2020欧洲杯小组赛

SigFig raised $120 million on the promise of reinventing investing, but hasn't announced a big partnership in years. Here's how it went from deals with UBS and Wells Fargo to struggling to compete.

mike sha sigfig rise and fall 2x1 mike sha sigfig rise and fall 2x1
In interviews, a dozen sources describe the Silicon Valley startup's impressive rise and recent struggles to compete in the crowded wealth-tech space.
Lucas Jackson/Reuters; Samantha Lee/Business Insider

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  • SigFig has raised some $120 million in funding from the likes of DCM Ventures and Bain Capital Ventures and signed partnerships with industry giants with the promise of powering wealth-tech.
  • But in recent months, a string of executives and other employees have left, 10% of its workforce was cut, and wealth deal growth has slowed since it partnered with UBS and Wells Fargo four years ago.
  • In interviews with Business Insider, a dozen sources described the Silicon Valley startup's rise and more recent struggles to compete as a wealth-tech startup in a crowded space.
  • The market for white-labeling robo-advice tech for wealth managers is more challenging today than it was when SigFig first launched, and investors are more heavily scrutinizing startups' life cycles.
  • Visit BI Prime for more stories.

When SigFig launched in San Francisco nine years ago as a low-cost roboadviser catering directly to customers, it was one of the only games in town.

It was part of a tiny club of pioneering, purely digital roboadvisers, with rivals Wealthfront and Betterment popping onto the scene. Big firms were still a long way from building out their own robo-advice platforms, now commonplace on Wall Street. Investors lined up to back co-founders Mike Sha and Parker Conrad's vision.

2020欧洲杯小组赛"It's a big idea," Sha, the chief executive, a TechCrunch reporter in a 2012 webcast as he leaned back in a swivel chair next to Conrad and rattled off a list of SigFig's investors. "I think a lot of people who understand that there's a real pain point in this industry have gotten excited about the fact that we can help a lot of people."

DCM Ventures, the $4 billion blue-chip venture capital firm, was a lead investor, Sha said. Bill Harris, the Personal Capital2020欧洲杯小组赛 founder and former PayPal chief executive, was also behind them.

2020欧洲杯小组赛The Union Square Ventures partner John Buttrick in a July 2013 blog post that SigFig was on solid footing, with "interesting" investment tools in the works. "It's too early to say exactly what those will be, except they will be low cost, easy to understand, high quality and investor-friendly," he said.

But its initial foray into directly managing money for customers wasn't catching fire.

As of 2016, SigFig as a business-to-consumer company hadn't caught on as a household name. It pivoted in strategy to a business-to-business (B2B) model and set out to partner with giant wealth management2020欧洲杯小组赛 firms to create new tech tools for them and their human financial advisers. 

A man walks past a UBS logo projected on a screen in Singapore, January 14, 2019. REUTERS/Feline Lim
The Swiss bank UBS is a strategic investor in SigFig.
Reuters

It was a moment of transition for SigFig, which has a valuation pegged at $471 million by the robo advice industry research firm Backend Benchmarking. It wouldn't be the last. 

Today, San Francisco-based SigFig has raised some $120 million in funding from investors including Bain Capital Ventures, Union Square Ventures, Eaton Vance, and General Atlantic. It counts Wells Fargo and UBS, two of the largest wealth managers in the US, as partners who pay SigFig to use its technology. UBS also took an undisclosed equity stake.

But over the last 10 months, a string of executives and other employees have left, including its former heads of wealth management and strategic partnerships, who were core to SigFig's business model. SigFig recently filled the latter role internally, shifting another senior leader into a similar post overseeing all aspects of SigFig's strategic partnerships.

Last year SigFig, which had around 170 employees at the start of 2019, also laid off some 10% of its workforce, or around 20 people. And SigFig's wealth deal growth, once white-hot, has flamed out since it first started signing on big banks as clients four years ago, according to sources.

Robo-advice is a scale business. With fees in the ballpark of 25 basis points, a large asset base is critical to creating significant revenue. And as Business Insider has reported, standalone players may struggle to reach scale. They can be "fiercely independent," and at current valuations may not be attractive M&A targets. 

In interviews with Business Insider, a dozen sources, including current and former employees as well as people familiar with the firm, described the Silicon Valley startup's rise and more recent struggles to make it as a fintech competing in the crowded, cutthroat wealth management arena. 

A company spokesperson said SigFig has signed "multiple new partnerships" between 2016 and 2019, but declined to specify on the record which companies that refers to, or how big those partners are. SigFig's staff and revenue has also grown during that time, the spokesperson said, but declined to provide specific figures around either.

The market for white-labeling robo-advice tech for wealth managers and their financial advisers is more challenging today than it was when SigFig first launched, . Firms are now building out their own automated investment platforms at relatively low costs. Some of SigFig's value add, in that sense, has diminished.

Investors, too, are more closely scrutinizing startups' plans and private valuations after WeWork's failed-initial public offering fiasco placed a fresh spotlight around other companies' corporate governance and paths to profitability.

A challenging path

Nine years after its formation, analysts and industry-watchers we interviewed say SigFig is in a challenging position. 

2020欧洲杯小组赛"I think the functionality has been commoditized around them," a person familiar with SigFig's operations said, referring to the now-ubiquitous automated wealth-tech at many of the industry's biggest banks.

Since last August, at least five senior employees have left. For startups, employee turnover and slicing headcount is not unusual. But together they highlight SigFig's difficult moment in the context of the ever-changing wealth management technology space. A company spokesperson confirmed the layoffs, adding that while SigFig "did reshape our talent footprint last year," it is currently recruiting for more than 20 roles. 

Some senior leaders whose roles were critical to forming new deals and taking care of clients have left. Its head of strategic partnerships, Martin Attiq, left last summer, staying on as an adviser through year-end. Its general manager of wealth management, Randy Bullard, left for another role in the field, and SigFig is now advertising for his old job.

2020欧洲杯小组赛Its head of quality assurance, Tung-Huy La, left in December. So did its vice president of branch strategy and integration, Michael Reed. Its chief information security officer, Clint Maples, left in January.

"It was a hard decision for me as I really loved working at SigFig and it was like a family to me," La said in a December email2020欧洲杯小组赛 to Business Insider.

SigFig hired internally for a role similar to its old head of strategic partnerships. The company shifted its former general manager of banking, Dan Mercurio, over to a newly created role where he runs all aspects of strategic partnerships. 

A company spokesperson said its senior employees who left "contributed meaningfully to our success to date and our current leadership team is strong and getting stronger." SigFig is also set to announce a new chief product officer, the spokesperson said. 

Mike Sha, the chief executive officer of SigFig.
Mike Sha, the chief executive officer of SigFig.
REUTERS/Lucas Jackson

Meanwhile, funding that's been plowing into wealth-tech over the last few years has fallen. Venture capital funding2020欧洲杯小组赛 into wealth management technology fell to $260 million in the fourth quarter, compared with $516 million a year prior, marking an eight-quarter low, according to the market research firm CB Insights. 

SigFig's board has also shifted. The chief executive of Eaton Vance, Thomas Faust, left as a director last year, according to a filing. He had been a director since 2016. A spokesperson for Eaton Vance, which has invested in SigFig, declined to comment.

2020欧洲杯小组赛A SigFig spokesperson said Faust "remains an active board observer supporting SigFig's continued growth and success. His transition to being an observer coincides with a new board member joining with 30 years of highly relevant experience in the wealth management industry." 

Some sources described a difficult environment for product managers who felt they were designing products and services for the banks they were partnering with, not SigFig, leaving some employees dispirited.

One former employee, who requested anonymity to speak frankly about her experience, said she felt like employees weren't given much leverage or freedom around what the company's big-bank partners wanted.

2020欧洲杯小组赛A company spokesperson said SigFig builds products "not for ourselves, but to help everyday consumers be more financially successful," and that its "enterprise platform has been selected by partners who collectively serve over 70 million consumers."

A messy split, then a pivot

2020欧洲杯小组赛Before there was SigFig, there was its predecessor, Wikinvest, which Conrad and Sha founded in 2007. Wikinvest — think Wikipedia, plus investing — was an application to help regular investors track and understand their investments.

Conrad eventually left SigFig after what he has described as a falling-out with Sha, and shortly after leaving in 2012, he launched the workplace benefits software startup Zenefits. Some SigFig staffers went with him.

Regulators later fined Zenefits for selling insurance without proper licenses. Conrad resigned in 2016 amid turmoil at the startup, and his insurance license in 2018 after entering into a settlement with a California regulator. 

Parker Conrad
SigFig co-founder Parker Conrad later founded Zenefits.
Brian Ach/Getty Images for TechCrunch

2020欧洲杯小组赛In interviews, some former employees and people familiar with the matter described Sha as a "visionary" type of Silicon Valley boss who could have trouble executing projects. Others described a strong, friendly leader who is respected inside the company. 

He's a great salesperson, some former employees said, but at times that didn't translate into efficiently leading a team effort or deciding direction. Sha previously held a series of positions in engineering and strategic projects at Amazon2020欧洲杯小组赛, and says he was one of the original architects of the Amazon Prime program. 

Sha and Carol Pai, a former Facebook and eBay product designer who heads up SigFig's user experience and visual design, are married. With a couple in senior positions, that power dynamic rubbed some people the wrong way, two former employees said. 

A spokesperson said Pai was never on SigFig's executive team, and that in addition to following other human resources-related best practices, she was hired by and has always been managed by someone other than Sha. 

2020欧洲杯小组赛As SigFig's whole strategy shifted around 2015 from a direct-to-consumer model to building out technology for big firms roughly four years ago, the pipeline was full of big deals.

In April 2016, SigFig the Boston-area community bank Cambridge Savings Bank for an undisclosed amount as its first wealth management partner deal, building out a digital investment management tool called Connect Invest for the bank's clients, where they could track individual investment goals on a dashboard.

The next month, SigFig said it would create digital tools and services for the thousands of financial advisers in UBS's Americas business.

For SigFig, it was a coup. UBS is among the world's largest wealth managers largely with a focus on the ultra-wealthy, with $2.6 trillion in assets under management; $1.4 trillion of those assets are in the US.

2020欧洲杯小组赛Part of UBS's thinking behind paying SigFig to build technology for UBS advisers and their clients was that advisers could use that tech for their smaller accounts and spend more time catering to clients with more complex needs, according to a person familiar with the deal.

2020欧洲杯小组赛That concept ended up upsetting some advisers, who grew frustrated at the disparate experience of working with clients in two different fashions, according to the person. UBS declined to comment. 

For instance, a UBS client using the SigFig product — complete with features like an algorithm-constructed investment portfolio and digital enrollment — has a different experience than one just working with a full-fledged adviser, and harnessing new technology has frustrated some advisers who were given these various options.

Back when UBS and SigFig announced their deal, the startup was one of the only options on the table for what UBS wanted SigFig to do for them, a person familiar with the matter said. And another option had recently disappeared from the market: a few months before that deal was announced, BlackRock the digital B2B wealth management tool FutureAdvisor for an undisclosed amount. 

SigFig was novel at the time, but times have changed. These days, going low-cost or commission-free for digital wealth tools and transactions is the name of the game

Customers also take on fees for the low-cost exchange-traded funds they invest in, mostly from Charles Schwab, BlackRock's iShares product line, Fidelity, Vanguard, and State Street. 

For SigFig, big partnerships are its lifeblood

2020欧洲杯小组赛SigFig's partnerships are crucial to its survival. Its direct-to-consumer base is small relative to its larger competitors, so it's important for SigFig to team up with big institutions, create wealth-tech products for them, and gain access to their lucrative, built-in client bases.  

2020欧洲杯小组赛The company personally managed some $485 million in assets as of March 2019, according to a regulatory filing, most of which is with 11,154 individual investors. That filing does not include the assets held at the banks that use their white-labeled technology — assets on which SigFig makes a percentage. The company today requires $2,000 to open an account, and charges an annual management fee of 0.25%, billed monthly, after funding the first $10,000.

Other robo-advisers like Wealthfront and Betterment directly manage billions of dollars, and traditional wealth managers like Merrill Lynch and Morgan Stanley directly manage trillions. 

In June 2016, BNY Mellon's Pershing Advisors and SigFig into a now-inactive partnership. A Pershing Advisors spokesperson declined to comment on when the two firms' relationship ended, or specifics around why. A person familiar with the matter said SigFig had completed the integration product it intended with Pershing, which its clients now use. 

In mid-November of 2016, SigFig and Wells Fargo2020欧洲杯小组赛 Advisors, a wealth management subsidiary of the bank with some 13,000 US-based financial advisers, said they were partnering to power WFA's direct-to-investor robo-advisory platform called Intuitive Investor. Wells Fargo also has a "small equity stake" in SigFig, a spokesperson said. 

Wells Fargo
Wells Fargo is also an investor in SigFig.
REUTERS/Rick Wilking

2020欧洲杯小组赛"Clients with a wide array of asset levels have chosen to open Intuitive Investor accounts," a Wells Fargo Advisors spokesperson said. "Some are purely self-directed investors and others also have relationships with WFA full-service financial advisors."

2020欧洲杯小组赛The , in December 2016, Citizens Bank said they were teaming up with the startup. SigFig's deals with UBS, Wells Fargo, and Citizens Bank are all ongoing.

SigFig's next partnership wouldn't be publicly announced for nearly three years, and it wouldn't be with a wealth manager. 

Last October, SigFig and the data provider Refinitiv they were partnering for an undisclosed amount. Unlike other deals where banks paid SigFig to design technology for their advisers and clients, SigFig would create digital advice tools for the institutional investors that use Refinitiv's clearing and custody platform. 

2020欧洲杯小组赛The lull in deal-making — SigFig's lifeblood — in recent years hasn't kept the company from raising more money.

In June 2018 the New York-based private equity2020欧洲杯小组赛 firm General Atlantic, which is focused on growth equity investments, led a round of $50 million in Series E funding, which is SigFig's latest round. 

Existing investors who also participated in that round included UBS, DCM Ventures, New York Life, and Union Square Ventures. Paul Stamas, a managing director at General Atlantic, joined SigFig's board of directors.  

Meanwhile the broader robo-advice space faces an uncertain future, particularly with some fresh macroeconomic risks. The World Health Organization this week designated the novel coronavirus known as COVID-192020欧洲杯小组赛 as a global pandemic, hitting economies around the world, a development analysts say is likely to crimp growth and funding.

One former employee at SigFig said that for the company and the wider robo-adviser space, the situation is like "Waiting for Godot," hoping for something — wider adoption, or breaking through what's become a commoditized space — that may not come. 

SEE ALSO: Robo-advisers like Wealthfront and Betterment are in a tricky spot — here's why one fintech banker thinks buyers and public investors will be hard to win over

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