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How Betterment's CEO is thinking about her next deal as the investing startup looks beyond its do-it-yourself investing roots

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  • Betterment’s CEO said in a recent interview with Insider that her team is open to new deals. 
  • There are small startups in the financial-wellness space that may make sense to add, Levy said. 
  • Betterment, known for a retail investor focus, is bolstering its units catering to other businesses.

Betterment acquired Makara, a cryptocurrency robo-advisor, in February as a response to clients who said they would be interested in crypto investing through the digital wealth startup.

Now CEO Sarah Levy says she is open to another deal as Betterment seeks to expand the company beyond its roots as a do-it-yourself investing app aimed at retail investors. 

“For the right opportunity, we would be a buyer right now, because I do think we continue to be a little bit subscale for what I believe to be a successful stand-alone entity, long-term public company,” Levy said in an interview with Insider.

Levy’s team does not have a target in mind, but there are a handful of “small Series A, Series B companies” in the financial-wellness space that might make sense to add, she said. 

Financial wellness — the corporate buzzword for products and services people use to manage their entire financial life, from retirement savings to setting monthly budgets  — “is the place that, right now, excites us,” Levy said. 

Last fall Betterment raised a Series F before the private and public markets turned and startups started taking measures to conserve cash. The New York-based company raised $60 million in equity and secured a credit facility of $100 million. The round was led by the investment firm Treasury, which was founded by a cofounder of Betterment.

“I would like to think that in this time where people are going to have trouble raising money, that we may have an opportunity as the largest independent to do some consolidation,” Levy told Insider, referring to Betterment’s position as the largest independently owned digital wealth manager. 

“There are also a couple other challengers in the 401(k) space,” Levy said. “We don’t have clear visibility into other people’s liquidity positions, but I think there would be strength in numbers in putting some of those businesses together.”

Betterment’s recent deals

Since Levy joined Betterment in December 2020, she has overseen Betterment’s first two acquisitions — Seattle-based Makara in addition to the US accounts of Canadian digital wealth management startup Wealthsimple in 2021. 

A former employee told Insider that previous leadership was apprehensive about adding crypto, but that changed under Levy. Former CEO and cofounder Jon Stein was more averse to offering a crypto product, and it was never much of a priority in previous years, the person said. The price of bitcoin, the largest cryptocurrency by market capitalization, has plunged this year

Mike Reust, president of the retail business, said the board was torn when it came to offering crypto products. 

But it was clear from data on other apps Betterment’s customers use, along with surveys on investor interests where users said they would be interested in a digital asset offering, that crypto was the next area to invest in. 

The price of bitcoin, the largest cryptocurrency by market capitalization, has plunged this year. But the financial industry, which has invested in teams with crypto expertise, is still looking to find value in the space. On Thursday, BlackRock and Coinbase said they would partner on an offering for BlackRock clients.

“Crypto’s been around a while, but doing it in a way that aligns with our principles hasn’t been historically possible,” he told Insider. “The actual scale and trading efficiency and costs have been coming down year over year. Only now was it actually reasonable and responsible to consider that we could offer this product.”