General Atlantic's funding largess comes after $67 million carried the San Francisco robo its first 11 years

June 19, 2018 — 12:41 PM UTC by Brooke Southall

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Brooke's Note: Your eyes aren't playing tricks. We just published a fairly in-depth article about UBS going live with SigFig last week. Mike Sha's robo-advisor faced tough choices until two wirehouses offered unique partnerships -- and maybe a new business model to boot No sooner had that RIABiz article populated cookies on your screen than we heard that SigFig had secured a round of funding that'd increase its VC haul by about 75%. I talked to CEO Mike Sha to see what more I could learn based on the cash infusion. The biggest takeaway is that  a VC accustomed to making 10- to 100-times its money has eagerly stepped in to become the biggest SigFig investor. The way Mike Sha explained it to me was that the VC, General Atlantic, took a pass on putting cash into the early B2C robos because it didn't want to partake in a war of customer acquisition, playing a zero sum game with legacy providers. It prefers the idea of taking a clear disaster -- namely existing banking technology -- and replacing it with far better technology to keep and expand upon an existing customer base. Should RIAs care? Maybe not too much in the sense that SigFig is neither a competitor nor an RIA vendor per se. But if wirehouses and the like ever crack the code of creating offers that compete for RIA assets, it'll be, in part, because they find a way to disentangle themselves from the rusty old wires of their proprietary information systems. 

SigFig CEO and co-founder MIke Sha wasn't actively looking to raise more VC money. But when a company with a portfolio that includes Facebook, Alibaba and AirBNB comes knocking, it's hard to say no. 

The San Francisco-based robo-software firm just accepted $50 million from venture capitalist, General Atlantic, on terms too good to pass up, says Sha. SigFig declined to disclose the deal's valuation. The total raised is now $117 million.

"They approached us earlier this year," says Sha. "It happened all very quickly, and we were open to raising money."

Existing SigFig investors including Bain Capital Ventures, DCM Ventures, Eaton Vance, New York Life, Nyca Partners and UBS. Union Square Ventures also invested in the series E round.

Pedigreed green

General Atlantic isn't stepping too far outside its tech focus. Its portfolio also boasts RIA-leaning firms like First Republic Bank and Santander Asset Management.  First Republic pays a staggering sum for Luminous Capital, sources say, and shifts the breakaway and M&A games in the bargain

People at the Greenwich, Conn. firm like SigFig's fit with  brick-and-mortar financial advisors, says Paul Stamas, managing director at General Atlantic, who will join the company’s board of directors.  

“With its B2B2C model, SigFig leverages its industry-leading technology alongside its partners’ existing physical infrastructure and human capital to create a best-in-class advice solution," he says in a statement announcing the deal, a copy of which was obtained in advance by RIABiz.com

Indeed, SigFig's product is sold as software-as-a-service, but plugging and playing it into all the banks and brokerages that want it presents a challenge, Sha says.

"We've been capacity constrained," he says. "This allows us to scale up."

SigFig has 200 employees, including about 100 in San Francisco. “We're up to capacity where we are we could fit a few more but not a huge amount more so we have been looking to expand our office space,” Sha added in an interview in early June.

The company is eyeing more staff to execute deployments in brokerage branches where non-technology services like sales training, scripting and compliance need retrofitting. "Part of raising our capabilities is keeping up with demand," Sha says. 

The intangible benefit of raising the capital is also big. It will forestall the need to raise capital again anytime soon. 

What banks want

"Banks want to know we'll be around a long time," Sha says.

Ultimately, Sha points to a virtuous circle, being the software modernizer for a whole series of big banks -- like UBS and Wells Fargo -- while also taking what it learns from those customers and applying it to future customers.

Banks go along with SigFig for a simple reason, Sha adds.

"You want to be connected to a platform with the fastest rate of improvement," he says. "For banks, it takes longer but also by the time they finish, it's out of date."

 



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Brian Murphy said:

June 19, 2018 — 7:38 PM UTC

Though I honestly don't know, I suspect there is more to this than is being disclosed at present. I also suspect that SigFig as it currently stands won't be an independent entity 18 months from now.

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