The 2008 recession taught us a tough lesson: Financial literacy is hard to come by. While some organizations focus on student loan repayment or credit consolidation, those are just part of a bigger problem. With the help of their app and human advocates, SmartPath has the perfect equation to help those living paycheck-to-paycheck to tackle emergencies without going into debt.
“It’s an investment to improve productivity,” says CEO Alok Deshpande. “As one senior VP for a Fortune 100 company said to us, ‘10% of my workforce is dealing with acute financial problems. Their productivity is 30% lower than their peers. That’s a $100+ problem that won’t get solved by rebalancing the 401(k). This isn’t altruistic, this is simply good business.'”
Deshpande and CTO Jon Pokrzyk are hoping to raise financial awareness through their system and help communities take back their financial power. After attending the Y-Combinator accelerator and pivoting in a more focused direction, SmartPath talks to us about why financial literacy is essential for employee productivity and how the accelerator helped their startup grow.
What’s your pitch?
SmartPath is a financial coach for families. We deliver our technology and service through employers as part of their financial wellness initiatives.
We don’t sell products but instead provide a system — an app and human advocates to help everyday people make better financial choices. Think of it as the family member that helps you think through financial choices (and isn’t selling you anything). Many people don’t have that person. SmartPath is making sure they do.
What was it like to attend Y-Combinator?
The one word I would use for YC is intense. The program forced us to take a deep, introspective look at our business from every angle possible. We were asked to share our progress every two weeks which only increased the intensity. At the same time, we met some of the brightest, most inspiring entrepreneurs that understood how hard it is to build a successful business. Overall, it was a transformational experience. Painful at times, but well worth it.
How has the accelerator experience helped your startup?
First and foremost, we spent twice as much time with our customers. Going into the summer, we understood their basic needs, but we went much deeper throughout the summer. As a result, our business model and approach changed. Secondly, we improved working together as a team. We lived, ate and worked together nearly 24/7. You definitely get to know someone when you’re sleeping on a couch, eating breakfast tacos at 10pm and riding together all over the Valley!
And last, we learned how to focus. It sounds simple but in startups there are hundreds of things you can do. It’s a juggling act. YC, and other accelerators, teach you how to get laser-focused on the 1-2 issues that matter.
What problem are you solving?
First, 76% of families live paycheck to paycheck. 46% of families don’t have $400 to cover an emergency. Where do they turn? High schools don’t require financial education. As adults, these families don’t have enough assets to get an objective financial advisor. It’s sad and leads to constant financial stress for these families.
Which leads us to the second problem – the negative impact on employers. Multiple studies have shown that employee financial stress leads to lower productivity, higher absenteeism, and lower morale. Let’s face it, wage garnishment, bill collectors, foreclosures or lack of transportation are stressful and impact focus. And, 401(k) education does not solve that problem. We’re fixing that for employers. We’re directly helping employees solve their financial stress so they can get back to being productive for their employers and their own future.
What is your revenue model?
Employers pay us as part of their employee benefits. In some situation, the employee may also contribute.
How’d you get the idea for it?
I was at Bain & Co in 2009 during the recession. It was difficult to watch. Families were losing their homes, declaring bankruptcy, losing their jobs, the list goes on. While banks were carrying the brunt of the blame, it was also clear that most people didn’t know how to make smart financial choices. They were often being guided by a salesperson or friends/family. They had no objective place to turn.
In 2010, I left to teach personal finance. I started with six people in a room and essentially taught them how my mother turned $8 into a million. Eventually, employers started hiring me for seminars and coaching session. Their employees loved that it was simple, inspiring and something they could control. Fast forward to 2016, we now have the system, an app, and human advocates to help employees get and stay financially healthy.
Who are your competitors and how do you stand out?
The financial wellness market is noisy in a good way. Multiple organizations are trying to attack this problem from different angles, which is great. However, my experience tells me that getting employees beyond paycheck to paycheck requires two things – a quarterback to help solve the acute problems and mobile tools to help them consistently spend less than what they make (we call it Financial Fuel). Our quarterbacks are their advocates to assess their options, navigate the vendors and serve as a sounding board. Then, our app helps them build Financial Fuel and work through a 7-Step System.
How does ATL weave into your story?
Atlanta’s been my home for nearly 40 years. I grew up in Stone Mountain, went to Emory, worked throughout the city and love the Falcons. In my mind, the impact should start here. We have thousands of businesses that employ people that make less than $60K/year. Many of these employees live paycheck to paycheck. While an employer can’t simply start paying everyone more, they can help their employees keep more of what they make.