In July, Guideline – a San Mateo, Calif.-based 401(k) startup – announced an $85 million Series D round co-led by Al Gore’s Generation Investment Management and Greyhound Capital.
But what was not revealed, until now, is that American Express Ventures also participated in the financing, the firm has told FinLedger exclusively, ahead of a public announcement planned for later this week.
I spoke with Lindsay Fitzgerald, who leads Amex Ventures’ B2B practice area, and she said that American Express’s venture arm just closed on its investment in the company..
Amex Ventures’ mission is to invest in and identify capabilities in areas that are most relevant to American Express such as B2B services, data analytics, consumer commerce, fraud prevention and cybersecurity. But it’s also increasingly focused on serving small businesses.
“Traditional 401Ks have been challenging for small businesses to adopt,” Fitzgerald told FinLedger. “Something like just 10% of small businesses that exist today offer 401(k)s.”
Guideline’s solution helps SMBs and earlier stage startups more easily adopt 401(k)s by automating processes that are usually outsourced, such as administration, record-keeping, and investment management, she added.
“That allows them to do things,” Fitzgerald said. “One is to offer a product that’s customized for SMBs at a price point that makes sense for them.”
In September, FinLedger looked at how 401(k) startups have added clients at a rapid clip since the pandemic began. At that time, Guideline, which has $2.9 billion in assets under management, said it had grown its account numbers by 65% year over year, with 14,500 plans. As of late October, Guideline had over $3 billion in assets under management with 15,000 small businesses using – and 255,000 investors live on – its platform.
“We had actually come across Guideline a few years ago and were impressed,” Fitzgerald said. “But we hadn’t fully developed our thesis around an SMB focus. Since then we’ve doubled down on our thesis of investing in the small business services ecosystem, came across Guideline again while they were in the middle of the raise process and were thrilled to be able to jump in and join the round.”
Amex Ventures was, perhaps surprisingly, also drawn to the fact the startup was not founded by industry veterans.
“They viewed this challenge from the lens of an entrepreneur,” Fitzgerald said, “and built a great, easy-to-use platform.”
For its part, Guideline CEO Kevin Busque said having Amex Ventures as an investor “is really great brand elevation for us.”
“Many people don’t realize it’s a bank, and they have to do a thorough diligence to invest in a company,” he said. “But they clearly see the value we offer to SMBs. We get a lot of validation from a company like American Express.”
In a recent interview, American Express’ global head of ventures Harshul Sanghi told FinLedger that the firm very often ends up developing commercial partnerships with its portfolio companies.
“We can’t say definitively we will be one of them [a commercial partner],” Busque said. “But we’re exploring opportunities.”
Also recently, Intuit tapped Guideline to be its exclusive 401(k) partner with “a deep integration in QuickBooks.” The deal puts Guideline in front of the millions of businesses that run on QuickBooks via an integration that it says “gets them started in minutes.”