The banking giant UBS announced earlier today that it will buy Wealthfront, a venture capital-backed robo-advisor, in an all-cash deal worth $1.4 billion.
Wealthfront, which raised just north of $200 million while private, according to Crunchbase data, is one of the few wealth management services that has grown from offering tools automatic investment schemes to consumers. Betterment ($435 million in funding, per Crunchbase) and Personal Capital ($265 million in capital raised, according to the same data source) are other related games.
The $1.4 billion price tag for the UBS-Wealthfront deal is therefore significant, as it could impact the exit values not only of other startups, but also hundreds of millions of dollars in capital- risk invested.
It’s hard to say with confidence whether the sale price Wealthfront managed to secure was a strong win for its backers. Data from PitchBook estimates the company was worth $700 million in 2014 and $500 million at the end of 2017 when it raised its last known capital round, a sum of $75 million.
At these prices, the company’s exit price is a win as long as it represents a multiple of 2x or more on its final private valuations. But its output value is also analyzable from a number of alternative perspectives: AUM, customers, and revenue. We’ll explore each briefly to better understand how the company was valued when it was sold and what UBS gets out of the deal.
AUM, customers and revenue
In its statement, UBS said Wealthfront had “more than $27 billion in assets under management,” or AUM. This means that UBS pays around 5 cents per dollar in AUM in the business. Is it a lot?