When? Ankur Nagpal Teachable has sold for a quarter of a billion dollars, he feels lucky. Then he quickly felt lost as he tried to navigate the financial systems of a country he wasn’t born in and learn the institutional language that often only the historically wealthy speak fluently.
It would be a few years of self-employment and later building a venture firm before Nagpal returned to that moment as one of the early catalysts for his newest startup, Ocho. The company, which is going public today, wants to make it easier for business owners to set up and manage their own 401(k) retirement accounts.
Personal finance is hard, and it’s a tale as old and hard to break as time. And while Nagpal agrees that there’s no “north star” company that has shown how to tackle financial literacy, he hopes Ocho’s 10-person team might just have a less boring wedge to change that.
Ocho joins several fintech companies aiming to modernize and actually rebrand the retirement account away from traditional providers like Charles Schwab or Fidelity, or expensive solutions like lawyers and consultants.
“I’ve started researching the space, and we’re realizing that everybody, like Robinhood and Coinbase, are just spending unsustainable amounts of money to get customers, but they’re not making money and they’re constantly needing these big funding rounds to just exist. to have.” Nagpal said: “I actually expect it’s going to be a very rough six, 12 or 18 months for fintech companies in particular.”
Ocho’s turnaround from the competition, he says, is the market’s focus. “There are so many companies that target startup founders and their wealth. there’s literally a new one launching every month or two, all backed by big-name VCs, but none focused on the business owner who’s otherwise doing well but isn’t a startup founder. or an employee of a startup,” he said.
Instead, Ocho leans on Nagpal’s background working with creatives when he was building Teachable. Teachable helped creators create revenue streams. Ocho wants to help those same creators take their earnings and invest, pool and grow them in a smart way.
“At Tachable, we helped these people make money online, and now there are many places where creatives, freelancers and entrepreneurs can make money online, but how do we help them think about building wealth?” Nagpal said: Ocho’s long-term vision is to offer products beyond stand-alone 401(k)s that help business owners build wealth.
Human Interest is one of Ocho’s closest competitors, having raised $200 million last year at a $1 billion valuation. Nagpal says Ocho differs from him because it focuses more on individuals, freelancers and creatives, rather than Human Interest’s target of small and medium-sized businesses.
For now, Ocho charges a $199 annual fee to help individuals start their retirement account. Setup takes about 10 minutes and final approval takes 48 hours.
A big challenge for a startup is getting the right sole proprietors to take care of their retirement accounts. It’s looking for people who have income-generating businesses but don’t have full-time employees. If you have a side gig along with your full-time job, you can set up a 401(k) just for the side hustle, but you can’t contribute full-time income to a retirement account.
Nagpal believes he can drive early adoption through smart educational content and awareness, citing personal finance trends on TikTok as an example of consumer demand for more information. He says 40% of Ocho’s staff work in marketing or education, and that the balance will remain even as the company grows.
If education is so important to making Ocho work, one wonders why it’s starting with a fintech product. The answer is simple: deadlines. Users must set up a retirement account by December 31, 2022 if they want one for 2023, which puts the fintech in a relevant but time-pressed position.
Nagpal isn’t worried about the seasonality of 401(k) products because of an upcoming product roadmap that includes education products, investment flows into retirement products, such as being able to invest in startups and ETFs, and even HSAs, which are often described as are like a 401(k) for health care.
To power that ambitious product splash, Ocho has raised $2.5 million from Nagpal’s own venture capital firm, Vibe Capital. The entrepreneur says he raised a $60 million debut fund for Vibe Capital with the idea of incubating one or two startups from the firm, which came to fruition today when it owns 20% of Ocho.
Nagpal acknowledged that the idea of a founder using his own venture firm to launch his own startup might sound like the “mother of all conflicts of interest,” but reasoned that it’s anything but. He emailed all the LPs in his fund about the investment, got a unanimous yes, and ended up raising the startup at a much lower price than if they had gone to the fair market. It’s still unusual to see founders sell a company, start a venture firm, and then use that same venture firm to start their next company.
Perhaps the unique connection between Nagpal’s first company, his company, and his newest startup might suggest what his approach to personal finance might be: diversify into multiple vehicles, redefine what a leveraged investment can look like, and keep learning.