In Part 1 on roboadvice, we looked at the participants attempting to carve out a role, hoping that the support of startup capital lasts long enough to find a buyer, pivot to something else or show a path to profit.
In Part 2, we focus on an early mover in the consumer market.
Interview with BigFuture
BigFuture launched its ‘cloud-based wealth advice service’ in 2015, driven by three experienced co-founders including Donald Hellyer. It raised capital and promoted itself at trade conventions, and produced an entertaining newsletter and educational videos. It was a runner-up in the 2015 Afiniation Showcase for the Best Robo-Advice service.
Three years later, it issued this advice:
“At the end of May 2018, we intend to close the BigFuture website. We are proud of what we built but regretfully we were unable to commercialise the application …
BigFuture Pty Ltd is still around as an entity. We are working on revenue producing projects.”
This is my interview with Donald Hellyer, CEO of BigFuture.
GH: What was the original vision for BigFuture and how did it change over the years?
DH: It was quite simple. Most people don’t have a good handle on what they own. They often have the ‘spreadsheet from hell’. And a single number on the value of their assets in the future provided by a super fund calculator is bound to be wrong. It is deterministic and life is much more complicated. Nobody really cared enough do a better job, so three of us who had been working in financial services all our lives thought there was an opportunity.
We wanted to link up a person’s entire financial position and give it real time to a financial planner, and it’s something with even greater need now given the Royal Commission revelations on fee-for-no-service. How do you create better interaction between clients and advisers?
Think of three or four possible markets for a product like ours:
- B2C (business to consumer), a system used directly by investors
- B2B (business to business) with financial planners as one market, super funds in another, and possibly fund managers
The main lesson we learned along the way in B2C is ‘verbs not nouns’. That is, we can give clients details, but we need to give them an action, something to do.
GH: Do you mean particularly in communications to them?
DH: You got to say, “Here are the results, now you can do something.”
GH: When you first started, you were ambitious about B2C.
DH: Yes, we were, it seemed a logical space to be. Perhaps we were early. There’s a problem that millennials don’t have enough money and don’t feel particularly engaged anyway. Most want to repay their student loans and save for a house. And not enough people with more money want to share their details on a cloud-based system. We did not create the required virtuous circle to keep building more functionality.
GH: What about the difficulties finding an audience, reaching out to people?
DH: It’s chicken and egg. Any development must create something people want, not something that you think they want. Perhaps nobody knows what the ‘market’ wants. Everybody has ideas, and some of them will work among the thousands who try. I would not have thought that Acorns (now Raiz) would work, but it has, with relatively low marketing expenditure.
The age of 65 is never going to occur for a 30-year-old. Raiz has made a fundamental change in the business of super compared with institutions, allowing people to put $1 in super when they buy something. It links spending with long-term savings.
When we started BigFuture, I joined 15 super funds to check the experience, and only two called me after I signed up. If you’re a millennial, you want better communication.
GH: Tell me more about B2C problems.
DH: We tried blogs and animations and social media but we never had a breakthrough. Maybe we should have started with an app not a website. But on an app, you struggle giving enough detail on a small screen. Maybe we just didn’t produce something people wanted in enough numbers. Many people loved the product, but just because I think people ‘should’ know about their financial affairs, doesn’t mean people will. We thought people would pay say $10 a month for the service.
GH: What was the point where you said this B2C is not worth doing?
DH: Well, we really moved in parallel, but we needed to work B2B with people who already had clients. We went to super funds who would pay us to offer the product to their clients.
GH: It seems like a strong proposition to a super fund, to offer your service to their members. You had some success, but why did it not resonate more?
DH: The game’s not over, we’re still working with the big funds, but we’ve ‘pivoted’ the business to make more money elsewhere. We put resources where the revenue is, into software development and coding.
Competition between the industry funds is minimal, they each have their constituent, there’s no ‘creative destruction’. Nobody is going out of business. The average person cannot distinguish between them, just like the top three electricity suppliers. The effort required to differentiate the products is too much. It’s not whether super funds care enough about the technology – it’s about how fundamental it is to their business. The largest super funds will probably supply essentially the same services in five to 10 years’ time as they do now. Smaller funds will be more entrepreneurial, they will want to add more value.
GH: What is your pitch to them? They should want what you’re doing for their members.
DH: We only had good conversations, but they required all the development to occur outside the super funds and be proven outside the super funds. But people like us have the least amount of capital to do the development. Someone will break through but take the example of the listed company Decimal. Latest share price 1.5 cents.
The main business development of a super fund is not with its members, it’s with the employer base that uses it. It’s about becoming the default member fund.
You also have administrators in an oligopoly, Link and Mercer. So if you’re going to do something special in technology as a super fund, how do you get the data? Neither has open APIs.
We have a couple of super fund clients with apps we have developed for them, with enhancements specific to the needs of their clients, rather than using the entire BigFuture picture we started with.
Other pivoting developments in the charity space include our launch of ‘Charity Booster’, an app designed to increase a charity’s donor numbers. For example, donors can give to a conservation charity each time they buy petrol, or a charity like OzHarvest each time they go to the supermarket. We can deliver the whole thing for $30,000.
So instead of wealth aggregation tools, we pivoted into contribution planning through payments systems, plus the charity applications.
Fintech is a game of attrition. When does the business stop burning cash as it is creating something? I’ve got five developers cutting code, but if you’re waiting for someone to make a decision, that’s a major operating cost. Our expenditure goes on developing product and the cost of data. You need to find a toe hold where you can make money.
Graham Hand is Managing Editor of Cuffelinks.