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Softbank Leads Funding Round for Wealth Management Startup Zoe Financial

The SB Opportunity Fund led a $10 million Series A investment round in the company that connects investors to financial advisors.

Softbank Group, the Japanese conglomerate known for its telecommunications businesses and investments, is now an investor in a fast-growing U.S. wealth management startup.

On Tuesday, Softbank’s SB Opportunity Fund announced that it led a $10 million Series A round of funding for Zoe Financial, a company that matches select wealth managers with prospective clients and doesn’t collect a fee unless they work together. The startup previously raised $6.3 million in seed funding, bringing its total raised to $16.3 million.

New and former investors also participated in the round. Aaron Schildkrout, an investor in the venture capital firm Addition and the former global head of Growth at Uber; Jessica Lachs, vice president of Data Science at DoorDash; and venture capitalist Christopher Nakutis Taylor, were all new investors in Zoe. 

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Christopher Jones, a principal with CMVJ Capital who was previously a co-head of Active Equities at BlackRock, invested again in the company (after leading a previous seed round). Marie Chandoha, the former CEO of Schwab Asset Management; Stephanie DiMarco, the former founder and CEO of Advent Software; and venture capital firm ThirdStream Partners, all invested in the company again.

March of 2020 was not a good month for the startup, as the Covid-19 pandemic made health and safety the priorities of investors and wealth managers. But the lull didn’t last long. The pandemic proved to accelerate trends in wealth management, like investors’ willingness to find and choose a financial advisor online. In 2020, Zoe’s network of RIAs grew to more than 2,000 independent advisors, managing an aggregate of $320 billion, up 790% from 2019.

It has continued to grow rapidly. Over the past 12 months, Zoe’s network has mushroomed to more than 2,600 independent advisors managing an aggregate of $410 billion, up 1,477% from a year earlier. The company said “tens of thousands” of qualified prospective clients with an aggregate of over $12 billion in investable assets have matched with an advisor in Zoe’s network.

In 2019, new assets under management by Zoe advisors were growing between 15% and 20% month-over-month with help from the matching service. In return, RIAs share part of their fees with Zoe in one of two ways. Advisors who charge clients a flat annual fee pay Zoe a flat annual fee for five years. RIAs who charge clients a fee based on a percentage of their assets pay Zoe a slice of that revenue for as long as the investor is a client. The company does not disclose the portion of revenue it takes in either scenario. Investors can use the service for free.

“Zoe Financial is disrupting the financial advisory market through the implementation of technology, data, and sector expertise,” SB Opportunity Fund managing partner Shu Nyatta said in a statement. 

“The SB Opportunity Fund is excited to partner with Zoe as it fuels the growth of independent advisory firms providing best-in-class, personalized advisory capabilities to a larger audience – including individuals who have been historically underserved by the market.”

Early this year, interest in Zoe from venture capital firms started picking up, founder and CEO Andres Garcia-Amaya told RIA Intel. He chose Softbank’s Opportunity Fund in part because it invests in companies with underserved and underrepresented founders.

“I really liked that aspect of it because the round was competitive. We had other term sheets from several VCs to lead the round. I found that as an opportunity for us to essentially bring light to funds like this that are trying to actually make a difference,” Garcia-Amaya said.

“A lot of corporations and venture [capital] all are saying ‘we support Latinos, we support African Americans,’ and they don't do anything about it. They're next funding is a white guy from Stanford. I like the idea of someone putting their money where their mouth is and actually creating a fund that's focused on that.”

Zoe plans to use the funding to accelerate its hiring and speed up the development of its new products. The company wants to be an “end-to-end digital experience” for investors, where they can search for, connect with and evaluate advisors within a Zoe dashboard, Garcia-Amaya said. 

“I envision a world where people will just say don't even bother asking your uncle or going to a branch to hire an advisor. Just Zoe it,” he said. 

Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.

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