Investors Snap Up Online Financial Advisers
Startups Get Lofty Valuations From Venture-Capital Backers, Who See Tech-Stock Appeal
Silicon Valley’s latest passion: roboadvisers.HT: Ritholtz@Bloomberg
Investors are pouring hundreds of millions of dollars into these young companies that provide automated online financial guidance.
The startups offer portfolio-management tools for less than what traditional brokers or advisers charge. Although the firms are still startups and have yet to generate substantial revenue or profit, they are fetching lofty valuations as investors view them more like Internet companies than as conventional financial-services firms. That has some concerned about unrealistic expectations for earnings down the road.
Roboadvisers took in $290 million in venture-capital funding last year, according to CB Insights, double the total in 2013 and more than 10 times the amount invested in 2010.
Recent fundraising deals have given some of these companies values of at least 25 times revenue, mirroring the enthusiasm investors have shown for firms such as car-service app Uber Technologies Inc. that have upset established industry players.
Online adviser Betterment LLCcould be valued at more than $500 million in a future fundraising, though the investment talks are still in early stages, people familiar with the discussions said. Wealthfront Inc. last year raised $64 million at a $700 million valuation, and Personal Capital Corp., raised $50 million to value it at $250 million, people familiar with those deals said.
The new breed of advisers is just beginning to win over customers. At their current size, the firms each generate $10 million or less in annual revenue, people familiar with their operations said....MORE
