Vestwell raises $125m in Series D funding

Huge congratulations to FTC portfolio company Vestwell on their landmark $125m Series D round from growth investor Lightspeed Venture Partners. The oversubscribed round includes participation from new investors Blue Owl and HarbourVest, along with existing investors. The company will use the capital to help more U.S. workers and businesses access savings solutions and expand offerings to include new products in Student Loan Solutions, Emergency Savings Accounts (ESAs), and Health Savings Accounts (HSAs).

FinTech Collective led Vestwell’s first round of funding in 2016, have been the lead VC investor since, and have participated in each round of financing throughout the company’s lifecycle.

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It’s 2016 in midtown Manhattan, and Vestwell has just emerged from stealth mode to announce a $4.5m Seed round led by FinTech Collective. It’s the early days of their journey, and CEO Aaron Schumm is laser focused on his mission - building the industry's first full-fiduciary, white-labeled retirement platform for the advisor community and beyond. Since then, they have been able to impeccably execute while also expanding beyond retirement into education and health savings.

A series of investments by FinTech Collective in the wealth space dates back to 2014 and includes Artivest (acquired by iCapital), Openfolio (acquired by Stone Ridge Asset Management), NextCapital (acquired by Goldman Sachs), Quovo (acquired by Plaid) and tangentially, MoneyLion (IPO, NYSE: ML). More recent investments include NYDIG, Capintel, and Performativ.

The thesis encompasses the sustainability of a 60/40 equity/fixed income split to generate enough wealth to meet longevity expectations, retirement savings broadly, democratization of alternatives, and having holistic access to atomic-level financial data. The future of advice is swept into the thesis as is the replatforming of advisors and asset managers as they deal with an expanding portfolio of asset types, increased demands for data access, and portability of assets.

The $25t retirement savings market specifically encompasses investment services, trading, administration, custody, recordkeeping, and trustee services and, in FTC’s view, is still best-served by financial advisors. Modernization does not mean recreating the building blocks, but rather combining the best aspects of automated investing with the human touch that only trusted advisors can provide.

To further compound tailwinds around longevity, market volatility, and increasing product mix, the updated U.S. Department of Labor's "conflict of interest" rule applied further pressure on advisors and companies to manage risk with a solution like Vestwell to assume 3(38) and 3(16) fiduciary responsibility and reduce both financial cost and legal liability.

As Brooks Gibbins, co-founder of FTC, shared in 2016, "With more than 50% of working Americans not contributing to a retirement plan, there is clearly a fundamental problem with the mix of offerings in the market today. Vestwell will allow companies to bring more employees into the fold in a guided and low cost manner, while helping advisors grow their assets and increase the quality of their revenue."

With that context, and Schumm having already built and exited a wealth startup (FolioDynamix), Vestwell was off to the races. In the year that ensued, Vestwell signed over 50 registered investment advisor firms, as well as independent broker-dealers, asset managers, and bank/trust custodians. They built out their multi-recordkeeper, multi-custodial technology to facilitate every aspect of the advisor, company and employee's needs, and raised an $8m Series A in 2017 on the back of the early success.

Fast forward six years, $225m+ of capital raised, 300k businesses with well over 1m active savers, and nearly $30b in assets saved across all 50 states, Vestwell has beaten a path from a pitch deck to becoming a billion dollar business, with eyes on becoming a $500m revenue business in the years to come.

Today, Vestwell’s b2b2c model has investors’ and customers’ eye - as the leading player in the unbundled, turnkey 401(k) and 403(b) platform, reshaping how plan sponsors and employees are serviced throughout the US.

In addition to pursuing the $7.7t in defined contribution accounts and 700k+ small businesses without retirement plans, Vestwell successfully expanded beyond company plans to also serve state plans. Most recently the company was selected to power the New Jersey State Auto-IRA program, adding to its roster of more than 30 state savings programs.

Proving their creds as an acquirer, Vestwell has bought and integrated two businesses from wall street incumbents to expand their edge and suite of offerings. The first, Sumday, is a subsidiary of BNY Mellon that manages and administers 529 college savings, 529A ABLE, and Secure Choice/Auto-IRA state-sponsored savings programs. That business has proven to help double Vestwell’s top-line in under 24 months. And most recently this fall, Vestwell announced the acquisition of Gradifi, a student loan benefits provider.

Vestwell’s solutions will continue to tackle the $40t of existing savings assets in the US, with 33m incremental SMBs to service beyond that. The recent passage of Secure 2.0 acts as a further catalyst for workplace savings adoption, particularly among small and emerging businesses. The company is on track to surpass $35b in assets, 1.5m savers, and 500k businesses in 2024.

Crossing the billion-dollar mark is a milestone many companies aspire to. For Vestwell, it’s just a step along their path to become the infrastructure provider for all tax-advantaged savings in the US.

We are thrilled to continue our long partnership with Vestwell and to have contributed to bringing two new investors to the table with this round. LFG!