These 10 early-stage wealth startups are on the brink of breaking out, according to top VCs

  • Business Insider asked venture capital investors and other big investors to nominate early-stage startups in the wealth management ecosystem that they see as up-and-comers. 
  • Investors including DCM Ventures, Oak HC/FT, Accel, and Broadhaven Ventures pinpointed companies that have not raised beyond a Series B round of funding.
  • Wealth-tech startups raised $1.2 billion in venture funding in the second quarter, according to CB Insights. 
  • Visit Business Insider's homepage for more stories.

The world of wealth- and investment-technology can be a wonky, crowded space, full of entrants trying to find new solutions for old financial problems, clamoring for advisers', clients', and big firms' attention.

Like other corners of the fintech market, wealth-tech startups have reported fresh infusions of capital this year even as the coronavirus pandemic has threatened financial stability around the world.

Last quarter, wealth-tech startups raised $1.2 billion in venture funding, up from $450 million during the first quarter, according to a report from CB Insights. Total deal activity ticked up slightly from quarter to quarter, from 28 to 32 deals.

Business Insider asked investors to nominate early-stage startups in the wealth management ecosystem that they see as up-and-comers. We set a criteria that companies eligible for this list could be in and outside of investors' portfolios, while sticking with startups that have not raised beyond a Series B round of funding. 

Startups they selected in and around wealth management run the gamut. Two are in the business of will-writing and end-of-life planning — one US-based, and one London-based. One has been dubbed a "German Robinhood."

Another, the most-nominated startup on this list, builds technology for financial advisers with the use of artificial intelligence, and has cracked into the fast-growing independent wealth management industry. 

Here are the 10 startups investors nominated as wealth-tech companies on the rise. 

DriveWealth

Cited by: Route 66 Ventures, an investor in DriveWealth 

Total raised: $54.3 million

What it does: DriveWealth, headquartered in Chatham, New Jersey, builds out the underlying technology and infrastructure that serves as the backbone for firms like fintechs, broker-dealers, and registered investment advisers. For instance, it builds tech that powers self-directed trading and investing capabilities on an app.

Why it's one to watch: "The future of finance is frictionless. Converting consumers into investors requires embedding investing into everyday activities," said Benjamin Britt, general partner with Route 66 Ventures. "Buy Starbucks coffee, get Starbucks stock. Swipe your card, auto-invest the round-up amount without thinking about it. DriveWealth is building the brokerage infrastructure to make this future possible, enabling its clients to build imaginative trading, advisory, round-up, loyalty reward, and investment savings experiences for their retail customers." 

Read more: Robinhood, Fidelity, and Charles Schwab are racing to give customers the chance to buy $1 slices of stocks. We talked to a dozen insiders about who wins, who loses, and what it says about trading today.

Harness Wealth

Cited by: Bain Capital Ventures, an investor in Harness Wealth, and Norwest Venture Partners, which is not an investor

Total raised: $4 million

What it does: New York City-based Harness Wealth, an independent registered investment adviser (RIA), built a platform for users that shows their financial information, then pairs them with financial, legal, and tax advisers out of a list that Harness curates. 

Why it's one to watch: "We believe Harness Wealth will ultimately become the center of the financial life for their customers, bringing an 'ultra-high net worth family office experience' to millions of Americans," said Ashley Paston, an investor at Bain Capital Ventures. 

"Not every problem can be solved with an algorithm. Wealth-related decisions are complicated, high-stakes decisions, so it makes sense to partner with an expert. Harness Wealth is creating a platform that understands consumer wealth questions and connects people with experts who can help," said Parker Barrile, a partner with Norwest Venture Partners.

Read more: Compass' ex-CFO just launched wealth-tech startup Harness Wealth. Here's how it's helping advisers battle Betterment and Wealthfront for trillions in millennial and Gen-X assets.

Trade Republic

Cited by: Accel, an investor in Trade Republic 

Total raised: 80 million euros, or around $94 million

What it does: Trade Republic, a commission-free stock-trading app, has been called a "German Robinhood." Its users trade securities on its mobile brokerage app, and it last raised a round of funding in April with plans to introduce savings features, too.  

Why it's one to watch: "Trade Republic is Europe's mobile investing pioneer, giving people better access to capital markets. A platform for mobile saving, investing and trading, it allows anyone and everyone to take their financial investments into their own hands. This is a big shift from the traditional systems for investment in Europe, which are quite outdated," said Luca Bocchio, a partner at Accel.

Vise

Cited by: DCM Ventures, Broadhaven Ventures, and Redpoint Ventures, none of which are investors in Vise

Total raised: $18 million

What it does: Vise, based in New York City, built an automated investment management platform for financial advisers with the use of artificial intelligence, with features like designing custom portfolios for advisers' clients. 

Why it's one to watch: "The company has seen very promising traction with RIAs who are embracing technology at a faster pace than ever before. The company has a fee on assets under management business model which will take a while to grow but is recurring in nature. If the company can continue to penetrate the RIA market, they will build a very meaningful long-term business," said Kyle Lui, a partner with DCM Ventures. 

"I'm intrigued by Vise because the tailwinds are in their favor to provide a differentiated experience to wealth managers and their end clients," said Michael Sidgmore, a partner at Broadhaven Ventures, noting the fast-growing independent wealth management industry and those advisers' technology needs.

"Platforms like Vise will help RIAs scale their businesses and drive better outcomes for the many Americans who rely on advisers to manage their retirement savings and secure their overall financial health," Medha Agarwal, principal at Redpoint Ventures.

Read more: Sequoia Capital is betting zero commissions will transform wealth management — and it's placing a big bet on an AI-based stock-picking startup for financial advisers

FreeWill

Cited by: QED Investors, an investor in FreeWill 

Total raised: More than $10 million

What it does: FreeWill is a no-cost estate-planning service that gives users a way to create a will for free, offering options to set up charitable giving during that process. The startup, based in New York City, partners with non-profits to run its platform. 

Why it's one to watch: "One of the most interesting trends in wealth-tech is the $30 trillion transfer of assets that will happen from boomer parents to their millennial children. FreeWill is a company that is seeking to use that moment to create a trillion dollars of donations to charity," said Amias Gerety, a partner with QED Investors. "While that may sound ambitious, FreeWill democratizes access to estate planning with a truly-free offering that just takes 20 minutes."

Facet Wealth

Cited by: Centana Growth Partners, which is not an investor in Facet Wealth 

Total raised: $37 million

What it does: The registered investment adviser Facet Wealth, based in Baltimore, Maryland, is a startup that caters to households whose assets are typically too small for financial advisers serving ultra-wealthy clients. Facet has financial planners based around the US using its digital platform, and charges a flat annual fee for services. 

Why it's one to watch: "There is a large market for financial advice (a plan, not asset allocation) delivered by a human. Humans can deliver empathy and help a client in a way that automated advice can never deliver," said Ben Cukier, partner at Centana Growth Partners. "Facet's business model lets them give advice delivered by a human efficiently, at scale."

Read more: Financial-planning startup Facet Wealth is using Netflix-style pricing to scoop up clients that other firms turn down for being too small

Ethic

Cited by: Oak HC/FT, which is not an investor in Ethic  

Total raised: $19.8 million

What it does: New York City-based Ethic builds sustainable investing-focused separately managed accounts, or professionally managed portfolios of assets, for institutions and advisers. The startup's digital platform, accessed through advisers, lets users customize investments that keep with their personal values.

Why it's one to watch: "Sustainable investing is increasingly becoming attractive to financial advisers and the consumers they serve. But ensuring a stock or basket meets ESG standards is complex; even more so when trying to personalize to an individual investor all while generating market-leading returns," said Tricia Kemp, co-founder and managing partner of Oak HC/FT.   

Commonstock

Cited by: QED Investors, an investor in Commonstock

Total raised: $9.7 million

What it does: Commonstock, headquartered in San Francisco, built a mobile and web platform for users to link up their outside brokerage accounts and choose to share investment ideas with other users. Its dashboard feature shows snapshots of users' activity, like sentiment around different stocks and cryptocurrencies. 

Why it's one to watch: "Commonstock believes that 'educating the investor' is an important emerging industry focal point and will be the next battleground of innovation in the space. And while many brokerages are building out content as an extension to their core offering, education is Commonstock's entire business model," said Frank Rotman, founding partner of QED Investors.

Origin

Cited by: Oak HC/FT, which is not an investor in Origin 

Total raised: $13 million

What it does: Origin, based in San Francisco, built a workplace financial benefits platform for employers. It has financial planners on staff, and the platform can let users track financial milestones and create plans for financial situations like paying down student debt. 

Why it's one to watch: "Employers are increasingly responsible for the health and wellness of their employees. This is now extending into the realm of financial health. Origin helps employers provide financial benefits to their employees in a packaged, programmatic way," said Tricia Kemp, co-founder and managing partner of Oak HC/FT.   

 

Farewill

Cited by: Broadhaven Ventures, an investor in Farewill 

Total raised: $38.5 million

What it does: London-based Farewill built a will-writing and probate services platform for users. It has a team of will and probate specialists, and also provides cremation services. 

Why it's one to watch: "Many people overlook the fact that the biggest financial event of our lifetime happens at death: the transfer of wealth from one generation to the next. In the UK alone, there is an expected 1 trillion-pounds that will be inherited in the next 10 years. Farewill is sitting right in the middle of a massive generational wealth transfer," said Michael Sidgmore, a partner at Broadhaven Ventures.

This article was originally published on September 1, 2020.

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