As an investor with Contrary Capital, free-lance advisor for Southeast startups, and leader of Emory's entrepreneurship organization, I frequently have conversations with founders who are looking to synthesize their "story" prior to raising seed funding. In this series, I attempt to ask the same questions of startups that have raised seed funding from top-tier venture firms, and then back into what may have been their answer (albeit through the lens of my industry perspective).
Startup: Public.com (formerly Matador)
Backers: Greycroft
Raise: $2.0m (seed)
What is the simplest form of the business proposition (the Lobby Pitch™)?
Mobile-first, no-commission brokerage focused on capturing first-time investors through a social stack, automatic high-interest cash management, and thematic-based guidance.
Are they creating "space" or positioning against established players?
Matador is entering a crowded, established space. The most direct peer is Robinhood, but with the recent trend of brokerages competing on commission and building out mobile-friendly toolsets, almost all major platforms (e.g., Schwab, E*Trade, etc.) can be seen as potential competitors. Matador's emphasis on platform accessibility and social accountability is aimed at novice or casual investors, but the core offering is still a online brokerage.
What does "product-market fit" / "stickiness" look like?
A speciality brokerage like Matador would want to see a high percentage of trades being driven by Matador's unique feature set. Conversion from social conversations to active trades would be a key driver of engagement, as would usage of Matador's thematic lists (e.g., "meatless revolution") for targeted stock picks. Matador is making a bold bet by formalizing "investment clubs" and would need to prove a much larger set of investors are interested in participating.
What would "success" mean in the 5-year horizon?
Adoption of Matador's non-brokerage features will determine if the platform is a simply an option in the increasingly homogenous category fintech apps trying to be budgeting tools, online banks, and brokerages/advisors all at once or a clear market leader with the "secret sauce" to attract the large base of disinterested consumers. The similarities with Robinhood and Acorns are clearly apparent; it is unlikely all three will survive with the current level of differentiation.
Heavy VC investment in Robinhood has shown that the cost of educating and successfully on-boarding "non-traditional" investors far exceeds the revenue that can be generated through returns on uninvested cash. Transitioning to premium offerings billed as a percentage of AUM or flat monthly charge will be vital to turn a large customer base into a profitable one.
What are some market forces (headwinds or tailwinds) that could impact that?
Consumer reticence towards utilizing multiple services to manage their financial health could severely impact Matador's ability to attract users. It certainly possible that consumers will "fall into" brokerage or advisory services from their banks or other essential financial services, rather than branch out on their own to find a better-suited solution. This may be, however, driven by a systemic lack of financial literacy, something Matador and its peer set are aiming to address.
Update Aug. 2019: Matador has changed their name to Public.com