TurboTax for financial planning
Alexa von Tobel sold LearnVest to Northwestern Mutual on March 25, 2015, for about $375 million, five years after launching.
“And on our 5th birthday, on March 25th, 2015, sold the business to Northwestern Mutual for about $375 million.”
Alexa von Tobel sold LearnVest to Northwestern Mutual on March 25, 2015, for about $375 million, five years after launching.
“And on our 5th birthday, on March 25th, 2015, sold the business to Northwestern Mutual for about $375 million.”
LearnVest's plan never changed: start with free content to build an authentic brand and audience (a free newsletter in 2008), then add tools (a budgeting app), then advice. Each stage was an extension, not a pivot, with the company following its customers into what they wanted next.
“So we started, it was, the business plan was always the same. It was content, tools, and advice. And I started it out of my own savings. So we started with content because back in 2008 in New York City, I actually founded the company in 2007, you could do a free newsletter and just kind of get going. And so we started creating a brand, we started trying to talk to our users and just have a really authentic voice”
Steal thisBuild audience with free content first, then layer tools, then high-value advice as you learn what customers want.
The financial-advice industry pretended to give advice free but charged heavily on products, costing someone with $100,000 around $2,000 a year. LearnVest flipped it: a transparent flat $500/year for unlimited advice and no product sales, which von Tobel says turned the industry on its head.
“The industry used to pretend to give advice away for free but then charge you deeply on all the products that they would give you. And all those fees would actually be pretty material. So if you had $100,000, you were paying $2,000 a year for advice. And that didn't always feel good. People were very distrustful. And so, we just said, flip it over, make it $500 for the year to get access to unlimited advice and we'll sell no products.”
Steal thisIn an industry that hides fees inside products, win trust by charging one transparent flat fee and selling nothing else.
By acquisition LearnVest had about 2.5 million signed-up users, roughly half a million who linked their full finances, and about 100,000 paying customers, all built without spending even $1 million on advertising.
“we didn't ever spend on advertising. We, I think by the year we got acquired, we hadn't even spent $1 million on advertising. It was really old school. We were very focused on like, let's, let's go and find customers through business partnerships and relationships and creating content.”
Shaan estimated LearnVest did under $10M in revenue, making the $375M price a huge multiple. Von Tobel says revenue was much higher and the real value was ~8 patents on cash-flow-based financial planning software that didn't previously exist, despite 78% of the country living paycheck to paycheck.
“So, we had about 8 patents on our software. We built cash flow-based financial planning software, which didn't exist, which is really silly if you think about it. Most of the financial planning software out there was focused on helping people who are quite wealthy think about how to build more wealth, but it didn't have to ever net, can you pay your bills? But for 95% of the country, right now, 78% of the country lives paycheck to paycheck.”
Von Tobel describes herself as a recession entrepreneur who always lived as if there was no extra money, started by spending her own savings, and kept LearnVest near profitable even after raising $35M, holding ~$45M of cash at acquisition.
“My roots, first of all, are like, I'm naturally, you know, very, very frugal, very scrappy. Every dollar, every dollar we started spending was my own money, um, in the early days that I started the company up. And so that was, and I'd read a few different founders saying that that's the best way to be a founder. And I, I lived it because I felt like it was the right way to run the business.”
Steal thisOperate as if money is scarce even after raising; spending your own cash early instills the discipline that keeps you near profitable.
Despite ~$45M cash and a growing business, von Tobel sold because mission mattered more than ownership: signing up only 40 households a day was a slog, while Northwestern Mutual's 8,000 advisors could take the platform from 100,000 to 5 million families fast.
“Um, but I remember thinking to myself, oh my goodness, Northwestern Mutual has 8,000 financial advisors that passionately care about the mission in the same way I do. That can actually go and use this platform to get to more families faster. And if I really believe in our mission, that's probably the right thing to do actually for this business is if you could tell me that I could go from 100,000 to 5 million in a short period of time and like guarantee that that would happen, like that actually is a better use of what I built.”
With several acquirers at the table, von Tobel says the CEO's job was to gather every opportunity and bring them to the board unemotionally, presenting each path rather than deciding alone. She didn't make her own call until the morning they signed, given she was deciding on behalf of ~150 employees and hundreds of shareholders.
“My job was actually to go get all of the opportunities and unemotionally bring them to the board and to say, here are all the different paths that we can take forward. And then the board came together and made a decision of what we thought was best for us. Um, and I actually waited until that day, which was the morning that we signed, to make my decision because my job was gathering all of the different opportunities to bring them to the board and say, here's what we have in front of us.”
Steal thisWhen selling, separate your role: gather and present every option to the board unemotionally before forming your own opinion.