Higher education is more expensive than ever. On average, Americans complete undergrad with approximately $35.5K in student loan debt according to Experian. U-Nest is the mobile app for college savings that encourages parents to take a proactive approach to college savings. By downloading the app, parents set up a tax-advantaged 529 college saving plan in just five minutes. The U-Nest app has a built-in college savings calculator that calculates the best savings plan on a per month basis. Additionally, the app gives investment portfolio recommendations based on the child’s age and parents’ time frame.
LA TechWatch interviewed CEO Ksenia Yudina how U-Nest is bringing the benefits of 529 savings plans to the masses, the state of higher education funding, and the company’s recent seed funding.
Who were your investors and how much did you raise?
We raised $3.5M over the course of two rounds, Seed and Seed Extension.
Seed round was led by Artemis Fund and Tim Draper’s fund Draper Dragon. Additional investors included Anthos Capital, Unlock Ventures, Vested Ventures, Band of Angels and Pasadena Angels.
Seed extension round included Northwestern Mutual Future Ventures, Group 11, Unlock Ventures, and few Angel investors.
Tell us about the product or service U-Nest offers.
U-Nest is the first mobile app that makes it easier than ever before for parents to save for their kids’ education via tax-free 529 college saving plans. Rather than spending hours researching and completing application forms, parents can set up a tax-advantaged and affordable college savings plan in five minutes through U-Nest. Using our simple college savings calculator, you can establish future goals and choose a monthly amount that is right for you. You can also automate deposits, get tax-free growth, and get your portfolios aligned with your child’s age.
My biggest motivation was a desire to make a difference for the entire generation and solve a huge problem in the country. Student debt has reached a historic level of $1.7T and has become a national disaster. I saw so many families struggling to meet the cost of education. It’s devastating. As an example, my close friend just graduated out of USC’s Dentistry School with $500K in loans. It will become a drag on her future for years to come. I am sure she will have a successful career, but this debt will be a burden on her life for years to come. That is becoming the norm, student by student, family by family. As a wealth professional, I saw a need for a simpler process for families to save for college. It’s based on my experiences and previous work in the wealth management industry, specifically with 529s. I saw the challenges that advisers faced and also heard from friends and other professionals why it was difficult to save. U-Nest was born out of this idea.
How is U-Nest different?
Through U-Nest’s app, parents set up a 529 college savings account in less than five minutes, estimate goals with a college calculator, track progress, and make mobile deposits on the go. This is in direct contrast to the painful process that most parents go through when researching, and then applying for a 529 plan (that takes about 8 hours for the average person). In addition, parents avoid expensive front loads and broker commissions, and only pay a flat fee of $3 per month. This is significantly less than adviser fees.
What market is U-Nest targeting and how big is it?
We target Gen X & Millennial middle-income families where saving for their kids is their #1 investment priority. The total addressable college savings market in the US stood at $1.8T in 2018.
Who are your primary competitors?
Each US state offers its own 529 plan. These plans allow the family using them to apply the money to their kid’s education expenses in any other state, not just their own. Without exception, these state-sponsored plans are poorly marketed and typically difficult to apply for.
Organizations in the private sector also offer 529 plans, but few, if any, have focused their product design and/or marketing/outreach efforts on anything other than affluent consumers. As part of this, young millennial families are particularly poorly served. Central to this is the fact that no one has launched a 529 app prior to U-Nest.
What’s your business model?
Our initial business model is a low advisory fee of $3/ month per child. This is significantly more cost-effective than broker-dealer commissions charged by traditional financial advisors. We have additional revenue streams such as revenue sharing with investment managers, licensing our APIs to other 529 plan providers, and upselling to other financial services such as life insurance and affiliate programs.
What was the funding process like?
In order to close our Seed round, we had to get out of LA, since investors here are more interested in media and entertainment rather than Fintech. However, after traveling to the East Coast, Bay area and even Houston, we were able to identify investors that understand our business model and value proposition. Our first investors also became the users of the app and our most loyal customers. Eventually, we were oversubscribed at our initial target raise of $1.5M. We increased this to $2M and were similarly over-subscribed at this number too, so we started accepting additional funds at higher valuation during our Seed extension.
Our first investors also became the users of the app and our most loyal customers. Eventually, we were oversubscribed at our initial target raise of $1.5M. We increased this to $2M and were similarly over-subscribed at this number too, so we started accepting additional funds at higher valuation during our Seed extension.
What are the biggest challenges that you faced while raising capital?
Being a first-time (and female) founder in Fintech was a bit challenging. What helped is building a strong team with prior experience in startups and surrounding myself with a supportive network of mentors and advisors.
What factors about your business led your investors to write the check?
Team. The scale of the opportunity. My background and credentials. Breakthrough nature of the app in a market that is calling out for disruption. Pain points for both, customers and financial advisors.
What are the milestones you plan to achieve in the next six months?
Build an Android version of our app, introduce gifting feature, onboard 20K customers and raise Series A round.
What advice can you offer companies in Los Angeles that do not have a fresh injection of capital in the bank?
Don’t just target LA investors. Look outside of LA where the valuations are higher and there is a greater chance to get diverse perspectives on your business. If you’re a first-time startup founder, build a network of serial entrepreneurs and don’t be afraid to share equity in the company with people who can provide value.
Where do you see the company going now over the near term?
Continued growth in our user base, partnerships, team, and investors as we press towards a market leadership position.
What’s your favorite outdoor activity in LA?
Going to Santa Monica beach in summer and skiing in Big Bear in winter.