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Industry Spotlight > Broker Dealers

Betterment Snags Another $100 Million in Financing

By Bernice Napach

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Betterment has announced its biggest round of financing yet. The largest independent robo-advisor, with nearly $4 billion in assets and more than 150,000 customers, has just closed on a $100 million round of funding led by the Swedish investment company Kinnevik. Other participants include Bessemer Venture Partners, Menlo Ventures, Anthemis Group and Fransciso Partners, which are all previous investors in the company.

The latest round of financing is almost as large as the $105 million Betterment had raised previously in four other rounds of financing.

Jon Stein, Betterment’s founder and CEO, told ThinkAdvisor the new financing “signals that more charges are afoot, more development is coming, especially for advisors.”

He said Betterment will use the money “to build out more and better advice products” in its institutional platform for advisors as well as new products in its 401(k) platform, which launched in January.

Betterment wants to build “more personalization and customization” into client accounts and into dashboards for advisors, Stein explained. “We want to be our customers’ central relationship and … ultimately our advisor clients’ central relationship,” said Stein, referring to the firm’s two sets of clients – individuals and advisors.

Betterment currently has 200 firms as clients of its institutional platform. The exact number of advisors was not disclosed.

Betterment has been adding services, products and assets steadily since its founding in 2008 by Stein and Chief Operating Officer Eli Broverman and official launch in 2010, including:

  • Betterment Institutional, its platform for advisors, introduced in late 2014 in partnership with Fidelity, which left about a year later to start its own robo-advisor service
  • Betterment RetireGuide, introduced in April 2015,  to help investors build a  customized savings and investing plan for retirement
  • Betterment for Business, a 401(k) platform launched earlier this month as a turnkey service that includes personalized investment advice for all plan participants
  • An aggregation tool for all client assets including assets not invested in a Betterment account, also introduced in March.

Since January 2015, Betterment has tripled the number of its customers from 50,000 to 150,000 and more than tripled its assets, from $1.1 million to $3.9 billion, making it the largest robo-advisor in the business.

The latest round of financing – the fifth for Betterment – is not only its largest but the first round that includes Kinnevik, whose contribution accounts for more than half the $100 million, according to Stein.

“Kinnevik shares our vision of building a technology-driven financial services company that customers love,” Stein said in a statement. “From our first meeting, it was clear that we shared the same values of what a modern-day financial company would look like.”

Kinnevik CEO Lorenzo Grabau, in that same statement, said the investment firm it was “delighted” to partner with Betterment’s “entire team and existing investors to support the company’s long-term growth.” He added that “Betterment shares many of the principles that have made other Kinnevik investment companies successful: a mission to make valuable digital services available and affordable to all, a true entrepreneurial spirit, the pursuit of continuous technical innovation, and a belief in building customer-centric businesses that contribute to their communities. Everyone should have access to unconflicted and low-cost financial services that enable them to reach their financial goals.” 

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