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Fintech Startups Vie for Funding at ScratchWorks Season 4

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What You Need to Know

  • The fintech companies Benjamin, Andes Wealth Technologies and College Aid Pro pitched to the ScratchWorks investors.
  • The investors included Marty Bicknell, CEO of Mariner Wealth Advisors, and The Colony Group’s CEO, Michael Nathanson.
  • Scratchworks gave Benjamin and College Aid Pro the thumbs-up but passed on Andes Wealth Technologies despite an impressive pitch.

After an 18-month pandemic delay, ScratchWorks, the wealth management industry’s elite fintech accelerator, finally debuted its Season 4 at the Barron’s Advisor Independent Summit in late March in Louisville, Kentucky.

Three emerging fintech companies took the stage live to make their pitch — “Shark Tank” style — to the luminary investors of ScratchWorks, hopeful for industry fame, valuable connections and most importantly, cold, hard cash to fuel their growth. No doubt these tech entrepreneurs were humming Pink Floyd’s “Money” as they prepared for the main stage.

ScratchWorks connects innovative tech startups with wealth management leaders to advance the digital transformation of the financial services industry. Finalists pitch their companies to a panel of RIA executives with deep pockets and hundreds of billions of dollars in collective assets under management, with the goal of securing an investment for their company. 

In the format, finalists have 15 minutes to make their case to the ScratchWorks investors to get a deal — making that pressure-packed stage time likely the most important 15 minutes of their fintech careers.

Season 4 featured a subset of ScratchWorks’ famous investors, including Marty Bicknell, CEO of Mariner Wealth Advisors, and The Colony Group’s CEO, Michael Nathanson. The ability of the ScratchWorks investors to transform the trajectories of fintech startups can be quite dramatic,  most notably in the case of Season 1 graduate Robert Sofia and his marketing automation platform, Snappy Kraken. 

Sofia turned a $100,000 investment from Bicknell and his co-investors into a multimillion-dollar raise from Bicknell just a few months later to make Snappy Kraken a household name in the advisor marketing technology sector.

Benjamin

Up first was Matt Reiner, CEO of Benjamin, an AI-driven workflow automation engine and business support system that automates over 100 common workflows and tasks to bring efficiencies, scale and cost savings. Through Benjamin’s advanced design, advisory firms can automate much of the client journey from streamlining the prospecting process, simplifying onboarding, coordinating meeting scheduling and preparation, as well as ongoing client engagement and relationship management by synchronizing the RIA and custodian tech stacks.

Reiner opened with a request of $500,000 in exchange for 10% of the company, a valuation that both Bicknell and Nathanson thought was in the ballpark for an emerging firm that had great potential to make inroads into the highly competitive advisor tech space. 

They thought, however, that $500,000 was a bit rich for where Benjamin was in its evolution. Reiner backed up his valuation with solid growth numbers, including the fact that Benjamin has a nearly yearlong streak of double-digit quarter-over-quarter growth. 

After spirited discussion, Bicknell and Nathanson made a final offer: $250,000 for 10% of the company, subject to agreement from ScratchWorks’ other investors. This offer would be a significant haircut to Reiner’s initial ask; it was clear in Reiner’s mind, however, that having Bicknell and Nathanson and the other investors in ScratchWorks as partners in Benjamin would be transformational for the company. 

After a dramatic pause that had the hundreds of advisors in the audience murmuring, Reiner agreed to the deal with a big smile and handshakes all around. ScratchWorks’ Season 4 was off to a roaring start.

Andes Wealth Technologies

Up next was MIT graduate, CFA and veteran technologist Helen Yang with her award-winning technology platform, Andes Wealth TechnologiesAndes is an integrated client onboarding and communications platform designed to help advisors deliver differentiated and personalized services at scale, incorporating behavioral finance to help advisors better manage client relationships.

Yang’s opening offer was a very rich one of $1.8 million for 6% of the company, creating a valuation of $30 million. While both Bicknell and Nathanson are big believers in behavioral finance and noted the need for better tools for advisors to work with clients, they pushed back against this high valuation.

Yang countered with some impressive industry accolades for Andes, including being recognized repeatedly by industry awards programs as  the best risk-tolerance tool. In addition, Andes’ streamlined process to develop an integrated investment policy statement that maps back to advisors’ model portfolios versus canned portfolios common in “model marketplaces,” along with innovative portfolio analytics, would be a powerful differentiator. 

She also said that she and her team were deep into negotiations with multiple enterprise relationships and that the pipeline for prospects was full.

Despite Yang’s persuasive pitch, Bicknell and Nathanson decided to pass on the deal. They did agree, however, to a formal, 1-1 demonstration of the Andes platform. 

College Aid Pro

Rounding out Season 4 was the final pitch by Matt Carpenter and Joe Messinger, the co-founders of College Aid Pro, or CAP, whose college planning SaaS platform provides students, families, and the advisors supporting them with technology, education and guidance needed to ensure a great return on the college investment.

Carpenter and Messinger also had a very rich valuation of $30 million and were asking for an investment of $3 million for 10% of the company.

“We’re here to solve the college funding problem in America,” Messinger said in his opening pitch. “Each and every year we have 3 to 4 million kids heading off to college, which means we have 3 to 4 million parents trying to figure out how to pay for college. If advisors want to reach Generation X, this is their No. 1 financial concern, so if you are an advisor in your local community who can do this, you have a great chance to build a great business.”

Through CAP, advisors can glean key insights into the affordability of college; the “sticker” price often overstates the total cost as many colleges provide merit scholarships as part of their offers. “We think we can disrupt the way families shop and pay for college funding,” Carpenter said.

While both Bicknell and Nathanson were on board with the CAP value proposition and potential, both pushed back on the $30 million valuation. In defense of that number, Messinger noted that CAP was on track for over $2 million in annual recurring revenue and had already signed up hundreds of advisors, making CAP a proven fintech platform with tremendous growth potential. 

In addition, Carpenter and Messinger said they were well on their way to rolling out a consumer version of CAP that would be a powerful lead generation tool for their advisor users.

These strong metrics for an emerging platform had an impact on Bicknell and Nathanson, as they became more attuned to the potential for CAP. After further spirited debate, Nathanson dropped an intriguing offer that again had the audience murmuring in anticipation. “Would you be willing to accept a $15 million valuation for a $1 million investment?” he asked Messinger and Carpenter.

This compelling counteroffer caught the CAP founders by surprise and led to a quick sidebar in front of the hundreds of attendees, huddling among themselves as the clock was ticking on the pitch session. After about 30 seconds of whispering, Messinger and Carpenter made a “raised eyebrow” glance to their CEO, Kevin Degnan, who was sitting in the audience, implying, “Boss, should we take it?!”

And in one of the most dramatic endings in ScratchWorks history, Degnan gave them the “thumbs up” sign and ScratchWorks closed out Season 4 in style.  

Stay tuned for ScratchWorks Season 5, opening up for indications of interest at www.scratch.works soon.


Timothy D. Welsh, CFP, is president, CEO and founder of Nexus Strategy LLC, a consulting firm to the wealth management industry. He can be reached at [email protected] or on Twitter @NexusStrategy.