San Francisco-based robo-adviser SigFig raised $40 million in funding, led by Eaton Vance and contributions from institutions across the industry, the online investment firm said on Tuesday.
The extra capital includes $33 million in equity financing,and $7 million in credit from Comerica Bank to SigFig through a lending facility. The capital is proof firms see a place for digital advice, said Mike Sha, chief executive of SigFig. Institutions choose to partner with robos because of the automated investment providers' flexibility and ability to grow digitally, Mr. Sha said.
"We can move a lot more quickly, we can enable them to get to market more quickly, and innovate in a much more fast-paced fashion," Mr. Sha said.
The chief executive said funding will go toward research and development, team expansion and innovation. The company designed its syndicate of investors to remain uninfluenced, he added.
"There is no exclusivity and no corporate governance," Mr. Sha said.
SigFig, which has $93.7 million in assets under management as of its latest Form ADV, focuses heavily on enterprise partnerships, and has sparked relationships with big name companies in the industry, including
UBS Wealth Management Americas and
Pershing Advisor Solutions. Cambridge Savings Bank, based in Boston, is using SigFig to open, fund and manage goals-based portfolios on the
bank's dashboard.
NEW YORK LIFE, UBS
Other investors besides lead investor Eaton Vance include New York Life, UBS, Santander InnoVentures, as well as
Bain Capital Ventures, DCM Ventures, Nyca Partners and Union Square Ventures. Though UBS formed a "strategic alliance" with SigFig, these investments do not necessarily mean a partnership. Eaton Vance, for example, does not have a current customer arrangement in place, said Tom Faust, chairman and chief executive of Eaton Vance.
Personal Capital, a hybrid robo-adviser with $2.4 billion in AUM, last week closed out a Series E funding round of $75 million from IGM Financial, which invested $50 million immediately and agreed to invest $25 million more in the next year. It is valued at $500 million. Betterment, the leading robo-adviser with about $4 billion in assets under management,
raised $100 million in March, with investments from venture capital firms. It has a valuation of $700 million.
Industry watchers say robo-advisers are in rough waters, especially with
high client acquisition costs, but these digital companies disagree. Mr. Sha said the best way to scale is by partnering with large institutions.
"That strategy puts us in a good position to reach a much larger audience, which is a big part of why we have chosen large enterprises," he said.
Mr. Faust said the evolving technology and regulatory landscape will put a spotlight on digital advice.
"It won't set in motion new trends but accelerate trends already in place," he said.
