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- Four years after its public launch and nearly $80 million in outside funding later, women-focused digital wealth manager Ellevest's $635 million in assets trails rival robo-advisers.
- That Ellevest, co-founded by wealth management industry veteran Sallie Krawcheck, hasn't had more traction highlights the ultra-competitive nature of managing money.
- Its growth is further complicated by marketing to women whose tastes vary wildly between generations.
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Ellevest, the women-focused digital wealth manager, launched one day before the 2016 US presidential election in anticipation of what pollsters thought would yield the first woman president.
At the time, the dialogue on gender playing out across the country was impossible to ignore. Sallie Krawcheck, the chief executive of Ellevest and once one of the most senior women on Wall Street, and Charlie Kroll, Ellevest's co-founder and chief operating officer, were working to unveil a startup they hoped would close the gender wealth gap.
That May, Krawcheck appeared on stage at TechCrunch Disrupt NY to discuss her new investing startup.
"This isn't 'for women,' 'pink it and shrink it,' 'make it smaller,'" Krawcheck said. "We're going to forecast out your life so that you can achieve your goals. And then we'll put a bespoke investment portfolio against each goal to help her achieve them."
Four years later, Krawcheck is promoting the same message that helped lift Ellevest off the ground: women in the US earn less than men and have different trajectories, and should have tailored financial services.
Now, mission-driven VC investing has gained renewed attention amid a national outcry over systemic racism and pledges by venture-capital firms to earmark funding to back firms led by Black Americans and people of color. Some women-focused startups have also been called on to do more to promote intersectional feminism and broaden their notion of diversity beyond gender.
With backing from some of the biggest names in Corporate America, Ellevest has grown its assets under management to more than $600 million. It's a sum far smaller than rivals catering to a broader audience.
Business Insider spoke with a dozen people including former Ellevest employees, analysts, VC investors, and other fintech and wealth insiders about the rise and positioning of Ellevest in the ultra-competitive business of managing money — and whether or not a startup targeting a smaller subset of users, women versus everyone, can compete long term.
Read more: 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
Ellevest drew big-name backers
Investors have come out in droves to back Ellevest, which now offers both automated investing and premium advisory offerings. From Melinda Gates and Valerie Jarrett to tennis star Venus Williams, Ellevest has raised nearly $80 million from notable women investors and philanthropists.
Ellevest oversees some $635 million in assets across digital, premium, and private wealth management as of June 7, a spokesperson said. That's up from the $580 million disclosed in a February SEC filing.
That pales in comparison to other older fintech firms in the wealth space who cater to customers of all kinds. Some of the largest robo-advisers, like Wealthfront and Betterment (launched in 2011 and 2010, respectively), and hybrid firms like Personal Capital, launched in 2011, each manage billions. Wealthfront has a war chest of venture capital dollars that's more than double what Ellevest has raised. Traditional wealth giants like UBS and Morgan Stanley oversee trillions.
In an interview with Business Insider, Krawcheck said Ellevest's uniqueness as the only wealth offering specifically geared towards women make it difficult to compare to others, and that pay gaps make AUM an imperfect measuring stick for Ellevest. With women making less than men, the amount of wealth they generally have for Ellevest to manage is lower too.
"There have been so many people who went after the target market and failed," Krawcheck told Business Insider. "If you'd woken me up in the middle of the night three years ago and asked if we'd be at $640 million in assets under management, I'd have said, 'We'll be lucky to be at one.'"
Read more:Inside the quest to reboot Personal Capital, the wealth manager grappling with its identity in the cutthroat robo-advisory age
A career in wealth
Krawcheck led some of the largest wealth-management businesses on Wall Street years before rallying cries for a more inclusive financial services industry.
She began her career as an analyst at Sanford C. Bernstein, today AllianceBernstein, and rose to become the firm's chief executive. Krawcheck later served as CEO of Smith Barney (what is today Morgan Stanley Wealth Management), Citi's finance chief and head of strategy, chairman and chief executive of Citi's Global Wealth Management, and head of global wealth and investment management at Bank of America.
Her last job in traditional wealth management was heading up Merrill Lynch until 2011.
She and Kroll — the founder of financial-technology firm Andera, which was acquired for roughly $47.6 million — founded Ellevest in November 2014.
Kroll, who is still president at the company, is far less visible than Krawcheck, who regularly discusses Ellevest, investing, and the gender wealth gap in the press.
A clear mission from the start
Ellevest, headquartered in New York City's Flatiron neighborhood, started with a core team focused on investments, engineering, product, design, and marketing, with some still there today. Prior to the coronavirus pandemic, around 75% of Ellevest's 92 employees worked out of that office, a spokesperson said.
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Sylvia Kwan, the chief investment officer, and Melissa Cullens, chief experience officer overseeing design efforts, both joined in 2015.
Alexandria Stried, the chief product officer, also joined that year from Weight Watchers, where she was the director of product management.
One former employee said the feeling and culture formed during earlier days of the company was very much mission-driven, and Krawcheck's reputation leading massive wealth units was core to getting it off the ground.
"The credibility Sallie has is what made Ellevest what it is" today, the person said.
In 2016, Ellevest hired the once-hot, now-shuttered home interior design startup Homepolish to design the glossy new offices, the website Officelovin' reported.
There were some hallmarks of a fresh startup, with funky twists: pastel armchairs and modern lamps; a sunny, open-office concept; and a whiteboard with rows of Post-it notes scattered nearby. There were twin seats with white shag covering near the reception area, where a hardcover Coco Chanel biography was kept on a table.
In earlier days, Kroll's thinking around Ellevest's hires was that everyone "had to have a story," the former employee said.
Stried, for instance, had experience at Weight Watchers creating a personalized coaching program for customers. Cullens, a creative and design strategist, had worked with clients like Vogue.
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"Incorporating someone's 'story' is one of many factors in our hiring process," a spokesperson said. "Ellevest was built on foundational belief in the power of diversity in building strong businesses, and we take that seriously."
But in a message on Ellevest's website earlier this month, Krawcheck, like executives at many other firms, publicly addressed her failings and commitments around diversity and inclusion. She noted Ellevest doesn't have "a single Black person" on her leadership team.
In the post, she included a breakdown of diversity across Ellevest: some 15% of all employees are Black, and 46% are people of color. At the leadership level, 30% of employees are people of color.
"You also have my commitment that the amplification we've been doing of Black voices on our social channels, in our articles, and in our newsletters will continue," Krawcheck wrote as she vowed to add Black executives to her leadership team.
Building Ellevest
The early focus at Ellevest was on building up a team of engineers, creating infrastructure for the eventual platform, and cultivating research on women and investing.
While the official launch came in November 2016, Ellevest ran a closed-beta version with a small number of users beginning earlier in the year, a spokesperson said.
At the time, there were only automated tools in mind. The financial-planner offering and private wealth management services would come later.
The team worked to create tools with fees that could compete with existing robo-advisers. For the straightforward investing tool, clients pay an annual fee of 0.25% of assets under management, with no minimum balance.
For Ellevest's premium product, which requires a $50,000 minimum and comes with a fee of 0.50%, clients also have access to certified financial planners and executive coaching.
Krawcheck said that the idea wasn't welcomed with open arms by all women, but it was able to win over skeptics.
"We had a double-digit percent of women, essentially at the time, shoot us the bird," Krawcheck said. "They said, 'For women? That sounds sexist, how dare you. I don't need my own thing to manage money, you know, for women.'"
Quest to add deluxe offerings
September 2017 marked another milestone for Ellevest: a $34.6 million fundraise. Rethink Impact, a US-based venture firm investing in female tech entrepreneurs, led the round.
Ellevest had some $54 million under management at the time.
PSP Growth, the growth-equity arm of PSP Partners — run by billionaire businesswoman and former US Secretary of Commerce Penny Pritzker — and Salesforce Ventures joined as first-time investors.
Ellevest said it would use the funds to launch a financial-planning offering and a private-wealth service for clients with investable assets of at least $1 million.
Initially branded Ellevest Ascent, financial advisers would help customers strategize various areas of their personal finances.
From a financial perspective, it was easy to see why the rollout was attractive: the margins on the business are traditionally much higher than robo-advisers, and bringing on bigger accounts would help offset customer acquisition costs.
Anisha Kothapa, an analyst at the market intelligence and research firm CB Insights, told Business Insider that Ellevest made a smart move shifting into more of a hybrid wealth-management product, rather than stick with an automated-only offering.
Still, one way to propel asset growth would be to widen its approach and cater to different demographics, rather than focusing on women, she said.
Heartstrings and purse strings
Three former employees, all of whom requested anonymity to speak candidly about their experience, noted there was never much talk of an end-game for Ellevest, and one said they never received a real straight answer about what any eventual exit might look like.
This isn't necessarily unusual for a startup. Founders focus on building big businesses rather than discussing ways to hand them off. However, many startups that have focused on niche audiences, such as women or college students, either find they later need to expand their userbases to stay competitive or wind up with disappointing outcomes.
SheCapital, Swell, and WorthFM, all of which targeted either women or socially-responsible investing, have shuttered within the past few years.
It's a delicate balance between deciding what "pulls at the heartstrings, as well as the purse strings," Genevieve O'Connor, an assistant professor of marketing at Fordham University's Gabelli School of Business, said in a recent phone interview.
"Companies need to stay away from 'pink-washing,'" O'Connor said. The phrase has roots in labeling brands that critics say exploit rainbow color schemes and the color pink in marketing around breast cancer awareness and LGBTQ causes, but has widened to describe the notion that products for women should come with a lighter touch — a general practice Krawcheck has railed against.
Building the wealth-management side of the business could also help improve key metrics or statistics potential investors would look at. But according to one former employee, the announcement came before the actual tech platform needed to support the wealth-management offering was complete.
"They weren't really bridging the gap between the robo side and being tech-enabled on the wealth-management side," the source said.
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Reporting features and the actual client site lagged behind the robo offering.
"They just weren't applying the technology with the same, I would say, gusto, that they were with the other side because the other side was the tried and true proven business that really kept the funding going," the source added.
However, that lack of a wealth-management platform didn't stop the push to try and build the business up.
The directive from management was to continue to get assets in the door from high-net worth individuals with the caveat of, "we'll figure the rest out later," the source said.
The wealth-management platform was in a closed beta phase at the time of the announcement, a spokesperson said.
As for the discrepancies between the robo and wealth-management side, the spokesperson said it's natural for products to mature over time.
"There are fundamental differences in the service models for our digital and private wealth management offerings," the spokesperson said. "Our digital investing offering relies almost exclusively on technology, whereas our private wealth offering is driven by financial advisers, who are tech-enabled. We continue to invest in all of our products."
Turnover had also become an issue for some teams, according to the source. In 2019, at least six software engineers left between February and August.
A spokesperson confirmed that turnover and said Ellevest took actions to improve retention, and that since August 1, 2019, voluntary attrition among engineers has been less than 5%.
There was also a departure at the C-level as Lisa Stone, who joined in August 2017 as chief marketing officer before transitioning to chief strategy officer in April 2018 and leaving one year after, according to her LinkedIn.
More big names get involved
The company nabbed more funding in March 2019, raising $34.5 million in an extension of its Series A round.
Rethink Impact and PSP Growth led the extension, but a who's who of backers also joined.
Among them were Melinda Gates' Pivotal Ventures; PayPal Ventures; Mastercard; Elaine Wynn, the cofounder of Wynn Resorts; Eric Schmidt, the former executive chairman of Google and Alphabet; and Valerie Jarrett, former senior adviser to President Barack Obama. Former Goldman Sachs tech banker Linnea Roberts, through her VC firm Gingerbread Capital, also participated.
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"Unlike other fintech start-ups, Ellevest is changing women's behavior, changing the narrative around women and money, and in so doing, giving women the means to change their own lives," Jenny Abramson, founder and managing partner of Rethink Impact, said, adding Ellevest is "more than meeting its benchmarks for success."
None of Ellevest's other investors returned Business Insider's requests for comment, while a representative for Elaine Wynn could not be reached.
The wealth-management business, re-branded Ellevest Private Wealth Management, had reached $100 million in assets under management, Krawcheck said in a statement at the time of the last fundraise.
"After this round, I feel like I'm at the end of a marathon — one in which I threw up, hallucinated a giant rabbit running next to me for the final four miles, and broke my knee," she wrote in an annotated press release posted to Ellevest's website.
The road ahead for Ellevest
The March 2019 raise was the last big news the company reported.
A spokesperson declined to disclose how its assets are currently split across digital, premium, and private wealth beyond noting the latter has grown "in multiples" over the past year.
Ellevest still lags behind both upstarts and traditional players. It's not profitable, a spokesperson said, declining to disclose burn rate or profitability figures. To be sure, many startups in the space have yet to turn a profit, as most tend to focus on growth.
"At Ellevest, we don't see digital investment platforms as direct competitors because we have a different audience demographic," Krawcheck said in a statement, adding that "in comparing us to other companies in the category, you have to consider the fact that Ellevest's membership base doesn't have the same amount of money to invest as others' users."
So where does Ellevest go from here?
"This idea of you build a startup with an eye on the exit door, and who are you going to sell to, and who's it going to be — it hasn't entered the equation. We've never talked to our investors about it. We spend no time as a leadership team about it," Krawcheck said.
"We can easily be a publicly traded company. We can easily be a profitable private company. Any of those things can be available to us as we're successful," she said.
Business Insider spoke with five venture capitalists who have made investments in personal-finance startups. They were not authorized to speak publicly about Ellevest and requested anonymity to preserve relationships in the industry.
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While all spoke highly of Krawcheck and her vision for the platform, none had pursued making an investment beyond initial conversations.
Ellevest's relatively small total assets versus the amount of money it's raised was one red flag cited by a few of the VCs.
"They are way smaller than they should be," one venture investor said. "For the amount of money they have raised … It doesn't make sense."
Another venture investor highlighted the risks that come with focusing on a specific segment. That approach, some venture sources said, can sometimes limit scale.
In interviews, multiple sources pointed to another woman-focused financial planning startup, LearnVest, as one way they could see Ellevest's path playing out.
The personal-finance software startup was acquired by Northwestern Mutual Life Insurance for $250 million in 2015. Three years later, in May 2018, LearnVest's offering was discontinued.
There are no shortage of onlookers rooting for what's been the most successful women-focused investing startup in the wave of digital wealth managers over the last decade. Still, not every woman has wanted an investing service with a gender lens.
"Many of women's money woes do originate in unequal pay and lopsided caretaking burdens, and it's nice to see that acknowledged — but financial advice can't fit it," personal finance writer Helaine Olen wrote for Slate in 2015. "Only social change can do that."
"Women are not monolithic, any more than men are," she wrote.
A former employee said in an interview that Ellevest's stated goal was never unclear: get more women investing in the market, and close the gender wealth and income gap.
"We were all, and many of us still are, true believers," they said. "There were a million things that went wrong, as with any new company. But one thing that was true was everyone believed in that mission, and the goals."
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