- Ksenia Yudina is the founder of U-Nest, a startup that offers users an app to set up 529 college savings plans on their phones.
- After self-funding for the first few months, Yudina said the biggest challenge she faced as a first-time founder was finding investors.
- Yudina says founders need to establish credibility, surround themselves with experienced advisers, and build a strong team around the product.
- Fintech is a highly regulated space, so founders need to be aware of those nuances and challenges. “Not every person can start a fintech company,” Yudina said.
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Ksenia Yudina didn’t see herself as an entrepreneur. But like many founders, she saw a problem in the market, and felt that she was in a perfect position to solve it.
Yudina is the founder of U-Nest, an app-based fintech that offers users the ability to set up 529 college-savings plans on their phones.
After getting her MBA from UCLA in 2014, Yudina joined American Funds, a subsidiary of LA-based asset manager Capital Group. She worked as an adviser to wealthy clients, and part of her job was to set up college savings plans for their children.
A 529 plan is a state-sponsored education savings plan, with tax benefits that vary state by state. Many states offer 529 participants the ability to deduct money contributed to the plan from their state income tax, for example.
Establishing a 529 can be a lengthy and unpleasant process, Yudina said. And her millennial friends, who tend to be more open to digital solutions, were put off by all the paperwork involved in 529 applications.
“The current process just doesn’t satisfy the needs of the new generation,” Yudina said.
“It is a huge pain point in the country. There is a huge opportunity to solve this pain point with technology, and I couldn’t think of another person with the right credentials, the right expertise, and the knowledge of this product who would be capable of solving this problem,” she said.
Yudina said her initial thought was to try to improve the 529 process from within Capital Group.
“It’s really hard to innovate inside these large institutions,” Yudina said. “They’re still very conservative and things move slowly.”
“I realized the best way to do this was to branch out on my own.” So in 2018, she launched U-Nest.
After self-funding for the first few months, the biggest challenge Yudina faced was finding investors.
And as a first-time founder without a technical partner, Yudina said establishing credibility with investors didn’t come easy.
“Because I didn’t have a technology background, I had to identify the right partner on the technology side to help me bring the vision to a minimum viable product,” Yudina said.
She started attending networking events, looking for a co-founder or technology lead. Eventually, she met Steve Buchanan, who would become the CTO of U-Nest.
To be sure, having a technical partner isn’t enough to secure VC cash. It took U-Nest five months to raise its seed round.
Yudina identified three key steps she took to secure funding.
“First, I was trying to build credibility. I was telling investors about my background, I was showing them results and the speed of execution, and always keeping them in the loop with important developments on the product and user acquisition,” said Yudina.
The second step was surrounding herself with experienced entrepreneurs who could serve as advisers, she said. Advisors who believed in her vision and her potential were comfortable advocating for her to investors.
Third, she said, is the team.
“In any startup, investors bet on the team. You can be the most incredible founder, the most passionate, the most driven, but they still want to see that other people buy into your idea,” Yudina said.
Yudina brought on Peter Mansfield (who helped launch card-issuing fintech Marqeta) as chief marketing officer. Mike Van Kempen, who spent four years at investing fintech Acorns, as chief operating officer.
“Each of those people, who were comfortable following this mission and quitting their current jobs to join our forces, provided the level of credibility for the investors,” Yudina said.
Once founders have established credibility and have a strong team, the real challenge is finding a lead VC, Yudina said.
“The lead VC is someone who gives you the term sheet. So basically they put valuation on the company,” said Yudina. The lead VC does due diligence and once they are comfortable backing the company, other venture firms tend to hop on board, she said.
U-nest raised a $2 million seed round in October, with participation from The Artemis Fund, Draper Dragon, Unlock Ventures, and Vested Ventures.
Fintech’s not for everyone
Starting a fintech, Yudina said, comes with its own challenges. On top of incorporating as an LLC, to work in fintech, other registrations and certifications are required. U-Nest had to register as an adviser with regulatory bodies like FINRA. Founders may also need to obtain certain licenses to sell securities and investment products before conducting businesses.
“It’s highly regulated and you kind of need to have the right licenses and domain expertise,” Yudina said. “Not every person can start a fintech company.”
And the fintech space is crowded. Globally, there are now 58 fintech unicorns (startups valued at more than $1 billion), according to CB Insights. To stand out, founders should be hyper-focused on one problem, Yudina said.
“Having domain expertise in certain niche, solving one big pain point, and being very, very focused is one of the advantages that you can have,” she said.