New York-based fintech startup Vestwell has raised $125 million from investors via its latest Series D funding round to keep helping employees save more money and build wealth. The round was led by Lightspeed Venture Partners and counted with the participation of both new and previous backers.
Vestwell develops technology to help employers offer workplace savings and investment programs like 401(k)s, 403(b)s, 529 college savings plans, ABLE disability plans, and more. Over 1 million savers across 300,000 employers currently use Vestwell’s platform to manage nearly $30 billion in assets.
The company will use the new funding to expand its product offerings and acquire other businesses, with about half the funds earmarked for potential deals, the CEO of the firm, Aaron Schumm, told the tech-focused magazine TechCrunch.
Earlier this year, Vestwell the acquired student loans benefits platform Gradifi from Morgan Stanley in its first acquisition.
The company is aiming to become a profitable venture in around 18 months according to Schumm while the tech executive believes that an initial public offering (IPO) has become a “very real possibility” at this point.
Vestwell is Now a Unicorn – At Least Presumably
Vestwell has reached elite startup status during this latest funding round as the company was reportedly valued at over $1 billion, sources familiar with the matter told Bloomberg.
Several new and existing investors also contributed, including Blue Owl, HarbourVest, Fin Capital, Primary Venture Partners, and FinTech Collective. To date, Vestwell has raised $227.5 million.
Justin Overdorff, a partner at Vestwell’s top backer, Lightstpeed Venture Partners, commented:
“We are deeply impressed by Vestwell for its groundbreaking infrastructure-first approach to solving the systemic savings problem in the US. Their commitment to the thoughtful execution of its plans assures us of its stability and growth potential in the workplace savings and investment space.”
Overdorff was appointed to Vestwell’s board of directors as part of the deal. In regards to the prospects of the company, he further added: “They’re undeniably the dominant player and a true disruptor when it comes to the savings landscape – Lightspeed is excited to invest, and I’m proud to be joining the board and look forward to working closely alongside Aaron and his team to accelerate this company together.”
CEO Schumm said that the company expects to be doubling its annual recurring revenue and transaction volume this year. The fact that the company managed to raise such a huge amount in a challenging macroeconomic environment speaks volumes about the robustness of its finances, business model, and growth prospects.
Vestwell Aims to Disrupt a Landscape Filled with Titans of the Industry
The New York-based company was founded in 2016 by entrepreneur and current CEO Aaron Schumm and launched its industry-leading SaaS platform the following year.
The company’s platform simplifies administration and compliance for employers while providing an engaging and personalized experience for employees. This helps businesses both attract and retain talent as they compete for workers by offering competitive benefits packages.
With the latest cash infusion, Vestwell aims to maintain its aggressive growth pace and develop of new capabilities while staying on track to reach profitability in the near term.
Also read: What Is B2B SaaS? Top 20 B2B SaaS Examples, Trends, and Strategies
According to data from Statista, approximately 48% of US employees claim to use 401(k)s and other similar retirement plans to invest and save money for retirement and other purposes.
With around $30 billion in assets under management, Vestwell still only manages a tiny fraction of the mammoth-sized total balance of pensions held by businesses in the United States.
The market for Vestwell is huge but competition is also fierce as large financial institutions like JP Morgan Chase, Goldman Sachs, Vanguard, T. Rowe Price, and Fidelity have been around for quite a while and have maintained strong relationships with corporations for decades.
In addition, the company is also a direct competitor to the vast number of automated passive investing solutions that have emerged lately like Betterment and M1 Finance, both of which allow customers to invest and save money for retirement by using individual retirement accounts (IRAs) and with the help of robo-advisors.
Vestwell’s backers seem to believe that the firm’s value proposition is strong enough to help it earn a seat at what can be considered a relatively crowded table.