Financial Education Startup SmartPath Raises $2.7 Million to Help Reduce Paycheck-to-Paycheck Living

Employee benefits startup SmartPath has closed a $2.7 million round, led by Boston-based VC fund PJC with participation from TTV, Y Combinator and several angel investors, to scale its financial coaching offering.

“The funds we’ve raised will be primarily used to continue building out the tech platform. We’ve done a great job growing our client base on continuing to use tech to support coaching. We believe in the hybrid approach — you can’t solve everyone’s financial situation just with a bot,” CEO Alok Deshpande tells Hypepotamus. “We’ve figured out big elements and this funding will help us figure out how to scale that.”

The startup was founded to give companies a way to help their employees make better decisions about their financial journey. It brings together a data-driven education platform and real-life coaches to create a holistic, individual solution for each employee.

The idea sprouted while Deshpande was employed at consulting firm Bain & Co during the financial recession. He witnessed that most employees are just not properly equipped to make long-term financial choices. Over 70 percent of American families live paycheck to paycheck.

After working as a personal finance consultant and coach, he founded Atlanta-based SmartPath. The startup went through the Y Combinator accelerator in 2016.

Employers include the solution as part of their employee benefits package, and SmartPath helps users reduce financial stress and navigate 401(k) programs, retirement, student loans, budgeting, and more, all with their specific goals in mind. Four out of five employers report that their employees’ personal financial issues are impacting their job performance.

The company’s client base includes several Fortune 500s across the manufacturing, education, legal, energy, and healthcare sectors.

“When people are dealing with financial stress, it really isn’t about the industry they’re in. It’s simply about their financial situation. [Companies] can play a big role in improving their employees’ financial health,” says Deshpande.

SmartPath’s coaches work to help employees get a handle on their finances and provide personalized accountability, a privilege often reserved for only those that can afford a financial advisor.

Deshpande shares that while they initially went after users with a broad financial health offering, they started to refocus as they saw more positive response from individuals with an immediate pain point. The team sees themselves as “financial doctors”, and has launched “financial care plans” to prescribe specific advice for each employee’s goal. Think home ownership, car buying, parent prep, retirement, and others.

“We started to target specific pain points — people having student loan collection calls, buying a home, times when money is a priority. That’s when they want to engage and talk with somebody. This has helped tremendously in communicating to employees what SmartPath is and how we can give them support on a specific pain point,” he says.

Next, the team plans to develop a way to drive accountability through technology, in the same way they do with their human coaches, and inject those insights into the platform. They will also be adding team members to their sales and client success teams.

“Oftentimes, we know what to do, but then three weeks go by and we didn’t do it. Part of that is because we weren’t held accountable. The same is true with money,” Deshpande says. “That’s the number-one thing that coaches do. How do you build that digital coach to keep people accountable?”