August 12, 2022

Flight Plan #16 - Our Investment in Pearler

Expressing our love for the "get rich slow" movement, here are the details on our investment into Pearler.

Written by

An Vo

We are excited to share our Investment Notes fuelling Pearler - the "boring" investment platform for the long-term investor as part of their $7.8m Seed Round.

Built for a community of investors focussed on long term wealth creation, Pearler has taken a position as the 'anti-Robinhood' (a trading app for active investors) and has built a platform that allows investors to learn about personal finance, connect with like-minded investors, invest through Australian shares and ETFs, US equities and through their micro-funds, and track their progress towards financial independence. They are pioneering the ‘get rich slow’ movement.

History:

We were introduced to the company's founders, Nick Nicolaides, Kurt Walkom, and Hayden Smith, over a year ago and have been following their growth and performance ever since. Staying close to the team, we could see something special was happening and decided that we wanted to be a part of their mission.

Nick, the CEO, has 14 years plus of experience in investment banking, transaction advisory, and funds management and understands the retail investing market well. Nick met co-founder Kurt when they were working together at Marshall Investments and grew frustrated that there wasn't a dedicated investing platform aligned with long-term investors. Kurt then teamed up with his longstanding friend, Hayden Smith (CTO). The three of them each were passionate about personal finance and helping their friends and family achieve financial independence, so together they set about to build the anti-Robinhood investing platform by helping their users unbundle the complexity of personal finance and achieve compounding wealth through consistent investing.

Problem

For many younger retail investors who grew up during the Global Financial Crisis, the finance industry is seen as being untrustworthy and expensive. Rather than trust institutions like banks and financial planners like their parents once did, younger generations are taking matters into their own hands and are talking about money to friends and family, in ways that were once considered taboo.

Whilst younger generations are increasingly seeking to take charge of their finances, those interested in prudent, long-term investing, and wealth creation don't have a natural platform to go to. Traditional institutions like banks have tried to capture their hearts, minds (and dollars) but younger generations have pushed back, due to the perceived moral failings of these institutions, poor user experiences, and expensive trading costs, meaning there's an open opportunity for a new retail wealth platform to emerge.

More broadly, long-term investors are part of a global community and generally chaff at platforms like Robinhood & Stake which encourage users, through gamification, to trade frequently, often using derivatives that users don't fully understand. These platforms make trading easy, but that doesn't come without high risk as we’ve seen with the recent major drop in the global share market with sad stories like those reported here of investors nursing major losses.

Solution

Whilst Pearler's starting with share trading, it isn't just hoping to be another retail broker. Pearler wants to build the social and platform infrastructure for communities of the everyday person to take a long-term investment approach and share their experiences, view each other's portfolios, and plan for financial independence together, whilst being the platform through which they invest, manage, and grow their net wealth.

Source: Pearler

As part of its growth plans, Pearler is also looking to launch an investing app for children, expand into New Zealand, and build a general advice forum where users can ask investing-related questions such as how to layer two ETFs in their portfolio, and more.

Pearler launched its beta in September 2020 and has experienced strong growth since. Despite the recent fall in the share market, Pearler has grown to ~59k members (approx. even split across female and male) with $490 million in investments. Their typical user is a 32-year-old female, who invests 10 to 12% of their after-tax income.

Pearler’s young, diverse, and highly engaged investor base gets us excited as these users have decades to compound their wealth, creating further opportunities for Pearler to layer in additional products and offerings over time.

Why we invested

  • Major opportunity: Community is the new moat in software products and we believe that the category for a retail wealth platform focused on patient investors is open for the taking. Robinhood grew into a multi-billionaire dollar company by 'democratising' share trading, yet doesn't own its own community meaning its day-trading users are free to transact on any platform that offers cheaper trading or a better experience. Pearler is building the social + fintech investing platform to educate the everyday person and build financial independence (not optimise for day trades). We see a massive opportunity for the company over the long-term as their investors stick around, advocate for the platform and community, compound their net wealth, and buy into new Pearler products over time.
  • Timing: Whilst we know that many retail investors were hurt by the recent sharemarket (and cryptocurrency market) correction, we believe that Pearler has a major opportunity to capture this disaffected group of investors and to educate and equip them with the tools and community needed to reach their financial goals.
  • Strong Early Traction: Despite the recent headwinds, we’ve been impressed by how Pearler has grown its diverse community of ~59k members, engaged them, and converted them into regular investors on their platform who are passionate about building their net wealth.
  • Product Led Growth Strategy: Pearler is also showing early signs that they have found a cost-effective go-to-market strategy with sound unit economics. The median customer acquisition cost on their customers is low (and hasn’t required billboards and busses), meaning that their payback period is short as typical new customers trade quickly and continue to invest regularly. In addition, many of their customers are signing up organically (or were referred) showing that they're finding strong customer advocacy and trust.

With strong traction and an exciting product roadmap on the horizon, we are stoked to be backing Pearler alongside Portage Ventures - who've supported some of the best names in this category including Wealthsimple (raised over US$900m), Clearbanc (raised over US$650m), and our local friends at Archangel Ventures.

Pearler is actively hiring post their latest investment round. If you’re passionate about personal finance, and love community building, come and join them on this journey by getting in touch at jobs@pearler.com.

You can read more about their latest round in the AFR here.

Safe Travels,

An Vo

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