The importance of managing personal finances came to the forefront during the pandemic as individuals sought to buffer themselves against the effects of COVID and the economy. With the internet, many of these individuals chose to go the self-directed route. Many also established relationships with professional financial advisors. In either case, it’s likely these people interacted with this NYC startup without even knowing it. SmartAsset is a personal finance content engine that distributes content, tools, and calculators related to common, everyday financial issues as well as a customer acquisition platform for the personal finance advisory industry. By using content as a driver of interest, SmartAsset can connect interested individuals with advisors that will meet their investment goals, preferences, and criterion. The company, founded in 2012, now handles over 100M customer interactions per month, is responsible for originating $1.5B in new assets under management for advisors per month, and is nearing $100M in ARR.
AlleyWatch caught up with Cofounder and CEO Michael Carvin to learn more about the path to building one of NYC’s newest unicorns, the company’s strategic plans, latest round of funding, which brings the total funding raised to $161.4M, and much, much more.
Who were your investors and how much did you raise?
We raised a $110 million Series D round, valuing SmartAsset at over $1 billion. The round was led by existing investor TTV Capital with participation from Javelin Venture Partners, Contour Venture Partners, Citi Ventures, New York Life Ventures, North Bridge Venture Partners, and CMFG Ventures.
Tell us about the product or service that SmartAsset offers.
SmartAsset is a leading source of personal finance content, tools, and calculators and also the largest client acquisition platform (SmartAdvisor) for financial advisors in America. Building on SmartAsset’s relationship with millions of investors, SmartAdvisor connects financial advisors directly with consumer prospects who meet their ideal client profile. Our in-house team does the work of locating, validating, and matching leads, so that advisors can maximize the time that they spend with their clients.
What inspired the start of SmartAsset?
SmartAsset was inspired by my own home buying experience back when I was working in finance. When trying to determine whether to buy a home or continue renting, I found the information online sorely lacking. In particular, the available tools and calculators provided bad answers and a terrible user experience.
Leveraging my professional background, I developed financial models to determine if I was ready to make the leap to homeownership and exactly how much house I could afford. That’s when I realized that the same models I was using to drive complex financial transactions for businesses could help to improve personal finance decision-making for all Americans.
The models I built eventually fueled SmartAsset’s early home-buying calculators and paved the way for a suite of intuitive, custom financial modeling products addressing a wide range of personal finance topics. These tools helped our growing audience make smart financial decisions.
How is SmartAsset different?
Our key differentiator is the size of our audience and the unparalleled scale this allows us to deliver to our financial advisor partners. Along with offering personal finance tools and resources on SmartAsset.com, we power personal finance calculators for sites like MarketWatch, CNNMoney, Forbes and 130+ others, giving us over 100 million consumer interactions each month. This allows us to generate billions in new assets under management (AUM) for our partners.
Our marketplace is the leading growth platform for financial advisors that simultaneously fulfills our mission to help consumers make smarter financial decisions. Given our recent $110M funding and $1 billion+ valuation, we’re well-positioned to further serve both sides of the market while trailblazing the next chapter of the SmartAsset story.
What market does SmartAsset target and how big is it?
As the operator of the largest client acquisition platform for financial advisors in America, SmartAsset serves the wealth management industry. With a total addressable market (TAM) of $20 billion per year, our vast target market gives us plenty of opportunity for continued growth.
What’s your business model?
Our SmartAdvisor platform matches certified financial advisors with validated, high-intent investors and we receive a fee for generating the match. Advisors pay per lead on a sliding scale basis depending on two factors: the investors’ investable assets and the way they are matched with the investor (via either email or a warm phone transfer known as a “Live Connection”). We also generate revenue by helping our users find the right financial products on SmartAsset.com, including mortgages, brokerage accounts, and life insurance.
How has COVID-19 impacted the business?
The financial advice industry was critically impacted by the COVID-19 pandemic. Historically reliant on in-person events, seminars, and meetings for lead generation and client prospecting, the pandemic dramatically shifted the financial advisory business model, especially in regard to consumer prospecting.
Additionally, the virus’ emergence in the U.S. caused global markets to fall precipitously, and financial stress reached its highest point since the 2008 financial crisis. During the first six months of the coronavirus in the U.S., the user search frequency for the term “financial advisor” on Google increased 17% compared to 2019’s average. With people confined to their homes and facing uncertainty, the need for financial advice had never been greater.
As the operator of SmartAdvisor, the largest online marketplace connecting consumers with financial advisors, we were uniquely positioned to help financial advisors grow their businesses in a remote environment and provide consumers with easier access to professional financial help.
SmartAdvisor has become a key business development channel for many advisors. In 2020, we transferred $10 billion in new, closed AUM to advisors on the platform, a 100% increase compared to 2019. Additionally, between April and December 2020, the number of advisors on the platform increased by 25%.
What was the funding process like?
The funding process for our Series D round was very straightforward. Strong revenue growth over the past three years made SmartAsset very attractive to investors.
What are the biggest challenges that you faced while raising capital?
We did not encounter many challenges during the funding process. We had multiple offers, carefully assessed each of them, and ultimately determined that the offer from our existing investor, TTV Capital, was best aligned with our long-term vision for SmartAsset.
What factors about your business led your investors to write the check?
Since raising our Series C in June of 2018, we have grown revenue by 10 times, are on the cusp of $100 million in annual recurring revenue (ARR), and are operating at breakeven. We reach more than 100 million people each month through personal finance content, custom tools, and personalized calculators. In addition, financial advisors and firms on our wealth management referral platform, SmartAdvisor, now generate $1.5 billion in new, closed AUM per month.
Since raising our Series C in June of 2018, we have grown revenue by 10 times, are on the cusp of $100 million in annual recurring revenue (ARR), and are operating at breakeven. We reach more than 100 million people each month through personal finance content, custom tools, and personalized calculators. In addition, financial advisors and firms on our wealth management referral platform, SmartAdvisor, now generate $1.5 billion in new, closed AUM per month.
The fundraise also comes on the heels of our partnership with LPL Financial, our one-millionth consumer/advisor match on the SmartAdvisor platform, a successful Live Connections rollout, and executive leadership additions. Additionally, I have been recognized as a finalist for the EY Entrepreneur of the Year 2021 New York Award.
What are the milestones you plan to achieve in the next six months?
In 2021, our goal is to help our wealth management partners raise $20 billion in new AUM. That would be nearly double our 2020 total of more than $10 billion.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
This is a good time to be raising money. The market is putting a strong premium on growth, especially capital-efficient growth. Provided that your company can demonstrate growth, this could be a good fundraising environment for your business.
Where do you see the company going now over the near term?
We plan to continue our revenue growth and improve the user and matching experiences for both consumers and financial advisors. To do so, we will invest in new product offerings, technology infrastructure, and data partnerships, along with continuing to aggressively scale our employee headcount.
What’s your favorite outdoor dining restaurant in NYC?
I have always loved Hillstone and was impressed by the Park Avenue South location’s outdoor dining transformation during the pandemic. The famous burger and spinach & artichoke dip are ‘must-tries!’
