Jon Stein built Betterment into a financial advisory firm by raising $280 million from patient investors like Bessemer and obsessing over customer conversations. He kept the team aligned through low salaries, equity stakes, and cultural traditions like Customer Week and annual retreats.
Chapters
I'm John. I'm the founder and CEO of Betterment. Raise your hand if you've heard of Betterment. Oh my God. Okay, good. So most of you. Raise your hand if you're a customer of Betterment. Okay, like a little less. I'd like to get that ratio better. Uh, but that's not why we're here today. You're here to hear about my failures and experiences and understand how those might help you in your own entrepreneurial journey. So I'm excited to talk about that. I'll just say quickly for context, Betterment is an online financial advisor. We take all the things a great financial advisor would do if you had one, and we make them smarter, faster, cheaper, and better. For instance, if you have a bunch of, you know, expenses and you've got your direct deposit coming in and you find yourself trying to manage your cash flow month to month in your bank account, we'll do that for you automatically. We'll sweep money back and forth where it needs to be to help you make the most of it. Or if you're planning for your family's retirement or your kids' college savings, we'll tell you what accounts to open, how much to put in each of those accounts. And keep you on track to your goals. That's what I mean by financial advice. When we, when we started back in the early days, I had a belief that I would just kind of get to think about things and work on the product. And my co-founder, my first co-founder, Sean, used to say, "What you have to do, John, is you have to make it real as quickly as possible." I would talk about all the things that I wanted to build and the services that I wanted to deliver, and he'd say, "You know what? Before we can design all these, like, these graphs and things, you just have to make a sign-up that people can use and do those basic things. Print your business cards." And this advice has stuck with me really more than anything else that I've learned in the past many years. When we would go to pitch VCs and early advisors and things like this, the thing that made a difference with them was when we could show them something tangible, right? So actually having a signup process that worked and having a website that worked, making it real for them. It wasn't just a concept, but it was a tangible thing. Made all the difference in the world. And so when people ask me, what's the number one thing that I should do to get my company off the ground? Who do I need to talk to? Just go out and make it real, make it happen, and make it something that people can touch and feel so people believe in your story. At that time, I was doing everything by myself. I was coding. I would get into these like 24-hour, you know, almost trance-like states of just trying to perfect a certain part of the site, and I loved that time, right? Like that flow that you get into when you're really working on something that you're passionate about. And I was doing the engineering. I bought like 40 legal books about securities regulation and derivatives and all of the things that I'd have to know to set up a regulated financial entity. It was too much. I took on everything, and over time I realized that I wasn't going to be able to do everything by myself. And I started talking to friends, and those friends started wanting to join up and sign up and help me. And what I learned early on was the role of a founder is to try to have nothing to do. You've got to build a team. You've got to find other people who can take all that work off of you. Just this week I was talking to one of my senior team members and I said to her, you know, this is going to sound crazy, but if I have work to do, it's a really bad thing, right? You don't want to be relying on me for this deliverable, right? We've got to find somebody else to do this. It takes an an amazing team, and you have to constantly be delegating. We found, you know, fortunately people came to us over the years, and the reason that they came to us was primarily for the mission. From day one, I was talking about how I wanted to change the world. I wanted to build financial services around the customer in a way that they hadn't been done before. And that mission, that idea of changing a really broken industry resonated with people. And that's why amazing people like Dan Egan or Alex Benke or all of our, our team came to join us and left great jobs in, you know, big financial services companies where they had great incomes and a lot of job security. They came for the mission. And to me, that, that mission is the one thing about Betterment that hasn't changed. This is something I feel like we, we got right from the beginning. Having a mission is so critical, I believe, to building your business and attracting talent and attracting capital. And that passion that you feel about the mission is going to come through in every one of your conversations. I see many of you smiling and nodding. You feel it, you know it. And don't be afraid of that conviction. I feel like some people, it won't resonate with them, right? Like, they're going to be like, you're a little crazy, like, what are you doing? But I think the right people are going to be attracted to that passion, and they're going to join your cause, and that's going to serve you for years to come. You've got to hang on to that. I've been doing this 10 years now. I've been building Betterment for a long, long time, and it's been the majority of my professional career at this point. An amazing spot to, to learn a lot about growing and running a business. But it takes constant energy to do that. And one of the things that really keeps me going is coming back to the mission, coming back to why I started this, coming back to our customers. And that, that helps drive me forward as well. I mentioned that mission is important and customers are important. Customers is the, is the other thing that really keeps me going. Just over Thanksgiving, I was home in Dallas where I'm from with my parents, and, and I had coffee with a couple of customers there. Betterment, we do this program where we send out emails to people in our hometowns and and a lot of the product and marketing teams do this. I got so much energy from these conversations. It's amazing to connect with real random people you don't know and hear their stories. And in this case, it was great because they had no issues with the service. They were just mega fans. They were so excited to be talking with me and sharing what they wanted to see on the platform that was new. They loved the high-interest Smart Saver account, and they loved the account aggregation and so on. It was great. And I brought that energy back to the team. Now we do lots of things at Betterment to try to build customers into everything that we do. Uh, we do Customer Week where every single person in the company is on the phones with our customers. This is a bit of a throwback to the early days when literally it was a room of, you know, 4 to 10 people as we scaled. And at that time we had no customer service. And there was just a phone tree and it would sort of like ring at one person's desk and then ring at the next person's desk. And we would see like, you know, how long we could wait, like with the phones ringing before somebody picked it up. But I was talking to all the customers back in those days and we all were and we all had this very close relationship with them. And I loved that. And, and when someone was on the phone with a customer, if they had a problem, you knew because you were in the same room with them. And, and so you'd hear what customers needed from us. All the time. As we've scaled, we're now almost 250 people, and we're no longer all on the same floor. We're not even all in the same building. And it's harder now to keep in touch with our customers. I get to do it because I can go and sit with the customer experience team anytime I want, and I still do customer week and all that. But a lot of our team doesn't have that same access and like, and memory and ability to connect. So my New Year's resolution for 2018 was to bring the customer to life within Betterment. We've done so much more this year to research our customers. We've done more surveys, more panels, more getting out there. And I just— I like— to me, this is all back-to-basics stuff, but it's a reminder to me of how important it is because I felt like as we were growing, we're getting further and further from the reason we're doing this. We were getting further from our customers. In the early days, we didn't have to do panels because like, like many of you who are hustling and entrepreneurial, we were constantly ourselves out talking to customers. And I just, I can't overemphasize the importance of that and those insights and cataloging them and acting on them. You have a great instinct if you're talking to your customers all the time. One of our values at Betterment is iterate to breakthrough. We have this concept of constantly trying to improve things. And I boil that down into this lesson of never settle. I think it's possible to get to a spot where you feel like things are pretty good and the product is working and maybe, maybe you're dominant in the market or you don't see any competition. But it's coming. I personally can tell you, like, we've been at this for 10 years now. We're the market leader in the space, and every year there are new entrants, there's new competition, there's new people coming after us, and they're doing interesting things. And you got to keep your eyes open and continue to iterate and improve. As a, as a founder, you'll, you'll appreciate that you're never quite satisfied with what you've got. You always want it to be better, right? You're thinking you've got this long list of things, and you may talk to people and your customers, and they may say, "I love your product." And I bet sometimes when you hear that, you think, "Oh, it should be so much better. Like, it's not what I want it to be yet." And that drive to improve, you're going to feel that more than your customers are going to feel that. You're going to feel that more than your team is going to feel that. You have to help all of them feel that. You have to paint for them the vision of what could be and how much better the service could be and constantly drive to improve it and iterate and make it better. We have another value. Our first value is pursue happiness. It's a little bit of a funny, you know, construction and pursue happiness and And what it means to us is that we're constantly striving. We're constantly going after something that we may never fully attain, but we enjoy that struggle. We enjoy the journey, and we enjoy struggling together. That idea of pursuing happiness is about struggling and striving, and I think it comes back to this, this concept of not settling and always trying for more. And that's been an important part of how we've continued to innovate and iterate and grow. There's a counterpoint to that, which is that you can constantly be trying to do all these things and never get anything done. And so the, the last point I want to make on lessons that I've learned or things that I feel like we could do better is prioritization is key. I'm terrible at this. I always want to do everything. And my team, in every planning cycle, has to tell me, John, we can't possibly do all of that. You realize we're going to break the company if we try and do this many things. We don't have that big of a team. We're already doing too much. What can we stop doing? And so we've tried different approaches of stopping things. And they try to contain me. But I just have this desire to do so much. I mean, we're in the retail business, we're in the B2B business, we support advisors, we're now doing cash management, we've got all this personalization. I'm just always trying to do more. And, you know, a little bit this comes back to hiring a great team and finding people who can support you. In those areas where you're less strong. I have a great management team who do contain me in this area and can talk to me and tell me what's actually possible. We've got great product managers and project managers and product marketers who help us to strictly prioritize and manage things and make sure that they get done. I can't emphasize enough how important it is to focus. And without that focus and drive on what's actually most important, we never would have gotten anywhere. And those are my very simple lessons, or learnings I should say, from my past 10 years at Betterment and the things that have helped to drive us forward. And I'd love to take your questions about anything that I've talked about today or anything about the business or other things that we've learned. So, should we be worried about the yield curve? Wow, this is pretty wonky. I have a really generic answer to all of these kinds of market questions. People say, what about China? Or, you know, it's something different every week. Week. If you're invested for the, for your goals, if you're thinking about the, if you're invested for what's really important to you, like if your goal is retirement, that's probably 30+ years out for many people in this room. If you're invested for, you know, a down payment on a house that you got to make next year, you're going to invest that money really differently. You're going to put that into a savings account or a high-yield money market or something. And as long as you're invested for the right duration for your goals, you don't have to worry about the news. The news is there to scare you and grab your attention and make you, you know, do things you shouldn't do. It's not there to help you make the right decision. And as a financial advisor, I just constantly come back to the idea that make sure your investments are aligned with your goals and you're going to be fine. You don't have to worry about this kind of stuff. I frankly think it's crazy that we live in a world where all of you are expected to be financial experts. It's like, it's the dumbest thing, you know. We have 401s now, and so you have to think about, you know, how you're invested for your retirement. But this is like not something that everyone has time to do. It's as though I said, you should be responsible for your own healthcare. You can have any drug you want, have as much as you want. There's no doctors, good luck. It's just like a dumb way to, you'd never design a healthcare system that way. But that's how our financial system basically works. It's like, here's a bunch of bad products, go have whatever you want, you know, like, uh, good luck. I, I believe the future of our industry of financial services designed around customers, designed around real people, is that you all, um, and I, uh, most including myself, shouldn't have to worry about this stuff. The, the, that, that we, there should be intelligence that helps to manage your wallet, that helps you to put the next dollar in the right place to make the most of it. Anyway, that's what we're building, and that's, that's my long answer to should you be worried about the yield curve. How do you find the balance between motivating your team to want to be, do better, and celebrating your team's successes? I love to celebrate successes. I, I think marking occasions is a must. We have a lot of traditions at Betterment, and we celebrate occasions all the time. We have— we have these traditions I feel like help to build the culture. They also help to let the team know how much you care about the team. So we have 4 tentpole events. We do our anniversary party every May. We launched at TechCrunch Disrupt in May of 2010, and so that's our annie party. We do a Thanksgiving, which is most people's favorite event, where it's a potluck and everyone comes and brings their own dishes and brings their families and so on. And then we do summer and winter retreats. We go skiing for a day in the winter and we do like a camp, camp thing in the summer. I really value this kind of stuff. I think it's so important to get the team together, to get out of the office, to see each other in a different context. One of our values is build relationships beyond the task. What that means, build relationships beyond the task, of course if you're like in a project together you have to get to know someone. But go beyond that, go outside of it, get to know them beyond the way that you work with them. To me, that's important to building a strong team where you have people you can go back to and people who will come to you even if you don't have an immediate need from them. I think that's an important part of building a great company. When we, when we think about traditions, we also do things like the Betterment of Betterment Awards, where we have our 7 values And we have 7 hats, one that goes with each of the values. So like, you know, our value of embrace efficiency is one of those hats with like the drinking straws, you know, for like the beers up top, because it's an efficient way to drink beer, I guess. I think that having that recognition, and we celebrate people who represent each one of those values. I think that's an important way to perpetuate your company's values and culture. How much capital have you raised, and why did you choose venture? Yeah, listen, I have a ton of respect for people who bootstrap businesses. I think it's an amazing way to go if you've got that kind of a business and that kind of a drive where you can can achieve that, do it. I knew starting out that to build a financial services brand that would reach millions of customers, we would have to raise boatloads of money. Like, I just, I had looked, I looked at all the examples of people who'd built financial brands, and like, no one had done it for less than hundreds of millions of dollars, right? So I looked at Schwab, I looked at ING, you know, you look at all these guys. So, and So we, we, we set out knowing that it would require capital. It ended up requiring a lot more capital than even I thought. I mean, we've raised $280 million to date. We, we still have a lot of that in the bank. We continue to, to grow and invest it, but So when I think about why did we raise it, it was just, we had to do it. What was important to me was finding the right kinds of partners in raising it. So there's all kinds of venture capitalists out there. They all have somewhat similar motivations, but you know when you talk to someone if they share your values and if they share your aspirations and hopes for the company. Venture investor. I always talk, talk about our first meeting was love at first pitch, because we went out to the Bessemer offices and we sat down with Rob Stavis, who's still on my board today, and I told him about the vision for Betterment and what we wanted to do and the mission that I talked about earlier of helping customers to do what's best with their money so they can live better. And he said, that's great, we've been looking for a company like this for 2 years and this is the best one I've seen. And We'd love to be in business together. They had a long-term horizon. He's been invested for 8 years now and isn't talking at all about, you guys should think about, you know, liquidity, or you should be, you know, moving to find a buyer, because they have a very long-term horizon at Bessemer. And that's the thing that was important to me in finding the right kind of partner. All of our investors share that same long-term view, and that's important to us. There are other reasons to hire other investors. That obviously doesn't make that right for everyone. Some have great expertise in retail distribution or other networks. So I chose venture because I knew we'd need capital and patient capital. It would take a long time. How did you choose your team early on? How did they stick around? Did they volunteer, intern, or did you pay them? Oh, my poor early team. Uh, uh, uh, we, uh, my co-founder Eli and I didn't pay ourselves salaries for at least a year and a half in the early days. Um, we really, uh, we went through all of our savings. We'd put a lot of our savings into the company. Um, we hired a couple of friends. I mean, uh, my co-founder Eli My colleague from FMCG, Anthony, joined us. And then we hired a CTO, Kieran, who I knew through the Columbia network. We paid them not enough. It was well below market, like a quarter of what they'd been making. And we paid them in equity. And then after they worked for us for like 9 months, we said, so we're going to run out of money. And it would be great if you guys could put in some money so that we can continue to pay you. And, you know, fortunately they did. So we were really lucky to have people who were passionate about the mission and believed in it as much as I did. And they helped us to get through. Equity is something that we give to every employee at Betterment. I think it's part of aligning the team around the vision and the mission. And with that, I want to say thank you so much for having me here. It's a great honor to get to speak to all of you. Good luck. Thanks.
