Wealthfront Said to Be Raising $30 Million Led by Index

Mar 25, 2014 11:32 am ET

(Updates with Betterment talks in fifth paragraph.)

March 25 (Bloomberg) -- Wealthfront Inc., an online financial advisory firm, is in talks to raise about $30 million in a round of financing led by Index Ventures, according to people familiar with the situation.

The fundraising, which also includes new investors such as Ribbit Capital, is at least two weeks away from closing and final terms could change, said the people, who asked not to be identified because the discussions are private. The Palo Alto, California-based company is set to be valued at about $300 million, said one of the people.

Online financial startups have become a popular venture capital category in recent years, with new companies specializing in peer-to-peer lending and mobile payments springing up to challenge banks and credit card companies. In November, LendingClub Corp. received a secondary investment that valued the largest U.S. peer-to-peer-lender at $2.3 billion. Mobile finance startup Check Inc. raised $24 million in September.

In 2013, financial-services startups attracted $550.7 million, twice as much as the prior year and the most since 2007, according to the National Venture Capital Association.

Betterment Funding

Betterment LLC, an online investment company, is also in funding talks, according to people with knowledge of the situation. The New York-based company, which previously garnered around $13 million from investors including Bessemer Venture Partners and Menlo Ventures, is trying to raise another $30 million, said one of the people, who asked not to be identified because the discussions are private.

Andy Rachleff, Wealthfront’s executive chairman, didn’t return requests seeking comment. Amy Sezak, a spokeswoman for Index Ventures, didn’t return a call for comment. Joe Ziemer, a spokesman for Betterment, declined to comment.

Wealthfront, founded in 2008 by former venture capitalist Rachleff, was earlier named KaChing and billed itself as a investor talent discovery service. The company, renamed Wealthfront in 2010, now uses software to balance investors’ portfolios among different asset classes, mostly through index funds.

The startup targets technology executives in Silicon Valley who are looking for an alternative to traditional financial services. The minimum investment is $5,000, and the fee is 0.25 percent of assets per year. That compares with the $1 million minimum and 1 percent-plus fee of a typical wealth manager.

Wealthfront has raised $30 million in the past from investors, including Greylock Partners.

--With assistance from Ari Levy and Peter Burrows in San Francisco.