United Income Acquisition Validates Approach to Purpose-driven Fintech Investments

United Income Acquisition Validates Approach to Purpose-driven Fintech Investments

By Tilman Ehrbeck

Earlier this year, we launched our investment firm Flourish with the conviction that purpose-driven entrepreneurship and technology-led innovation can create new solutions to help people improve their financial health and economic outlook. Capital One’s acquisition of our portfolio company United Income—a robo-advisor that builds personalized retirement plans—announced this week, is a tangible validation of this conviction.

United Income founder and CEO, Matt Fellowes, started the company recognizing that tens of millions of Americans near or early in retirement face an intimidating challenge: how to optimize their finances in retirement and make resources last for what nowadays often amounts to a decades-long, new chapter of life. US retirees need to decide and act on a number of complex questions. For example, when to start claiming social security, how to best sequence drawn down of private retirement and savings accounts, or what the tax implications are for the various strategies. While there has been a series of robo-advisor start-ups, they overwhelmingly focus on millenials, while the challenges for the large and fast-growing over-50 cohort remained unaddressed.

United Income’s goal was to build a front-end user interface that engages users in plain English on their goals and concerns in retirement. For the backend, they developed a sophisticated decision-engine that digests all the relevant user-specific information and optimizes outcomes across a variety of possible future market scenarios. The idea is: Understand customer’s objectives, do the complicated math, and provide them with peace-of-mind—perhaps best epitomized by the notion of bundling the various retirement income streams into one consolidated retirement payment, similar to a regular, single paycheck most Americans are used to; hence the company name, United Income.

The team’s approach and solution have clearly resonated. Since going live in September 2017, assets under management have rapidly grown to $761 million.

Capital One’s acquisition of United Income gives the company a huge shot in the arm. The Northern Virginia-based bank has the reputation of a forward-leaning incumbent, actively seeking and embracing new technologies and approaches. The acquisition will enable Untied Income to continue to evolve its offering , with Matt Fellowes running the business for Capital One.

For Flourish, Capital One’s acquisition of United Income is a tangible validation of our bets supporting purpose-driven entrepreneurs who address people’s real life problems. Matt and his team successfully demonstrated the validity of their approach, whose positive impact can now be amplified many times over with the backing and resources of one of the nation’s leading banks.

Since our start as the financial services team of the Omidyar Network, Flourish has made investments in over 40 companies across the US and select emerging markets that, similarly to United Income, leverage today’s digital infrastructure and availability of new data sources to create solutions that previously were simply not feasible.

Across Africa, we have invested in Pula, an insurtech startup that leverages the mobile payment infrastructure and satellite data to distribute and manage micro, rainfall insurance for smallholder farmers. In case of seed germination failure, farmers receive insurance payments within days, so that they can quickly replant and still catch the same growing cycle.

In alternative credit, we have invested in startup lenders, such as Indifi in India and Lidya in Nigeria, who use new information sources, such as supply or distribution chain data, to underwrite credit for micro and small enterprises—a segment that has historically been neglected by traditional banks.

Here in the US, through its FreshEBT app, our portfolio company Propel helps food stamp recipients—which amount to 40 million people at any point in time—better manage their benefits. FreshEBT pulls benefit balance information and puts it at the fingertips of food stamp recipients, so they can easily check whether their groceries bill will be covered—avoiding the awkwardness of having the transaction denied at the checkout line. This service alone has secured strong customer engagement, which Propel used to launch other services to customers—from shopping calculators to customized discounts and jobs board.

In addition, across the globe, we have invested in a series of challenger bank startups that help people better manage their day-to-day finances. Unencumbered by legacy infrastructure and high costs, they can offer better services at far lower cost to more people.

Across the broader set of investment themes and geographies, the underlying belief is the same. When startup entrepreneurs leverage today’s technological possibilities and put customers first, tangibly solving real life problems, they will create lasting positive impact and value.

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