JD Vance joins MAGA backers, including mentor Peter Thiel, to raise $30 million for Vivek Ramaswamy's RIA rollup startup

JD Vance, who competed with Vivek Ramaswamy to be Donald Trump's vice presidential running mate, is now joining forces with his former GOP rival to take on the RIA roll-up industry. 

Vance, 39, who won the vice presidential sweepstakes, is part of a $30 million investment round in Ramaswamy's new RIA rollup. Vance's mentor Peter Thiel and other MAGA Silicon Valley heavyweights are also investors.

Ramaswamy's startup umbrella company, Strive Enterprises, reported the $30 million round in a July 23 release that most media outlets glossed over. But the deal raises significant questions about Vance's participation now that he is Trump's running mate. 

Vance's controls Narya Capital, a $120 million fund that more than doubled its total investment in Strive by joining the July 23 series B raise. Thiel, who has spent millions of dollars on Vance's political career, as well as Trump's, is also involved with Narya.

Ramaswamy, 38, the majority owner of Strive, was ruled out as a potential vice presidential candidate in March, but remains under consideration for a position in a potential Donald Trump cabinet, according to the Guardian. 

Ramaswamy stepped down as Strive's executive chairman in February a year ago. But so far, no word on how Vance will manage his business and political interests or the potential conflicts that might emerge. 

After winning the presidency in 2016, Trump was widely criticized for refusing to divest his interest in the Trump Organization or his string of golf courses, as previous presidents have done.  

Insider track

Ramaswamy's high profile means Strive's RIA has a fighting chance in a hotly competitive industry.

But basing a business strategy on ideology could have drawbacks, says Andrew Besheer, Principal of Albany, NY consultancy, Besheer and Associates, via email. See: Vivek Ramaswamy sells anti-ESG to RIAs to hit quick $1 billion.

“For an asset manager to successfully launch an RIA they need to be serving a market that aligns well with their investment products and market thesis. Strive certainly has a ready-made market that’s been created by its political activities,” he says.

“Will enough people with real wealth entrust a large enough portion of their portfolios to drive real profit? Or will this end up serving small, purely ideologically motivated, investors? Time will tell,” he adds.

If Strive's first two years are any indication, the ant-squish niche is vibrant. Not only has the firm grown to $1.6 billion, it added nearly 50% of those assets just in 2024. It reported $1.08 billion of AUM as of Dec. 31, 2023.

Still, Strive CEO Matt Cole says RIAs will not have to pass a political ideology test to do business with Strive.

“Strive as a business and our wealth management segment will be mission focused. We're interested in roll-up discussions with teams and RIAs that believe in excellence, innovation, meritocracy, and capitalism. 

"We don't care about an advisor's race, gender, political affiliation, religion or sexual orientation.”

Thin revenues

Strive may need the higher profit margins that an RIA affords, says Alan Moore, co-founder of Bozeman, Mont., RIA network and outsourcer, XY Planning Network. See: XYPN an RIA-making machine.

“It would be interesting to look at the expense ratios of their funds to estimate what revenue $1.6 billion of assets actually produces," Moore says, via email.

"At a weighted average of 20 bps – I haven't actually done the weighted average math, just picking a number between their S&P 500 and Dividend fund expense ratios -- that would mean they have about $3.2 million of revenue,” he explains.

“That's great for your first 18 months, but it's also been an amazing bull market and outside investors means you have to scale incredibly fast to meet their expectations. 

"I can't speak to their intentions, but if I had to guess, they are hoping to make 1% instead of 0.2% on the assets, hence the capital raise.”

Slippery slope

There are plenty of failed attempts to break into the RIA industry that Strive will have to learn from to succeed, Moore adds.

“Moving from being an ETF provider to offering comprehensive financial planning and investment management directly to clients is a major shift and will require a culture transition to be successful,” he says.

"The financial return on RIAs is hard to ignore, as we are a very profitable industry with high client retention. However, I do find that companies who don't actually know our space think that achieving these financial goals is as simple as launching an RIA. 

"They approach it [with] an ‘if you build it, they will come’ mentality, and don't really understand how difficult it is to recruit, train, and retain advisors, acquire new clients through organic means, and to actually scale an RIA," he says.

Deep pockets

Another potential drag on Strive growth is that $30 million doesn't go too far in the RIA M&A market.

Yet Cole assures that Strive will be able to tap the deep pockets of its investors as more capital becomes necessary.

“We have ways to finance a roll-up beyond the $30 million capital raise,” he says.

Indeed, the deep pockets backing Strive's Series B round include: 

– Financial services giant Cantor Fitzgerald, an international investment banking concern, and, separately, at least in Strive's seed round, Cantor chair and CEO Howard Lutnick.

– Deason Capital Services, a private family office that manages the fortune of Darwin Deason, a billionaire businessman who founded Affiliated Computer Services in 1988, and sold it to Xerox for $6.4 billion in 2010. 

– Private equity shop Morris Industries* in Lexington, Kentucky, headed by CEO Nathaniel “Nate” Morris, who has ties to Republicans George W. Bush and Kentucky Sen. Rand Paul. 

–Several “prominent” undisclosed entrepreneurs are also investors, according to a Morris Industries release. 

Access 

Vance also gives Strive greater access to an even bigger pool of MAGA influence, including Chase Koch, son of libertarian tycoon Charles Koch.

Thiel also funded Vance's senatorial campaign and first introduced him to Trump, the Guardian reports.

Strive already counts a number of vocal billionaires as early-stage investors, too, including hedge fund manager Bill Ackman and serial RIA entrepreneur Joe Lonsdale.

“They are talented guys and I expect [they] will find success," says Lonsdale, who passed on the latest round to avoid competing with RIAs that are his investments and software customers. 

"Right now, I am not myself building or investing in any single RIA, but instead partner with many as a founder of Opto Investments, Luminary and Addepar,” he explained, via email.

Unapologetic capitalism

Indeed, like the ETF division, the Strive RIA sees a niche of the non-squish variety among investors that can execute a revolution of like-minded.

“We believe in Strive’s potential to revolutionize the wealth management industry,” says Morris, in a release.

"Many Americans are hungry for an authentic and unapologetic embrace of capitalism, meritocracy, and innovation, and that’s what we strive to deliver.”

Though Strive has yet to file its SEC ADV, the wealth firm is well underway vetting RIA M&A prospects and “wealth management teams,” Morris notes. 

“As Strive continues to expand, the company is actively evaluating potential acquisitions of independent Registered Investment Advisors (RIAs) and wealth management advisor teams to join their dynamic growth,” he says in the release.

Cole says he intends to tap into Cantor's experience, its “deep institutional relationships and proven market expertise,” according to the release.

Cantor has deep experience with the RIA rollup business – including its pitfalls.

Cantor launched its 2013 roll-up, Cantor Fitzgerald Wealth Partners, which grew to $5 billion of assets in its first few years, but is now listed in filings as ‘terminated’ – it last filed an ADV in 2017 – despite still being listed on Cantor's website.

Fee ranges

Strive's ETF fees average 0.24% on an asset-weighted basis, and they range in cost from 0.05% to 0.49% at the high end.

They are cheaper than almost all other comparable ETFs, although roughly twice as expensive as similar apolitical funds, according to a mid-2023 Morningstar report on the anti-ESG market.

In contrast, the average ESG U.S. stock ETF charges 0.18% in annual fees on an asset-weighted basis, according to Morningstar.

*The initial July 23 release detailing Strive's Series B raise omits Morris' investment. Morris issued a separate July 25 release confirming its investment.