Betterment, a “robo-adviser” MBA start-up deploying algorithms to aid investors, has raised $100 million of equity — valuating it at $700 million.
Jon Stein founded Betterment in 2008, a year into an MBA degree at New York’s Columbia Business School.
“Our goal is to become the central financial relationship for our clients,” the chief executive said.
Automated investment start-ups have blossomed in the US with costs that are considered just a fraction of what a human investment manager would charge. Betterment has around $4 billion in assets under management.
The new fundraising, led by Kinnevik, a Stockholm investment group that has backed Zalando and Rocket Internet, pushes up Betterment’s valuation from $440 million.
Betterment is part of a wave of fintech ventures securing multi-million dollar valuations to have come out of top global business schools. These include TransferWise and Zopa of INSEAD, SoFi and Nutmeg of Stanford Graduate School of Business, and WorldRemit of London Business School.
“A number of students are launching start-ups in fintech, from peer-to-peer lending to 'robo-advisers',” Antoinette Schoar, professor of entrepreneurial finance, at MIT Sloan School of Management, told BusinessBecause.
Robo-advising usually sees investors fill out online forms detailing their risk appetite. Software then creates a portfolio and automatically rebalances it with the aim of maximising profit.
Deloitte, the professional services firm, estimates that algorithms could secure assets under management of $7 trillion by 2025, up from around $100 billion today.