Why We Invested: 401GO
The Next-Generation Retirement Plan Provider
401GO is a fintech retirement benefit platform. The company’s proprietary automation technology substantially simplifies the setup and administration of a 401(k) and IRA, reducing day-to-day work and driving down costs.
The company was founded in 2019 and has seen steady growth since its inception, averaging 250% year-over-year revenue growth over the last three years. Today the company serves more than 2,500 businesses, totaling more than 30,000 active users.
The $12 Million Series A financing was led by Next Frontier Capital, with participation from Rally Ventures, Impression Ventures and Stout Street Capital. Below is a short Q&A with Co-Founder and CEO Dan Beck, where he talks about the story behind 401GO, closing the retirement access gap and 401GO’s top priorities now that the funding round has closed.
1. What is 401GO and what core problem does it solve?
My brother (Nathan Beck, Co-Founder and CTO) and I discovered the opportunity for 401GO while building a previous company. We had a small workforce of mostly hourly employees, and we wanted to offer them a 401K as part of their benefits package. We searched for options for several months, and we eventually realized there were no good retirement benefit platforms available for small and midsize businesses (SMBs).
Through the process of searching for a solution, we learned a lot about why there weren’t any good solutions on the market. A 401K is a complicated product for SMBs, and there are many factors to take into consideration when offering a retirement plan. If you have an HR team to manage everything it helps reduce the burden, but as a small business owner you have to take on all that work and complexity yourself. And small business owners are already stretched thin.
About half of all Americans work at an SMB, and the vast majority don’t have access to a 401K. My co-founders and I wanted to close that access gap and improve outcomes amongst entry-level workers. Our platform is custom-built for SMBs, runs alongside existing payroll systems and can be set up within 15 minutes. The ongoing administration is fully automated and our system handles notifications, enrollment, distributions and loans. Employers can offer a critical financial benefit to their employees, and they don’t have to take on any of the administrative burden.
2. Tell me more about how 401GO helps people achieve their financial and retirement goals.
Much of the financial services industry revolves around the idea that people don’t know how to manage their money and we need to do it for them. Indeed, a lot of people don’t know how to leverage their money to further enhance their life, but we want people to be engaged in the process. This idea of participation in one’s finances drives the success of the platform.
We have a particular focus on overcoming the “first dollar hurdle” for people who haven’t yet started saving for retirement. We’ve done a great job overcoming that hurdle because we provide the tools people need to succeed. An important part of the platform is a financial wellness tool, which allows people to connect outside accounts and generate budgets that help them save and plan.
We’ve made a tremendous impact so far in closing the access gap and driving outcomes, especially for individuals largely overlooked by the financial services industry, like younger generations. If you look at the youngest cohort of workers, the industry average participation rate in retirement plans is 20%. On our platform, it’s 52%.
As an example, one of our employees started working for us at age 18, and he is the poster child for why we built this platform. He’s now 22 and has over $40,000 in his retirement account. He’s learning about the process of creating wealth and now he’s super excited about saving.
3. What are your top priorities now that you’re funded?
We’ve had a lot of success pursuing partner channels and building advisor relationships. We don’t believe 401GO is a pure tech play, and so we work in tandem with financial advisors, benefit brokers and payroll companies. Every person’s relationship with technology is different. Some people only want to interact with the platform and others want to work with financial advisors. We accommodate both preferences, and we designed our platform to be both high-tech and high-touch to drive higher outcomes.
Financial advisors get a lot of value from 401GO because, as opposed to the large incumbents where there is a lot of back and forth with setup and managing the ongoing relationships, advisors can onboard and manage relationships with customers independently on our platform.
A big opportunity we have is that large payroll companies are interested in using our technology to serve SMBs. A growing number of states require small companies to offer retirement benefits. Both payroll providers who haven’t been in the 401K space and big retirement incumbents now want to have their own in-house solution for the SMB market. A big goal of ours is to build out the technology layer so it can be embedded into enterprise solutions.
4. You’ve started and been involved with over a dozen small businesses and startups. What advice would you give to founders at the beginning of their entrepreneurial journey?
The element that propels someone to become a founder is they experience a pain point. My co-founders and I have a background in consumer products. When we moved into financial services, my co-founders and I had a new industry to learn.
It’s about being curious. Any time I came across someone with even a little bit of industry knowledge, I’d ask them as many questions as I could. Curiosity is something that needs to be fostered and if you do that you’ll see gaps and opportunities that others don’t. That’s been my approach to every business I’ve started.
