When almost all of your paycheck goes to something other than savings, it’s easy to wish it could do more.
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San Francisco-based fintech startup Northstar works with employers to offer financial wellness as a benefit, pairing employees with personal financial advisers who work with them to achieve financial goals, such as paying off debt, buying a home and saving for retirement.
The company’s mission is personal to Will Peng, who started Northstar with Matt Matteson in 2016. Peng graduated from college with $35,000 in student loan debt. When he was signing the paperwork, he didn’t realize he could have negotiated the terms.
“Managing money is so complex and can make smart people feel stupid,” said Peng, who is CEO. “It took me five years to realize that the 30-year payment plan I signed was meant to squeeze as much interest out of me as possible. The default state benefits the institution, not the individuals, and often leads people to do nothing about their situation.”
The new funding will go toward tripling the Northstar team by 2021 and developing new features.
Last week, we reported that the U.S. personal finance software market was estimated to reach $343 million by 2026, according to Allied Market Research. Meanwhile, there are nearly 600 U.S.-based startups listed in Crunchbase’s database under the “personal finance” category, that have raised more than $13 billion in venture capital dollars to date.
Personal finance isn’t the only bucket Peng thinks Northstar fits into. He said there are tools for human resources.
“Our key differentiator is that we have gone beyond financial wellness to redefine the employee experience and the relationship between the employer and employee,” he said. “Our approach is empathetic, and we listened to employees, but also to human resources. Our vision is that every single person who has a job will get Northstar along with that.”
What investors have to say
As part of the investment, Matt Hoffman, partner and head of talent at M13, joined Northstar’s board.
M13 invests in founding teams shaping consumer behavior, and personal finance is one of those focuses. Northstar’s tool combines human advisory work with digital self-serve tools to form a new benefit category and redefines the power of total compensation, Hoffman said via email.
“When employees clearly see how their compensation and benefits support their life goals, there is a measurable improvement in employee happiness and retention,” he added. “In Northstar, we’ve found the winning combination of a dream team and an investment that’s consistent with what we’re seeing in future consumer behavior, and we are proud to lead their Series A.”
Illustration: Li-Anne Dias