Palo Alto, California-based
Financial Engines, Inc., the third-party advice-giver, has just netted a cool $85 million round in its E round of financing.
Oak Hill Capital Partners led the investment round.
Strategic partners for the firm now include:
Merrill Lynch,
E*Trade,
American International Group,
Wells Fargo,
The Chase Manhattan Corporation,
Chase H&Q,
The Goldman Sachs Group, Inc.,
Intel Corporation,
Thomas Weisel Partners,
State Street Global Advisors (SSgA), and
Washington Mutual, Inc.
For Financial Engines watchers, there were a few familiar faces in this round as well.
Existing investors such as
Foundation Capital,
New Enterprise Associates,
Charter Venture Capital, and
Pivotal/Amerindo have also joined in on this round.
Currently, each strategic partner owns less than 4% of the company.
With this move and the recent hire of a cfo, can an IPO for Financial Engines be far behind? As yet, the firm has made no S-1 filing, so if there is going to be an IPO, it will not occur for at least two to three months. A firm files an S-1 with the SEC when it intends to go public.
Jeff Maggioncalda, ceo, would not comment on the possibility of an IPO, but he would discuss the future direction of his firm. "What we have seen with our recent roll-outs with everyone from
3Com to
Merck to
Hallmark to our alliance with
AOL demonstrates the growing demand for our service," he contended.
"We have 120 people at our firm. We are scaling rapidly at this point. It has taken the market time to get going, but now it looks like we are accelerating dramatically," Maggioncalda told InvestmentWires.
For Maggioncalda, the partners in this strategic round represent companies that Financial Engines expects to take a large role in scaling out the business. Maggioncalda and his team do not just look at advice as a product for the 401(k) participant but as a more holistic service designed to offer solutions for all of the individual investor's need including 401(k) plans.
"E*Trade's investment in Financial Engines reflects our commitment to empowering individual investors to take control of their financial futures," stated
Tom Bevilacqua, general partner of the E*Trade eCommerce Fund, L.P. "Financial Engines is a leader in the online investment advice category, and we look forward to developing a powerful relationship through which the benefits of Financial Engines can be made available to our customers."
"AOL has 18.7 million members. Our information will be placed on its second most trafficked page. Our alliance with AOL also means that 20 million
Netscape members can access us as well. The hardware and personnel to support that kind of volume is immense," Maggioncalda reported.
"It is becoming a consensus opinion that advice is going to be a standard part of every 401(k) offering. So we will continue to work with providers who are interested in providing advice as part of their offering," he opined.
Look for Financial Engines to explore global opportunities as the defined contribution business grows overseas. "We see great potential in Japan, Canada, Europe, and Australia in general for U.S. vendors," the official added.
"As I step back and look at this round of financing, I think it means a number of different things. One, I think there is a recognition from the leaders in financial services that online investment advice is going to be one of the most important service offerings over the next three to five years and that advice will probably reshape a lot of financial services as know it," Maggioncalda continued.
"Two, the reason that our investors have been willing to invest so much money in Financial Engines is reflective of the opportunity they see in our company. This is a strong signal that independent advice is going to be important for consumers. And even the largest financial services firms will work with independent providers to offer investment advice."
"And three, we are pleased that such prominent players in financial services recognize our leadership position in the online advice space," Maggioncalda concluded.
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