nuance behind the headlines.

This was a live week! Which meant that Mary Ann Azevedo was on the mic with Alex Wilhelm, and Grace Mendenhall, our ever-trusty producer, helped us power through. A big shoutout to Dennis, Julio, and Yashad for getting all the tech working well.

Right, what did we dive into during our live taping? A lot!

Equity is back Monday! Chat then!

Equity drops every Monday at 7 a.m. PDT and Wednesday and Friday at 6 a.m. PDT, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

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Having some crypto in your 401(k) is neither irrational nor exuberant

The biggest retirement plan provider in the United States, Fidelity, just announced plans to offer individuals the opportunity to invest in bitcoin through their 401(k) retirement accounts later this year. With 20 million plan participants accounting for $2.7 trillion in assets, Fidelity just brought a somewhat controversial strategy into the mainstream.

It’s not surprising that Fidelity was the first tradfi asset management firm to stake out its territory in this space – the company has been ahead of its peers in launching digital asset products under the tenure of CEO Abigail Johnson. It launched its first crypto-related offering in 2018 when it began to hold digital assets in custody for institutional investors.

The news marks a pivotal moment in the growing movement to expand access to alternative investments – a goal that can be seen as either laudable or risky, depending on whom you’re asking.

First, let’s start with the criticism, because skepticism over crypto’s expansion is understandable given the asset class’ reputation for scams and volatility. What’s more, it might not even be a good investment; bitcoin hasn’t proven itself to be an effective hedge against inflation and has lost over 40% of its value since peaking last November.

With that in mind, it’s easy to see why regulators don’t love the idea of allowing access to crypto in retirement accounts. The U.S. Department of Labor said in a directive last month that fiduciaries should “exercise extreme care” before doing so, citing crypto’s historical volatility, potentially inflated valuation, and fears about custodial issues given the near-impossibility of recovering crypto from a wallet if one were to forget their password.

And it’s not just regulators raising an eyebrow, though they seemingly have good reason to do so. Companies like Fidelity obviously have a profit incentive to launch crypto products because they can earn more fees, which begs the question of whether they’d expand into digital assets to make a buck while convincing average retail investors to shoulder all the risk. If crypto crashes, after all, retail investors could be left holding the bag after gambling away their retirement savings. That can’t be good, right?

If you want to allocate a reasonably small percentage of your savings to crypto, and you’re aware of the risks, it could make sense to put money into this growing asset class that could very well continue appreciating over the long term.

Wrong. Now, let me tell you why Fidelity offering crypto in retirement plans is a huge win for pretty much everyone who isn’t ultra-wealthy.

Crypto has promised to “democratize” a lot of things and largely hasn’t delivered. Individual wealthy “whales” have benefited from crypto’s rise to an extent that most average individuals haven’t. The wealthiest 82 individual crypto wallet holders account for almost 15% of the total supply of Bitcoin, according to River Financial.

One key factor behind why wealth is so concentrated in crypto, much like with other alternative assets, is that average investors don’t enjoy the same access to top-tier investment opportunities that the wealthiest folks have.

The demand for crypto investment opportunities clearly exists, though, and data show it is particularly strong among women and people of color, who see an opportunity to build wealth through the emergence of a nascent asset class. But average investors have been shut out of many of these opportunities through either regulation or a lack of infrastructure available to them.

Retail investors’ lack of access to premium investment opportunities is, of course, a much broader and more nuanced issue, but Fidelity’s announcement will help remove one particular barrier. While retail investors can fairly easily use a platform like Coinbase to purchase the most popular cryptocurrencies, there are no mainstream solutions that allow them to do so in a tax-advantaged way. A solution like this doesn’t exist in the mainstream yet because companies are hesitant to bear the regulatory and reputational risks associated with being the first to roll out a product that has been so heavily criticized by regulators.

Fidelity has decided that taking that risk is worth the tradeoff, and retail investors are likely to benefit as a result.

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Fidelity says it will offer crypto in retirement accounts this year

Fidelity, the largest retirement plan provider in the United States, announced plans to offer bitcoin in 401(k) retirement accounts to its accountholders later this year. The company is set to allow investors to allocate up to 20% of their 401(k) accounts to bitcoin, though employers will have the ability to lower that cap, Dave Gray, head of workplace retirement offerings and platforms at the asset manager, told the Wall Street Journal.

The Boston-based asset manager, which administers plans covering more than 20 million participants representing $2.7 trillion in assets, said the launch is expected to take place by mid-year, debuting at bitcoin supporter Michael Saylor’s firm MicroStrategy, which holds billions of dollars of the asset on its balance sheet.

The offering, which Fidelity is calling its Digital Assets Account, will hold bitcoin and short-term money market investments to provide the liquidity investors would need to engage in daily transactions if they choose to do so. The currency will be held in custody with Fidelity Digital Assets to ensure “institutional-grade security,” the company said.

The move from Fidelity, which administers plans covering more than 20 million participants representing $2.7 trillion in assets, comes just a month after the U.S. Department of Labor told plan fiduciaries to “exercise extreme care” before offering cryptocurrency in retirement accounts. The agency cited crypto’s historical volatility, potentially inflated valuation, and fears about custodial issues given the near-impossibility of recovering funds from a wallet if one were to forget their password.

While the offering will launch with bitcoin as its only digital asset, Fidelity plans to offer other cryptocurrencies in the future, Gray said. The company has been at the forefront of its peers in its digital asset offerings, launching a custodial service for institutional investors in 2018 and creating a bitcoin fund for accredited private wealth clients in 2020.

Bitcoin is trading down about 40% from its high in November last year.

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Capitalize, a startup that wants to make it easy to roll over your 401(k), closes on $12.5M Series A

If you’ve ever left a job, chances are you left your 401(k) plan along with it.

And, if you’re like many Americans and change jobs every few years or so, you could have multiple 401(k) plans spread out at various companies, doing their own thing.

Many of us don’t deal with the hassle of trying to consolidate accounts, which can lead to lost money over many years.

Enter Capitalize. The New York-based startup aims to address this very problem with a platform that it claims makes it virtually painless to locate misplaced 401(k) accounts, select and open individual retirement accounts (IRAs) and consolidate retirement plans — for free. 

And it’s just raised $12.5 million in a Series A round to help grow that platform. Canapi Ventures led the round, with participation from existing backers including Bling Capital, Greycroft, RRE  Ventures and Walkabout Ventures. 

Australian-born Gaurav Sharma co-founded the company after years of working in traditional finance.

“While I enjoyed investing, I started peeling back the layers and saw a host of systemwide problems with the 401(k) market,” he recalls. “One of those being that our accounts are tied to our employers.”

Sharma said that about one-third of the people who change jobs end up cashing out their 401(k) plans, and paying the related penalties.

“Another several million leave it behind for an extended period of time, ultimately because it’s complicated to move the money,” he said.

Sharma teamed up with CTO Chris Phillips in late 2019 to form Capitalize, which went on to raise a $2 million seed round last March led by Bling Capital. Since its formal launch last September, the rollover platform has processed almost $10 million in volume.  

“There were a lot of layoffs during the summer last year as a result of the pandemic,” Sharma said. “So a lot of our early users while we were in beta were people who had been impacted by those layoffs.”

I was curious about how Capitalize’s offering differs from the services that financial advisors provide. According to Sharma, the difference lies in the process and eligibility requirements.

“If you have an advisor, they will help you do some of this but in a really manual way, whereas we have built an online platform to help consumers find and consolidate retirement accounts,” Sharma told TechCrunch. “And usually, you have to have a few hundred thousand in assets to even get an advisor.”

That was one of the things that motivated Sharma.

“Whether you have $500 or $500,000 in assets, we’ll help you,” he said.

As mentioned above, Capitalize’s service is free to consumers, who can go to the site and let the company manage the consolidation process for them. If they need to open an IRA, the platform can help them do that, too.

“We help them compare IRAs from leading fintech providers and established institutions,” Sharma explained. If Capitalize has forged a commercial relationship with one of those providers, it is compensated by them for the referral in a model that is similar to NerdWallet, PolicyGenius and Credit Karma.

And if they already have an IRA, Capitalize will still help with consolidation.

Capitalize also offers employers a free onboarding service to help departing employees “roll over quickly at the point of job change,” Sharma said. 

“This is also great for the employer, who can save money on administrative fees and reduce fiduciary risk,” he added.  

Canapi Venture partner Jeffrey Reitman said his fintech venture fund, which has about 43 banks as LPs, was attracted to a number of things about Capitalize’s team and platform. 

First off, he described Sharma as “one of the best early-stage CEOs” he’s seen when it comes to recruiting, company building and decision making.

Canapi also had one of its VPs and family members try out the product in its early beta format.

They said, according to Reitman, that the platform “worked like magic and removed so much friction in the process.”

“So when you have a team member that has such a strong reaction to it, that’s such a validator of what it can be at scale,” he told TechCrunch. “That made it a bit of a no-brainer for us.”

Besides also being drawn to the company’s “mission-driven” approach, Reitman noted that about 80% of its existing bank LP base has existing IRA and individual retirement account products.

“Many of them are digital in nature, we believe there should be a lot of synergies between what banks are trying to accomplish as they further digitize their product suite and what Capitalize is looking to accomplish in reducing friction for as many people as possible in that process.”

Looking ahead, Capitalize plans to use its new capital to refine and streamline its product, and continue to invest in technology.