How They Funded It: blooom Flourishes with the Right Funders
Chris Costello, Randy AufDerHeide and Kevin Conard
Leawood, Kansas | Innovation-Led
Our fifth annual We Create KC report is out! This year we are focusing on the six imperatives the community laid out to reach Kansas City's goal of becoming America's most entrepreneurial city:
- maximizing entrepreneurial support resources
- telling the story of KC entrepreneurship
- creating a strong entrepreneurial pipeline
- building talent
- engaging the corporate community
- increasing available startup and growth capital.
To celebrate the release of the report, we caught up with some of the entrepreneurs who were featured in previous We Creates. When blooom was featured in year three, co-founder Chris Costello was CEO. He has since transitioned to chairman of the board and is here today with a few more updates.
What is your biggest news from the past year?
blooom is the fastest robo advisor ever to pass $2 billion in assets under management. We're helping more and more people everyday make the most of their 401K.
We've had great support from Kansas City's entrepreneurial community throughout our journey and take every opportunity we get to network with area Chambers, including: Kansas City Chamber, Leawood Chamber and Olathe Chamber.
What are you looking forward to in the next year?
We closed a $9 million Series B in January 2017 that included the local sidecar fund KCRise. This, along with the support of our customers and community, has fueled us this far and will help to ensure our continued rapid growth, additional product features and new hires.
What is your personal mantra that inspires you to greatness?
"You miss 100 percent of the shots you don't take." Wayne Gretzky
How would you like to see Kansas City's entrepreneurial community grow in the coming years?
I would like to see the larger established business community in and around KC be more supportive to the up and coming startup businesses when partnerships and collaborations makes sense.
Cheers to that! Learn more about what corporate engagement looks like in this year's We Create KC report, and enjoy this look back at how blooom got started:
With 15+ years’ experience as financial advisors, Chris Costello and Kevin Conard knew the financial services business model was broken. The typical client—high-net-worth individuals, wealth amassed and primed for retirement—were the people who needed financial help the least. Meanwhile, 90 million Americans, staring down that long investment timeline, were on their own, and bungling their most valuable retirement asset: the 401K.
“The 401(k) is what will determine if these people will ever be able to leave work and have any type of dignified retirement,” says Chris. “Up to this point, the only solution they’ve been given is a DIY manual, resources on the Internet and online calculators.”
Into that flailing financial darkness, blooom was born.
Based in Leawood, Kansas, and Midwestern practicality, blooom is a low-cost, online platform created to help improve the way average Americans manage their 401(k) retirement plans. In just five minutes, the online tool assesses a client’s 401(k) from start to finish and provides ongoing professional management for as little as $1/month.
Co-founded by Chris, Randy and Kevin, blooom was launched as a Registered Investment Advisory in 2013. To date, blooom employs 21 people in its Park Place office and manages almost $200 million in investments.
Seeding a Solution
“Our guiding star was to look at how Wall Street had approached financial services and do it 180 degrees different,” adds Chris. “We realized we could give people the same services millionaire clients received—and we could do it through technology.”
Bootstrapping the business with their own savings, Chris, Randy and Kevin created a prototype that they launched in April 2014. After beta testing, they refined it over the summer and in the fall presented blooom at Finovate, a trade show that unveils and highlights the latest innovations in banking and technology.
Out of the 70 companies presenting at Finovate, blooom won Best in Show.
Forbes, Barrons, Business Insider, CNBC, Time Magazine, Wall Street Journal—all stopped to sniff the blooom and through word of mouth and solid PR, blooom organically grew its customer base. In March 2015, they were named among the world’s top 10 most innovative companies in personal finance by Fast Company.
Ripe for Fundraising
For many startup entrepreneurs, coming up with a great idea is the easiest part. Figuring out how—and when—to raise money is one of the more difficult aspects to starting and growing a business.
Blooom was no exception. They struggled with the decision to seek capital for six months, waiting until they had a clear vision of what the funding would help them achieve before they started approaching investors.
“We knew blooom was ripe to grow faster than the resources we could afford to put into the company,” says Chris. And they knew they were at crossroads. Blooom needed the funding to figure out how they would gain distribution: through enterprise partners or direct marketing.
And so, they did their homework. They charted their path and timeline to that next major milestone, figured out the funding they would need to get there and prepped a solid slide deck with advice from seasoned entrepreneurs and investors.
“Our path to raising money was potentially easier than other startup companies,” notes Chris.
Coming off the Finovate Best in Show Award, several VCs had reached out to blooom in the fall of 2014. Back then, they weren’t ready to take funding—but they knew they would be. So they built a database, kept in contact, and six months later, when the time was right to seek funding, blooom used smart connections to get the meetings they wanted.
After around 50 presentations, they found their ideal investors and in October 2015, they landed a $4 million Series A round, led by QED Investors from Alexandria, Virginia, including local investors DST Systems Inc. and UMB along with Commerce Ventures and Hyde Park Venture Partners.
In addition, they won a $50,000 Launch KC grant and won another $10,000 when they dominated One in a Million, a national contest among 1 Million Cups alum hosted by the Kauffman Foundation.
Advice for Entrepreneurs
Master your power pose.
When Chris pitched investors, he didn’t come into the meeting as a startup desperately seeking capital. Instead, he approached investors with an opportunity.
“We interviewed them as much as they interviewed us,” he says. “We wanted to be damn well certain that the investors would add value to our company and bring more than their checkbooks.”
There are VC firms all over the country that don’t care where you’re based.
Blooom had difficulty grabbing attention from Silicon Valley investors, because, he says, of their provincial preference for funding startups on their bicycle routes.
“Finding funding in KC isn’t any harder than any other city. You just need a great idea, a great potential product, a solid vision and good story and you can raise no matter where you’re located.”
Get advice from someone who’s done it before.
Chris tested blooom’s deck and their story with investment savvy mentors Bo Fishback and Rick Vaughn before they ever pitched investors. He suggests other fund-seeking entrepreneurs do the same.
Advice for Investors
“I beg and plead with investors to be more direct with their No’s,” says Chris. He finds that many local investors don’t quite tell you no, and then don’t back their no’s with reasons. “Don’t be afraid to say ‘no’ and provide feedback. The entrepreneur can decide on his or her own if that’s something they want to act on.”
And entrepreneurs need to ask, too.
“Put it on the line and ask, ‘Is there anything that gives you reason to pause about moving forward with us,’” he advises.