Surfing a $15-billion-a-week asset growth meteor, Addepar CEO Eric Poirier hires an owner as president to achieve 'escape velocity' and keep operations from flaming out

Addepar is wowing RIAs with $15 billion a week in asset growth and just hired a new, bigger-thinking president to achieve "escape velocity" to hit a near-term $3 trillion AUA goal.

David Obrand, a partner at San Francisco private equity firm Valor Equity Partners, an Addepar backer, was named president, Apr. 8.

The Mountain View, Calif., performance reporting software firm for RIAs and other wealth managers now administers $2.5 trillion in assets, an increase of $500 billion in the past seven months.

On average, that works out to a $15 billion a week in new client assets -- including stock market gains -- since Sept. 2020, according to the firm.

"Addepar is approaching escape velocity. I'd anticipate $3 trillion in all likelihood by the end of the year," says Addepar CEO Eric Poirier.

"That momentum continues to pick up every quarter, and the strength of the tailwinds we’re experiencing now, we feel the market coming our way, in a very significant way," he adds.

White whale

Yet, Obrand's hire raises some eye brows, according to rival Craig Pearson, CEO Charlotte, N.C.-based Private Wealth Systems. See: A higher bidder ripped WealthTouch from Craig Pearson's grasp but his startup could rip the clients, free of charge, right back -- and leave Addepar gasping.

"Usually, when an investor feels the need to start running day-to-day operations, it's a signal there are serious challenges," says the head of the performance reporter and aggregator for ultra-high-net-worth (UHNW) accounts, via email.

Poirier concedes that Obrand's appointment "frees up a substantial amount of time" so he can mastermind the pursuit of a grand destiny, rather than manage day-to-day operations.

"I don't know if I'd characterize it as a white whale.  We're in the very, very early stages of what we can ultimately deliver to the world at a global scale," the Addepar chief explains.

(White whale -- not to be confused with white elephant -- refers to Capt. Ahab's fruitless pursuit of Moby Dick. It's typically a metaphor for an elusive and hard to attain goal.)

Yet, Addepar may be in the right place and right time to arrive in a land of white whales and unicorns because Poirier and Obrand can effectively morph their business model to whatever the market is hungriest for. 

In a word... data, says Lex Sokolin, global fintech co-head and chief economist for ConsenSys.

"The firm’s historic differentiator was alternative investments, and now it is likely the scale of its data set and its aggregation technology," he writes from his London office. 

"That’s different from workflows like trading or planning or allocation proposals. It may have those features, but it’s not the sharp edge."

Mutual revelation

Addepar hired Karen White as president and chief operating officer in 2013, but she left in 2014, and the position remained vacant. Addepar hired Barbara Holzapfel as a chief marketing office, but she only stayed for a year and now works for Microsoft.

Poirier began a search -- with then Addepar board member Obrand's help -- five months ago to fill the president slot. But the two executives had a mutual revelation.

"Five months into the search, we looked at each other and thought, 'okay, there’s a different answer here,' and once we had that conversation, it was very quick to make the transition from being a partner at Valor to a full-time employee," says Obrand.

"What better commitment can [Valor] make to a portfolio company than allowing one of the partners to actually leave the firm to do this work?"

Yet Valor had no input into Obrand's appointment beyond giving it the green light once Poirier approached the Chicago private equity firm, according to these principals.

Hitting the gas

Prior to joining Addepar, Obrand spent three years as a Valor partner. 

Valor led Addepar's firm's $50 million 2014 Series C raise and its $140 million 2017 Series D funding round, but did not take part in its $117 million 2020 Series E round. Obrand has stepped down from his management role at Valor upon starting work at Addepar.

His LinkedIn page also lists him as an angel investor. Typically Bay area angel investors have the personal capital needed to invest tens of hundreds of millions of dollars.

Significantly, he worked from 2002 to 2011 at Salesforce.com as one of the initial members of its sales team. By the time he left, Salesforce (CRM) was the industry standard customer relationship management software and made the fortunes of early staff and investors.

Marc Benioff founded the company in 1999, introduced a first product in 2000 and went public in 2004, when shares were trading around $3. When Obrand left in 2011, Salesforce was trading around $28 a share. Today, it trades at over $220 a share. 

Formerly an Addepar board member, Obrand helped Poirier recruit several of its recent executive hires.

The new Addepar president has also long had its CEO's ear as a result of a 2013 introduction through Addepar founder and chairman, Joe Lonsdale, a co-founder of Palantir Technologies, whom Obrand worked with as an angel investor.

Clear line of sight

Indeed, Obrand's knowledge of the company’s business model, staff, clients, technology and strategy meant he was too good a candidate to let slip, Poirier explains.

"It’s a question of unifying the entire go-to-market motion under a single leader, and [Obrand] is that leader … marketing, sales, business development, account management are all [his] areas of responsibility now," he says.

Obrand -- like Valor Equity -- self-characterize as head-under-the-hood "operations" people as differentiating calling card. In the first few lines of the Valor "About" page introduction, they write that they even built their own desks.

Obrand underscores that he also has an operations mindset as a dominant trait.

"I have the operator gene, it’s a very hard thing to expel," he says.

Wiping clear his responsibilities in those areas gives Poirier a clearer line of sight to pursue strategies that pay off biggest, Sokolin adds.

"Embedded finance and data aggregation are having a comeback, with Plaid raising at over a $10B valuation," he says. "Traditional institutions are looking at data as a revenue driver rather than a cost. So having space to figure our where alternative data can be useful remains an untapped opportunity."

Poirier is throwing no cold water on those high-velocity expectations..

"With David's leadership … we have an abundance of opportunity to go bigger, aim higher, grow faster. Now. it's really just hitting the gas."

Obrand, who spent just under ten years as a sales executive at CRM vendor Salesforce, and three as chief operating officer of Bay Area marketing technology company, Radius Intelligence, adds that his relationship with Poirier made his new role impossible to turn down.

"Typically when you make the move into private equity, you don’t boomerang back, but the relationship with [Poirier] … we hit it off very quickly."

Dead certainty

Addepar's leap to $3 trillion in administered assets (AUA) is also a dead certainty, says Obrand, who helped Poirier run a five-month search for the firm's first president before landing on a successful candidate--himself.

"We're actually slightly ahead of that number from a customer-acquisition perspective, and if we see anywhere near the same demand in Europe we're seeing here, it will be a very [positive] decision to expand," he explains in an interview.

The past twelve months have included a strong hiring run, too. Today, Addepar employs just over 400 staff, up 16%, from 346 last March.

Poirier deserves credit for not holding onto the reins too long, says Gavin Spitzner, president of New York consultancy, Wealth Consulting Partners, via email.

"All too often I see firms become a victim of their own success by growing so big, so fast and not staffing up properly and, in particular, bringing in outside operators, whether they be at the president, or chief operating officer level, to help run the business and drive the next level of growth," he says.

Mega Client

Founded in 2009 as a UHNW performance reporting, and data aggregation software company, Addepar has steadily pivoted towards high-net-worth RIAs, and expanded its business into portfolio management, an alternatives marketplace and a nascent data analytics play.

In the past 12 months,  Addepar has certainly made inroads among the largest RIAs. At least 20 of the Top-100 RIAs, as rated by Barron's, use its software.

Today, Addepar sells its portfolio management, performance reporting and data aggregation software to 600 RIAs, family offices and banks, up from 400 RIAs last March, a 50% increase.

It also just landed a potentially mega client in Focus Financial Partners' global subsidiary Connectus Wealth Advisers, and announced the launch of a new European headquarters in Edinburgh, Scotland. See: Focus Financial launches house-brand RIA and its shares spike past $45 on scale play, but will the 70 partner firms accept the change?

Sealing the deal

Major clients like Connectus have also begun to win the firm new business.

Connectus provides Focus founder, CEO and Chairman Rudy Adolf's $200 billion AUM roll-up with a way to obtain cheaper revenue growth abroad, as new entrants like Toronto-based CI Financial push valuation multiples ever higher, domestically. See: Focus reloads for M&A with $500 million debt raise.

The fact that Focus knew Addepar inside out sealed the deal, says Focus co-founder, board member and chief operating officer Rajini Kodialam, in a statement.

"As Connectus expands ... it's essential we collaborate with an industry leader.  Addepar's reputation and platform allows us to attract and serve a broad range of end clients, from high-net-worth to family office clients, globally," she explains.

Focus did not respond to a request for comment, and Addepar declined to break down its client-base or AUA by industry segment, but $7.2 billion AUM Bartlett Wealth Management is a notable RIA client. See: Woman CEO who grew her RIA to $7.2 billion of AUM yields to a new male CEO, but another woman in the wings is gearing up for its second century when female investors will dominate.

The Covid-19 pandemic work-at-home prerogative also boosted Addepar.

Large RIAs stuck on legacy software got a major jolt in the work-from-home era, which benefited the software maker, especially given its high technology brand, says Angie Herbers, founder and managing director of Austin, Texas-based RIA consultancy Herbers & Co., via email.

"The pandemic has expanded the need for all financial services firms to modernize their technology, and Addepar's image is certainly a driver," she says.

Strongest year

Addepar is also saturated in capital after its $117 million Nov. 2020 VC raise, according to the firm.

"We’ve got no plans for another equity raise at this point. Addepar is in a very, very strong capital position," says Poirier.

"To put it in perspective, it took Addepar nine years to get our first trillion on the platform, two to get our second trillion [last August] … and we've added another half a trillion," he continues.

"[We] had our strongest year on record in 2020 across all key metrics-- client revenue growth, user and firm engagement, and connectivity across our community," he says.

Indeed, stripping out market appreciation of roughly $200 billion, using a 60/40 equities to bonds split and the S&P 500 and the Vanguard Total Return Bond Fund (VBMFX) as benchmarks, Addepar added roughly $300 billion in net new client assets under its administration -- a 15% increase, equating to roughly $10 billion a week.

The company's June 2020-launched alternatives marketplace has quickly picked up steam, too.  A quarter, or 150, of the company's clients are using it to buy and sell alternative assets and to tap StoneCastle for high-yielding cash accounts. See: Addepar extends business model. from software maker to player in the investments business -- a secretive project 10 years in the making.

Addepar declined to answer whether it has turned a profit, stating only that both its board and its investors "are very pleased with trajectory." The company has raised $322.8 million to date.

Poirier adds that he has no intention of selling the firm, despite a "substantial" increase in inbound interest.

Eurovision

Addepar's choice of Edinburgh as its European base of operations is predicated partly on the fact that several of its current staff have previously worked in the Scottish capital in technology roles.

The company had little choice but to open a new base outside the United States as a result of its burgeoning international business, according to Poirier.

Addepar now sells its software to advisory practices in over 25 countries as a result of inbound interest, but it will soon flip its model to actively selling it abroad, he explains.

"Turning Addepar into a global business has always been our plan. Why now is we now have like a really strong muscle for continuing to expand the business in the US, so we're certainly not trading off US growth to go stand up a presence in Europe," he adds.

The company already supports multi-currency transactions, and aggregates data from a large network of global banks and custodians.

Yet Pearson remains unconvinced.

"[It will] most likely be a sideline business with a few key accounts. Supporting multi-currency transactions correctly is hard. Many systems say they do, but they don't do it correctly," he asserts.

Addepar's global ambitions are more than a glamorous sinecure. "Addepar knows the market is expanding globally ... [and] expansion is rarely a sideline," Herbers counters.  

Addepar continues to advertise positions domestically and in Scotland, with 15 research and development roles the primary focus in the latter.

In any currency, Addepar's investors may be rewarded in a big way, Sokolin says in his email.

"Fintech checks are hitting the $100-250mm size routinely there days and SPACs are hungry for targets. If [Addepar] generates $100mm+ in revenue, there’s a good chance for liquidity."

Of the portfolio management big three, Tamarac leads adoption on the Barron's list with 32 RIAs, SS&C follows with 29, and Orion lists 25, according to a September 2020 tally. See: Addepar now counts 20% of Barron's Top-100 RIAs as clients, but Tamarac, SS&C Black Diamond and Orion all retain an edge.