John Rourke just sold half his company to take 'biggest shot' of his life -- combining $200 million and artificial intelligence to exploit Salesforce's supposed Achilles' heel with RIAs -- implementation

John Rourke is making a seemingly unthinkable bet against the most unassailable force in the RIA ecosystem – Salesforce.

The co-founder and CEO of Wealthbox in Providence is selling 13-years of hard-earned equity as table stakes after making his CRM No. 1 among downmarket RIAs - and second among small advisors more generally.

San Francisco private-equity shop, Sixth Street, put up the ante, a $200 million strategic investment in exchange for a majority 50%- to 60%-stake in the 63-year-old entrepreneur's company. See: Wealthbox raises $31 million after finding its groove converting Salesforce and Redtail CRM users and leaping up the marketshare ranks

That pegs its valuation at around $370 million, according to a release. 

Now, Rourke is turning right around and betting much of it on a stretch dream – dethroning, or at least denting, CRM leader Salesforce's No. 1 CRM market share in the RIA upmarket, typically, $500 million or more in assets. Se: After spending millions and getting cozy with Salesforce, United Capital is morphing, maybe big-time

“We built what we set out to build… With fresh capital on the balance sheet, we’re focused on moving upmarket, attracting top talent, integrating AI throughout our platform and operations, and continuing to have fun,” Rourke says, in an email

Spending machine

Wealthbox, however, declined to provide a thumbnail of the firm's growth. It also declined to reveal the total value of assets under its software's administration, its overall client count, headcount, and RIA client count.

And, even Wealthbox fans like Doug Fritz see a mission-impossible scenario.

“They can certainly continue to grow ... but I don’t see them becoming the Kleenex of Wealth CRMs,” says the co-founder and executive chair of Chicago, Il. consultancy F2 Strategy, in an email exchange.

“Salesforce owns 70%-plus of the larger advisory, IBD, [and] banking space ... and it will be much harder to replace them versus working with smaller, [or] new advisors, [and] breakaways,” he explains.

Salesforce, with a $257 billion market capitalization and $5-billion-plus annual R&D budget, is a spending machine.

It has yet to respond to a request for comment.

Undaunted

Yet, Rourke sees a low-capital pathway for Wealthbox to compete, because larger RIAs seek the same simplicity as the smaller firms who readily buy his software, he says. 

“Wealthbox is dismantling the ‘Salesforce CRM Industrial Complex,’ a business model built on confusion, complexity, expensive implementation, onboarding, training, and support contracts,” he says.

“We’re taking plug-and-play functionality upmarket … [and after] switching to Wealthbox, advisory firms are up and running in days, not quarters." See: How one RIA's faith in Salesforce's sophistication led to cut-and-paste hell and a major rethinking

RIA technology analysts give Rourke a fighting chance to at least win a slice of Salesforce's marketshare.

"This is Wealthbox's opportunity to take the lead and not look back," says Boston financial technology analyst Bill Winterberg, in an email exchange.

“To continue to win marketshare against Salesforce in the enterprise wealth management space, they [needed] some dry powder … [and] the spending power of this latest investment is sizable.

Scoring wins

Joel Bruckenstein, founder of the T3 Conferences says Rourke may have picked the right time to take on Salesforce with a bells and whistles strategy.

“This is a large amount of money for a CRM firm in this industry … They will need to sell a lot of software to justify the investment; but if they go vertical and horizontal, it is certainly possible,” he explains, in an email exchange.

The proof, Rourke says, is already more than trickling in. 

“Revenue growth continues apace this year, tracking toward 60% year-over-year gains once again,” he says.

Wealthbox also has wins over legacy Salesforce accounts, including: $3.9 billion AUM, Houston RIA, Avidian Wealth Solution and $50 billion AUM Roll-up Sanctuary Wealth, in Indianapolis, according to the firm.

Wealthbox has other large clients, too, including $2.9 billion AUM RIA Csenge Advisory Group in Clearwater, Fla.

Plus, if Sixth Street*, with offices just a mile from the Salesforce Tower in San Francisco, invested $200 million and put three members on Wealthbox's board, much more capital could be in the offing, says Fritz.

"It’s a great platform and I could see many ways to build upon their success … The dollars spent on this transaction may be the tip of the iceberg with continued M&A or investment to expand," he explains.

Revamp, new pricing

Wealthbox will have to contend with more than software challenges.

Its brand may yet be an unknown to many, the upmarket sales cycle is long and expensive, and it faces an entrenched army of Salesforce consultants, experts, and RIA overlay vendors. 

Rourke is undaunted. The Wealthbox minnow is in a sweet spot; whereas Salesforce's “bloated,” “sprawling,” “impersonal” software for advisors is a complacent blue whale, he says. See: Salesforce's slew of new advisor-focused CRM upgrades gets slammed, while a rival CEO says fresh changes won't 'slow the stampede' of RIAs fleeing the San Francisco giant

“After all these years, Salesforce still has an interface that only the mother of a database technician could love … [it] can take months or even years to implement, and needs a team of consultants just to make it usable. Wealthbox works out of the box,” he adds.

Yet Rourke admits capturing RIAs using Salesforce – typically those with at least $500 million under management (AUM), and more often than not, several billion – Wealthbox will have to become more like Salesforce.

Indeed, Wealthbox has already green-lit a revamp to let RIAs customize how Wealthbox works, and a new pricing scheme, adding higher price tiers to support custom options for all firm sizes, is due in October.

"Pricing upmarket will reflect value and be less expensive than Salesforce," he says.

'Core promise'

Rourke also says he's sure increased customization won't make integrating Wealthbox into an advisor's software stack a labyrinthine task.

Wealthbox will “always” be easy to use, and fast to set up, “unlike Salesforce,” he explains.

“That’s a core promise ... the experience stays clean and intuitive. We’ll be there to support firms that want more tailored functionality, without dragging them into the kind of CRM complexity that others [overlay vendors and consultants] profit from,” he says.

"Wealthbox will be the intelligence layer and operating system for advisory firms of all sizes, a system of record and a system of action ... and we have the team to deliver it," he adds.

Set in motion

Rourke has real bonafides, says Franklin Tsung, founder and CEO of BlackCrown and a growth advisor to Salesforce CRM overlay AppCrown.

Prior to founding Wealthbox, Rourke and co-founder Dan Ferranti launched Upswing CRM, in 2007, a cloud-based system for financial advisors. They pivoted in 2009 creating Bantam Live, a ‘social CRM’ app that integrated Upswing’s technology, which was then sold, in 2011, to Constant Contact, Inc. for $15 million. 

“What Salesforce lacks in ease of implementation Wealthbox does seem to pick up,” Tsung explains.

“What kills Salesforce is the cost of implementation, less the cost of licenses, [and] the consulting costs have skyrocketed."

Rourke noticed what Tsung saw, and it set him in motion.

We “came to the conclusion about a year ago that Wealthbox is in a great spot, and it's time to innovate and scale even faster by putting more capital to work," Rourke says. 

Management also “rolled over a significant chunk of equity … [and] we’re committed to the next growth phase and pursuing yet another bite at the equity apple,” he explains.

Now, "with the Sixth Street transaction, there’s a mixture of capital that’s going to the balance sheet to further build our product, infuse our operations and product with ‘AI,’ accelerate our go-to-market strategy, and hire more talent,” he adds.

Untried, untested

Yet, only some of the $200 million raised will go to Wealthbox's new war chest. 

A number of early investors* in the 2012-founded CRM shop have opted to cash out, and part of the proceeds will stay on the balance sheet to fund the often protracted enterprise sales cycle.

For all the excitement of seeing David take on Goliath, Wealthbox's customization capabilities are largely untried and untested, Tsung says.

Salesforce is dominant among the biggest, because, although costly, its software is proven, and it can do it all, he says.

"Typically, when wealth management firms reach above $500 million, they will demand greater 360 [degree] solutions* from their CRM … these demands require Salesforce," he explains.

Examples of ‘360 degree’ CRM include “deep transactional data integrations with portfolio systems, alongside firm-wide reporting of advisor performance, based on their respective net flows and billable data,” Tsung adds.

But “Wealthbox has a great brand and sound fundamentals to move upstream," he says.

Two powerful advantages

Wealthbox has more experience with customization than is commonly known, Rourke says.

“For the mid-market and enterprise segments, Wealthbox is now developing configurable building blocks and templates that firms can plug in, customize, and deploy,” he explains.

Rourke adds that Salesforce is hardly perfect at customizing.

“Salesforce builds horizontal AI tools meant to cover every industry and use-case from pharma to finance to retail. The result [is] a sprawling platform that’s powerful but often bloated and impersonal,” Rourke argues.

"Wealthbox, by contrast … sits at the intersection of two powerful advantages: vertical specialization and system centrality.

"We’re not guessing at context, we already understand the workflows, terminology, compliance needs, and rhythms of advisor-client relationships ... offering targeted customization where it makes sense, without sacrificing ... simplicity and speed,” Rourke says. 

As a result, Wealthbox can now "compete in the upmarket segment, including firms with $50 billion [of] AUM and beyond, with the enterprise-grade features and AI functionality we’re rolling out this year,” he concludes.

Rourke has proven he can beat Salesforce downmarket already, adds Tsung.

“For RIAs that demand less data integration needs, the Wealthbox value proposition would rival Salesforce,” he explains.

Playing defense

Wealthbox also has a second reason to push upmarket – defending its value proposition.

Wealthbox has benefited from a “plateauing” among its CRM contemporaries, says Winterberg.

Yet, that could soon change. A host of new entrants using ‘AI’ and modern software design methodologies can catch up fast, not to mention a wave of ‘AI’ tools like Jump, Zocks, Zeplyn and FastTrackr, which encroach on traditional CRM use-cases.

The AI tools are “the largest threat to the CRM category writ large,” says Fritz.

"We don't see these necessarily supplanting CRM, [but] they do blunt the traditional use-case, and will continue to shake up the ‘advisor experience’ category for years … [it's] a strategic opportunity, if Wealthbox leans in, or an additional headwind."

Zombie decline

Rourke concurs that AI creates wildcards, but he believes that AI could be a Wealthbox trump card.

“There are still zombie CRMs stumbling around ... I expect the market to get much more dynamic as AI features and products - including those from Wealthbox - begin to create new ways for firms to manage clients and collaborate,” he says.

"In CRM software, specifically, AI will change how advisory firms [operate] ... That shift creates real opportunity for Wealthbox ... We’ve already begun redesigning Wealthbox with an AI-first approach, and this evolution will become increasingly visible," he explains.

"[AI] is in our culture, operations, product roadmap, and strategy - and now it's bolstered by the new capital,” he adds.

Indeed, Wealthbox just released the first fruit of its ‘AI’ spending, a July 23-launched a note taking tool.

It is the first 'component' of a series of ‘AI’ upgrades to Wealthbox's client interaction tools, according to a release.

The gamble is also the culmination of Rourke's 40-year career, not least the 18 years that he's spent building and selling CRM software.

"If this is my biggest shot ... I’m still on target ... As the lyric goes, ‘the wheel is turning, and you can’t slow down.’” 

* Wealthbox raised two seed rounds of $1.5 million and $2.5 million in 2013 and 2014, respectively. It raised $6.25 million in a 2017 ‘A’ round, and a further $31 million in a 2022 ‘B’ raise.

* Sixth Street manages approximately $115 billion, and its portfolio includes AirBnB, Real Madrid, and Spotify.