Why We Invested: Fortunately
By Michael Marquez
A robo-advisor for the masses
Typically we invest in seed stage companies that have been around long enough to at least have an MVP (minimally viable product). But we funded Fortunately earlier because of the market opportunity we see that aligns with our investment thesis.
We were introduced to founders Seth Burstein and Gerad Suyderhoud through a mutual connection whom we have co-invested with in the past. We were immediately intrigued by their vision to build a robo wealth advisor for the masses that would give the type of financial advice typically only available to the uber wealthy.
By leveraging data and technology, Fortunately would go after a significant consumer segment that’s largely ignored by the world of wealth advising: individuals with a net worth of less than $5M a year. With their automated approach, they would even be able to provide helpful advice to those with net worth of $1M, a segment of the market that is not serviced by at all by wealth advisors.
Automation expands the market
We’re always looking ahead to find the virgin ground where technology—specifically, data technology like AI and deep learning—has yet to infiltrate.
We’ve seen a lot of progress in fintech in recent years, but we always suspected bigger opportunities would emerge.
Companies like Wealthfront successfully reduced the human labor needed to construct simple stock portfolios by developing algorithms based on rules they establish. Consumers, in turn, have gotten used to algorithms recommending a stock mix based on factors like income, age and risk tolerance.
While we’ve seen this for years with stocks and equities, we haven’t seen it bleed into the other important financial investment decisions a family makes. Things like:
- How much should we save for retirement and our kids’ college?
- What kind of mortgage is right for us?
- What kind of life insurance should we buy?
- Should we have disability insurance?
- How could future events impact all of these decisions?
For folks higher up the income bracket, there are questions about estate planning and tax strategies, too.
This is where Fortunately comes in.
A robo wealth advisor for the masses
Fortunately started with the low-hanging fruit of mortgages and life insurance—two things families in the mid-range almost all buy without the help of a wealth advisor. They then added some simple planning tools for emergencies and a college fund.
The system can help people decide if and how they should:
- refinance a mortgage;
- invest in more life insurance;
- move money into an emergency fund; and
- start saving for your kids' college.
In the future, they plan to layer on estate planning and tax strategy—all of the standard types of services that super-wealthy people get with a traditional brokerage.
Fortunately is tapping technology to go after a significant non-serviced market.
These are the families that wouldn’t get very far if they called up a traditional brokerage firm for advice, because those firms are focused on clients in a higher income bracket.
With its actuarial model, though, Fortunately has created what’s essentially a self-serve wealth advisory. The customer answers some questions and immediately gets answers that are relevant to them.
We also were intrigued by the founding team’s unique combination of experience.
Burstein and Suyderhoud are both serial entrepreneurs who founded and operated their own companies. They bring a mix of technical know-how (Suyderhoud is a data scientist and former chief technology officer for fintech companies) and business experience (Burstein led operations for prior companies).
In addition, Burstein is an experienced actuarial analyst. He’s trained in gathering vast amounts of data to help predict the future.
Together, they can develop complex rule-based systems based on massive tranches of data—what they collect from users and broader economic data they cull—and put that into an interface that’s easy for consumers to understand and use.
As we’ve written before, we look for companies that are creating a data moat—collecting data nobody else has that adds to the company’s value as more is collected. That’s exactly what happens with Fortunately.
As more people use the system, Fortunately gets more and more relevant and reliable.
Over time, too, Fortunately will develop a powerful competitive advantage of knowing what data users find most helpful in making their financial decisions. They’ll be able to double-down on those areas, staying ahead of competition.
Fortunately can leverage this data for unique insights on future product development as well as key strategic partnerships to augment their own build efforts. This allows them to keep their advice focused on the most pressing needs of their customers.
As we have done in the past with our earlier investments/incubated companies, we’ve embedded Morado partner Henry Sohn alongside the Fortunately team to provide support while they get started—everything from product development and recruiting to go-to-market and fundraising.
We are excited to partner with Fortunately at this early stage as it not only demonstrates Morado’s ability to invest in companies throughout all critical stages of early company formation but also keeps our skills sharp on the changing needs of launching new companies in the ever evolving world of technology start-ups.