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Nevertheless She Persisted: How A Female Fintech Founder Raised Her Seed Round

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The average annual cost of a private four-year college is $32,410 and a public college (in-state) $9,410, according to the CollegeBoard. College is expensive. More than 44 million Americans owe $1.6 trillion in student debt, writes Zack Friedman, a Forbes contributor. What if there were a way for students to incur no debt or less debt? 

Many parents, extended family members, and friends want to make sure that children and their families do not have to borrow money to pay for college. They want to put money away in an education fund for the children for whom they care. Only 16% of families use the most popular form of education savings accounts, according to New Lessons About 529s Who Should Use Them, What Makes Them Powerful, and Where They Can Be Improved by Morningstar. 

The after-tax money you deposit in a 529 account is invested. Upon withdrawal, it is tax-free when used for eligible college costs, such as tuition, housing, meals, and books. Yet, U.S. families are leaving an estimated $237 billion on the table by not investing in 529 plans, according to the Morningstar report. This benefit isn't just a benefit for the wealthy who have financial advisors. Many families could benefit. 

From a consumer perspective, these plans are costly and complicated to set up. For the financial advisor, there is much manual paperwork for which they are not compensated. Ksenia Yudina worked as a Certified Financial Advisor (CFA) for Capital Group American Funds, which is the nation's largest provider of this type of plan. "The existing process [at the time] was very complex, confusing, and time-consuming," she emphasized. Yudina thought there had to be a better way. She wanted the average American family to benefit from 529 plans, not just the rich. 

Fintech startups are launching to take on legacy brands by rapidly building products that are cheaper and easier to use than their predecessors. Startups have successfully used fintech to provide loans in minutes to consumers and small businesses. Why not 529 plans?, thought Yudina. 

In 2018, she formed her company, UNest, to test whether she could build an app that helped consumers quickly and easily set up 529 plans. She also wanted to test the interest in the product and the economics of doing it. 

Yudina was introduced to Steve Buchanan, who had experience creating financial services products from initial concept to development, and from deployment to clients to working with strategic partners. He became a technical advisor and helped choose Distillery, a software development company, to build the app. For the test, they focused on the app for one system — the iOS iPhone system. She invested $160,000 and raised $300,000 from an angel investor. 

In response to Facebook, Instagram, and YouTube ads, 1,000 people signed up to use the app. The feedback was overwhelmingly positive. Now it was time to raise a seed round to build the Android version and widely market it. 

Yudina didn't know fintech investors and needed people to make introductions. It is a male-dominated sector that is very much an all-boys club. "It's super hard to meet them," she stressed. Female founders are relegated to separate networking groups. Yudina sought male serial entrepreneurs with established fintech investor networks as advisors. For their efforts, she gave them between 0.5% and 1% of UNest, which would vest over a two-year period. Vesting didn't begin until advisors proved their worth for three months. Her advisors made over 60 introductions. 

The process was painful, especially when she compared her experience with that of male founders. They were asked questions about how they would become leaders in the sector and knock out the competition. She was asked about market traction. This is not an uncommon experience for female founders. Dana Kanze's research highlights how female founders get asked how they would prevent risk while male founders get asked how they would grow their companies. As a result, men raise five times as much funding. 

To get investments, Yudina chose to bring a male team member to meetings. Kanze's research found that you can also flip the focus of your response. Yes, you have to answer the prevention question with a prevention response, but if you add a promotion response, you will go on to raise 14 times more funding than those who don't. 

Bias didn't end with getting an investor's interest. It continued through the due-diligence process. When investors checked her references, they asked if Yudina was coachable. Her male founder colleagues’ references were asked what kind of leader they would make. She persevered and raised $2 million in August of 2019. The Artemis Fund, a female-focused fund, led the round. Other investors included Vested Ventures, Unlock Venture Partners, Pasadena Angels, Draper Dragon, Band of Angels, and Anthos Capital. She raised an additional $1 million as part of an extended seed round in December 2019, which included Northwestern Mutual Future Ventures, Unlock Venture Partners, and Group 11. 

The Android version launched in February. It exceeded Yudina's expectations. "We were optimistic that launching Android, coordinated with our first significant outreach effort, would generate more accounts," she said." We weren't expecting the flood gates to open to the extent that they did! As of the end of April, we had 18,000 families using our platform, and our user number nearly doubled since March (when we had 10,000 users)." 

UNest has experienced solid week over week growth throughout the pandemic. "Parents tend to think even more about protecting their kids' futures in periods of uncertainty," said Yudina. 

How will you overcome bias to grow your company?

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