College-savings startup U-Nest just added $1.5 million to its seed round. Its founder explains why she's hoping to one day be partnering with the type of Wall Street firm she started at.
- U-Nest just nabbed an additional $1.5 million in seed funding from Northwestern Mutual Future Ventures.
- Ksenia Yudina, founder of U-Nest, left her job as a financial advisor at Capital Group American Funds to launch a college savings fintech.
- U-Nest is an app-based fintech that offers users the ability to set up a state-sponsored 529 college-savings plan on their phones. Yudina said that the money raised will go to marketing and hiring.
- U-Nest will focus on engaging a broader customer base and building awareness of the product among wealth managers who Yudina hopes to partner with in the future.
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Big banks may want to call themselves tech companies, but it's often said that innovation is hard to do at legacy financial institutions, where regulation and shareholder accountability can limit tech investment.
And those limitations are often cited by those who leave their Wall Street jobs to launch fintechs.
Ksenia Yudina, founder of U-Nest, left her job as a financial advisor at Capital Group American Funds to launch a college-savings fintech. And she just nabbed an additional $1.5 million in seed funding from Northwestern Mutual Future Ventures.
U-Nest is a fintech that offers users the ability to set up a 529 college-savings plan on their phones. 529s are state-sponsored education savings plans that parents can set up for their kids with tax benefits that vary by state.
Capital Group American Funds is the largest provider of 529 plans in the US, according to its website. But as a financial advisor, Yudina saw how hard it could be to set them up for her clients.
"I saw how important it is for people to save for college, but how inconvenient and convoluted and time-consuming the process was," said Yudina.
And it's a pain point for the advisors too, she said.
"A lot of financial advisors struggle with 529 plans," said Yudina. "They're of tremendous value to the consumers, but the commissions are very low and the plans involve a lot of paperwork and education for the consumers."
So in 2018, she launched U-Nest, which has now raised $3.5 million in seed funding to-date. The exact amount invested by Northwestern Mutual was not disclosed, but U-Nest raised $2 million in October last year from investors including The Artemis Fund, Draper Dragon, Unlock Ventures, and Vested Ventures.
"I think it was really her story that resonated with me at the beginning, which is a clear deep subject-matter expertise in this with her experience at American Funds," said Craig Schedler, managing director, Northwestern Mutual Future Ventures.
"The current 529 plan environment is very difficult for most consumers to navigate," said Schdler.
Investing in engagement
Yudina said that the money raised will go to marketing and hiring.
"The plan is to extend our outreach and engagement program to new audiences," Yudina said.
First, U-Nest will focus on building out its customer base. It's targeting millennial parents, many of whom understand the burden of student debt and are now starting families of their own.
Yudina is also focused on engaging with traditional financial services players like wealth managers, who she hopes will ultimately partner with U-Nest in white-label and licensing deals.
"I believe the way forward for us to partner with those financial institutions and financial advisors is to white-label our solution or license our technologies to enable and simplify this process," Yudina said.
Yudina will also look to grow the customer support, compliance, branding, and design teams. U-Nest currently has 10 full time employees, and six outsourced developers.
Challenges of relying on third-party providers
Feedback on the app has been generally positive, from investors and other beta users, Yudina said.
One of the challenges, she said, was relying on third-party providers that enable certain features of the app.
This is common in the startup world, where B2B players like software-as-a-service (SaaS) companies provide underlying infrastructure.
"Sometimes things happen that are outside of your control, but you need to rely on those third-party providers," said Yudina. "You cannot build everything yourself from scratch."
Yudina didn't disclose which providers U-Nest has partnered with.
And it's a valid concern. Digital bank Chime experienced outages last October due to an issue with a third-party processor, which left customers unable to use their debit cards or access their accounts.
Buzzy startups like Plaid, an API for startups to link into customers' bank accounts, and Marqeta, a card issuing platform, have received unicorn valuations and waves of VC cash. This week, Visa announced it would acquire Plaid for $5.3 billion.