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The almost unfathomable Silicon Valley investment being poured into creating wealth management software a catch-up move after decades of falling behind
July 21, 2014 — 7:59 PM UTC by Brooke Southall
Brooke’s Note: It sounds good as hell on paper: Find a big-time industry that somehow got caught in a back eddy of technological advancement, raise a bunch of capital, hire the world’s best engineers and set them to work bringing the technology for that industry into the modern era. Addepar is essentially building to that blueprint in the financial advice business. The company’s resolve to do just that is even more abundantly clear after it raised more money to keep engineering — and keep burning cash — even after many believe its offering, on a purely technical level, is already at another level.
Since Eric Poirier and Karen White to lead Addepar a year ago, the Silicon Valley company says it has grown its revenues and assets administered nearly five-fold and, going forward, will continue to hew to the same strategy: Do some business development but emphasize engineering.
The hires of Poirier and White came more sharply into focus when Mike Paulus left unexpectedly in March. The buzz around the industry was that Addepar was finally bringing in 'grown-up’ leadership to deal with the boring but necessary tasks of getting to the next level — i.e. taking Addepar from science project to business project. See: The face of Addepar leaves the company amid intrigue about just where it stands with the RIA market. Poirier and White declined to disclose how much in revenues or assets the company had before the five-fold growth multiple kicked in.
The Mountain View, Calif.-based company founded in 2009 and known to have raised $68 million of venture capital continues to bring on the customers with the thorniest asset aggregation issues i.e. advisors serving the super-wealthy who hold a hodgepodge of private assets, hedge assets and public assets held at various custodians.
A mystery to RIAs
But the growth is apparently satisfactory to some so-called smart-money investors who no doubt are privy to the hard numbers and invested $50 million in May — a round led by Yammer founder and former PayPal chief operating officer David O. Sacks and Chicago-based Valor Equity Partners. Other backers included Tesla, SpaceX and Solar City. Among others who tossed in some capital were San Francisco-based Formation 8, Stanley Druckenmiller, and money manager and real estate mogul Harrison LeFrak.
Addepar raised $16 million in previous funding rounds through investors including Peter Thiel and Blumberg Capital. See: Addepar hits $50 billion of assets and turns its eyes to Advent-Black Diamond’s plump RIA market.
But even as Addepar becomes better known among elite VC investors, it continues to be somewhat of an enigma to the many of the RIAs and RIA business participants who are considered to be among its core customers.
Representatives of Addepar briefly seemed to be showing at RIA industry events but regular attendees note that they have been conspicuously absent of late. When, the question goes, will Addepar shift gears from its hyper-engineering mode to a time where it becomes more overtly client focused?
Running to stay in place
Eric Poirier says Addepar’s task is
to 'solve the entire problem’ of
making a world of data gel.
“Not anytime soon” is the de facto answer that comes from its new chief executive, Poirier. In his opinion, Addepar is already tops in the business of reporting and aggregating for financial advisors of all stripes who manage $250 million or more of assets. See: Addepar means to be the only technology platform RIAs will ever need — and has MIT minds and PayPal money to back it up.
But Poirier says that the advice industry should continue to expect him to direct his firm’s capital toward more engineering. He declined to say what weaknesses, if any, that his company is trying to shore up. See: Addepar slashes prices, opens up its architecture and shows RIA custodians some love as it confronts market realities.
But if you don’t get ahead, way ahead, you fall behind, White says.
“What the market wants today is evolutionary and if you don’t [advance] every day, you fall behind.” See: Top 12 crucial technology happenings affecting RIAs in 2012, Part 2.
Performance reporting software has, the Addepar thinking goes, been stuck in place for decades and Addepar, on behalf of the whole industry, is working to play the long game of catch-up on its own. See: Why a disconnect between reporting software and advisors to UHNW assets persists — and what makes the problem so thorny.
“We have to solve the entire problem” of making a world of data gel so that an advisor can advise on a whole portfolio of assets, Poirier says.
Poirier was most recently at Palantir Technologies, a multi-billion dollar software company that helps organizations to reconcile disparate data. He joined the company as a developer in 2006 — one of the firm’s first 20 hires — when the Palo Alto-based firm was pre-revenue.
Previously, Poirier worked in the fixed-income analytics group at Lehman Brothers where he built tools to model, simulate and analyze data on a variety of debt and credit instruments. See: Addepar hires an Advent talent to help head sales, an ex-Lehman exec as COO and an ex-Merrill Lynch strategist.
“It was at Lehman that Eric first became passionate about re-imagining large-scale financial technology, so that it empowers professionals with transparent, unified data and powerful, intuitive tools,” according to a statement from Addepar.
Poirer co-founded his first business, focused on scaling websites, when he was 15 and won eBay and Priceline as customers. Poirier also stuck to his schooling and graduated from Columbia University with a B.S. in computer science.
Playing on dissatisfaction
White, now president and chief operating officer at Addepar, was senior vice president at Oracle from 1993 to 2000, most recently heading worldwide business development. In her seven years at Oracle, she held a variety of executive management positions, reporting to its chief, Larry Ellison, and president Ray Lane.
White was most recently chief executive at Santa Clara, Calif.-based Syncplicity, a cloud-based file management company that was acquired by EMC Corp. in 2012. She helped grow the company to more than 30,000 business customers in three years. Previously, she led business development at SolarWinds, joining while it was privately held, and saw out its successful IPO in May 2009.
White will help scale operations and expand globally, managing sales, marketing, business development, finance, operations and human resources a Addepar.
She says that she is seeing plenty of early signs that her company is on track.
“We’re winning customers from Advent Software Diamond (An independent business group of Advent)”:http://riabiz.com/d/black-diamond-an-independent-business-group-of-advent every quarter. There’s a lot of market dissatisfaction out there,” White says. See: Black Diamond divulges 'unbelievable’ data about how Advent is doing, two years after its $73-million buy.
Advent and Black Diamond continue to experience their own explosive growth. See: Black Diamond blows the lid off asset growth in Dave Welling’s first year in charge.
Mentioned in this article:
Portfolio Management System
Top Executive: Eric Poirier
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