A Product Market Fit Show | Startup Podcast for Founders
00:17:07 · Aaron Schumm
[00:17:07] S0: So it depends on where they sit in the ecosystem. There's different types of advisors, right? So you have advisors that are primarily focused on wealth. So the pitch to them is like, hey, give this to your private wealth client, right? Who you're already managing your assets, right? And so, my financial advisor, it's like, if I said, OK, hey, you're already doing my assets. I need a solution for my employees. What can you do? And before that would be, they go take one of the providers off the shelf or whatever it is. That's kind of outside and they just say, hey, here's something. That's not the ideal thing, but it's something and you just have to deal with it. That's what I was told in my last business, right? I was like, this is all you got and he's like, it's kind of all I can do right now, sorry, and it was really expensive. So, from that side, it's like, hey, we can give the advisors in that realm something for all of their clients who are entrepreneurs or business owners. That is tailored for them, that fits their world. That really becomes a lead gen engine for the advisor to see then not only their private wealth client and their assets, but all the underlying employees that work for them and who could be a potential wealth client going forward. So for the advisor, it's very attractive. Because all of a sudden it's like, hey, I have almost a sales lead gen engine sitting here in front of me. That I can start to look and say, oh, hey, Susie or Lisa over here and they actually have a lot of assets. Maybe they should be a private wealth client and I should go have a conversation with them.
00:18:30 · Pablo Srugo, Aaron Schumm
[00:18:30] S1: Because the advisor, like, let's say I manage your wealth. You run a business, I'm like, hey, you should use Vestwell. Now I get to see the assets of everybody that you put on, all the employees. [00:18:38] S0: You see all the employees and you can drill into them. You could see, you know, beneficiary information. You can see a lot of information that they can aggregate outside accounts, their bank accounts, other investments they have, and pull it into the platform. And then we service all that up, back up to the advisor. And then on the other side of the equation, there's also advisors who only focus on retirement, right? So that is their bread and butter. That's what they do. They're deep in the weeds when it comes to ERISA and all the regulatory components. So from that aspect, what we do for them is we can give them a solution. Where we're doing everything from like signing the 5500 as a notion, it's called a 316 fiduciary and we could sign their tax filings. We can give them everything that's for them. We also give all that data back to the advisors, where a lot of other players out there in the industry won't give them data. They're like, no, no, it's our data. Because really what they're trying to do is siphon assets out of the program and bring it in house to themselves. We're not in that game at all. We want to make sure that we're providing the best service possible to all the users in our profile, right? Whether that's an advisor, a home office, an employer, a saver, and alike.
00:19:43 · Pablo Srugo, Aaron Schumm
[00:19:43] S1: So if I kind of say back to you, on the one side. You're creating effectively, like it's a new. It's like you said, lead gen. That's really the main ROI for the wealth advisors. You can get new clients by running this motion and on the other one, it's kind of time saving. It's efficiency, it's like, you're already doing this but a lot of the things are clunky. A lot of the things are inefficient. With this, it's just, your life's just going to be easier and you're going to keep doing what you're doing. [00:20:05] S0: Yes and also these programs, like workplace savings programs specifically. They tend to be much larger and grow much faster than an individual wealth client's assets, right? Because if you think about it, it's much easier to go sell a plan. A 401(k) plan that's going to, if let's say it starts at zero and grows past a million dollars. That's going to grow past a million dollars exponentially faster than an individual who shows up with say $100,000 and tries to grow that to a million. Because you have a base of employees underneath and you have payroll that's coming in and contributing to these programs every pay cycle, every week, every two weeks, whatever it may be. So you think about it and then you start to accrue that those assets on top of the investments. They're going to grow much larger and if for an advisor who's getting paid some element of a percentage of assets. It's a quite a lucrative business for them relative than just trying to knock on a bunch of doors to find some affluent clients.
00:20:05 · Aaron Schumm, Pablo Srugo
[00:20:05] S0: Yes and also these programs, like workplace savings programs specifically. They tend to be much larger and grow much faster than an individual wealth client's assets, right? Because if you think about it, it's much easier to go sell a plan. A 401(k) plan that's going to, if let's say it starts at zero and grows past a million dollars. That's going to grow past a million dollars exponentially faster than an individual who shows up with say $100,000 and tries to grow that to a million. Because you have a base of employees underneath and you have payroll that's coming in and contributing to these programs every pay cycle, every week, every two weeks, whatever it may be. So you think about it and then you start to accrue that those assets on top of the investments. They're going to grow much larger and if for an advisor who's getting paid some element of a percentage of assets. It's a quite a lucrative business for them relative than just trying to knock on a bunch of doors to find some affluent clients. [00:21:02] S1: So now kind of going back into that time. Now I kind of understand the problem solution and the pitch to the people that are ultimately selling this, right through your channel. Tell me a little bit more about what the product was, you know, over ten years you've built a lot of things. I'm sure, and you service more, and more kind of subtleties and more types of plans, and these sort of things. V1, like what was V1? What was the absolute core that you had to say, we have to deliver at least this for anybody to work with us? What was that?
00:21:28 · Aaron Schumm
[00:21:28] S0: So it's kind of a funny story. So V1 was how do we create a, let's say, you get two or three flavors of a 401(k) solution for a micro or small business. So that would be some sort of box. It has a, you know, investment lineup that's already set up. It has all the fiduciary services and so on. And then, a business could walk and sign up, click a bunch of buttons. Think of it, I always think of it like a decision tree, right? You're just kind of like, okay, I want this option, I want this option, I want this option, I want this option. At the end of it, it's like, OK, great. Here's your document. Here's everything that's going to be submitted. There's a lot of other legal stuff that happens behind the scenes. But that was V1, right? So we went through that and people could sign up. Now, it's hard, right? You show up, it wasn't necessarily white labeled, right? When we started for everyone because we didn't really have anyone to white label for. We had a couple of clients, but they're like, who is this company? Who's his brand? Can I trust them, right? And this is a sensitive topic, right? You're asking someone for arguably the second most sensitive thing in their life outside of their family. You're saying, hey, give me your savings and let me take care of it for you. So, you know, you want to be a trusted, reliable source for that. So that was V1 that was funny. We quickly realized that we had boxed it too tight, right? That people didn't fit into those boxes all the time and they'd be like, oh, I don't really want that option. I want this option. Can you do this? And then, you start to open up the box and widen what you're doing. So we ended up sunsetting that kind of workflow. Because there were too many options that we wanted to offer. That we don't want to constrain people in that aspect. So we ended up not doing it because it got too messy. Now, fast forward last year, we rebuilt that same workflow from the ground up and it's one of our core things that flies off the shelf right now. So it was kind of like some of these early ideas that we were right with the idea. We were probably a little off with the exact structure of it. But those have kind of come full circle and now they're actually core to what we do day to day.
00:23:25 · Pablo Srugo, Aaron Schumm
[00:23:25] S1: And that would be the simplest version? In other words, the simplest version, which didn't really work back then. Now you're saying is really taking off. [00:23:30] S0: Yeah, it's really like a product led growth perspective. Where it's just like, hey, here's the link. Just go rip through it and get on board. And we do that all the time now, especially through our payroll partners and it works really well. But it took a lot of work and it took us, you know, we sunset the thing for eight years and then it came back to life. [00:23:46] S1: And then tell me a little bit, because this kind of helps context. Just on the fundraising side, like you started this in 2016. Do you raise money right away? How much? And then the Series A, the Series B, just walk me through how that played out. [00:23:57] S0: 2016, I started going out and raising angel funding. So I spun up a convertible note. It was just, you know, knocking on doors. People asking for, you know, $50,000, $100,000 checks. So I did that, I actually had a lot of success doing that. Was able to actually have an oversubscribed note on it. I actually ended up giving most of that cash back with interest, obviously. Because we did our seed round much faster than I anticipated. So I think it was September 9th or September 8th, 2016. We closed our seed round. We did $4.5 million on that in total. [00:24:35] S1: Which would have been, by the way. That's like median today, would have been top decile probably in 2016 is my guess.