Yodlee takes large financing — could spell trouble for Mint

June 4, 2008 | Chris Morrison | Comments |

Yodlee, an online finance web platform that directly serves banks and other financial institutions, has raised a large round of $35 million, led by banking giant Bank of America.

Although Yodlee has been something of a dark horse while popular personal finance sites like Mint have taken the spotlight, the company’s apparent success could indicate a more difficult road than anticipated for their competitors in the personal finance market, including Buxfer, Geezeo, Wesabe and many others.

The basic idea behind Yodlee is aggregation. The average American has 12 financial accounts of various types, according to CEO Anil Arora, and there are thousands of different services on offer, from banks to stock accounts. Yodlee got its start in 1999 as an aggregator of all the information from those different account types.

Today, it offers something called the Personal Financial Management Suite, which Arora called “a better, faster, easier Quicken online.” That product, in fact, is the back-end for Mint, which adds its own custom touches to help users understand where and how their money is distributed. However, it’s also used a growing majority of the country’s largest banks.

That should be worrying for independent finance sites. Most banks were very slow to add any online functionality beyond showing account balances and a list of transactions. That’s what provided an opening for personal finance sites to start up — consumers obviously want to see all the information from their various accounts in one place, arrayed in ways that are understandable. But banks are beginning to catch on, Arora says, and add the same tools to their own sites.

Given that the motivator for most people to seek out a personal finance site is a desire for things to be as easy as possible, if banks begin to aggressively use tools like Yodlee, there will be less incentive for their customers to seek out Mint and its cohorts, even if those sites continue to have an edge in visualization and functionality. In fact, Yodlee itself has only 50,000 users on its own personal finance portal, compared to 10 million who unwittingly use it through a bank.

Interestingly, Yodlee’s other big product, a recently-released bill payment solution, also sounds like a potential PayPal competitor down the road. Aside from the obvious function of paying bills from your utility, internet provider and other companies, it can transfer money between your various accounts.

Arora said you can also pay individuals, like your maid or gardener (if you’re lucky enough to have them). When I asked whether the service could be expanded, he only agreed that “other payments” could be addressed, but added, “Obviously, a lot of financial institutions are very interested in expanding transfers.” That seems to imply that other payments, for instance to a store or online auction, could be arranged in the future.

The funding, led by BoA, also brought on previous investors Warburg Pincus, Accel Partners and Institutional Venture Partners. Yodlee recapitalized with $40 million in 2002, making Warburg the primary shareholder; combined with the current funding, it has taken $75 million. It’s based in Redwood City, Calif.

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About the Author, Chris Morrison

Chris Morrison writes about cleantech and environmental issues for VentureBeat, with occasional forays into gaming and semantic technology. He got his start writing about tech for Business 2.0 magazine, but quickly realized new media was the ticket when that institution closed its doors in 2007. Chris has also covered public equities and regulatory issues. He originally hails from southern Virginia, graduated from Evergreen State College in Washington, and now lives in San Francisco.

  • Life Support
    This is a downround. Notice how they didn't talk about the valuation of the round AT ALL!
  • I'd be interested to know whether that's inside knowledge or speculation. I'd be inclined to think it's an up round, if only because the last one before it was a recap, and it sounds like the VC investors more or less took control of the company at that time.

    I tend to be more suspicious of motives when companies -do- talk about their valuation.
  • [disclosure: i am a mint investor & advisor].

    i have been a Yodlee user for over 5years. both services are useful, altho Mint now provides a well-designed front-end & additional services such as saving suggestions & other spending tips & reports, in addition to those it gets via its partnership with Yodlee.

    UI & other bells & whistles aside, should Yodlee decide to enter the fray directly, my guess is that Mint would likely become a very interesting acquisition target by any of the larger financial service providers (Intuit, Yahoo, Microsoft, eBay/PayPal, or Google).

    so while there could be competition ahead, there is probably also likely consolidation due to the potential for the category, applied to larger user audiences.

    (or at least as an investor, that would be my optimistic take on this scenario... more likely tho, Mint & other startups just end up being more nimble than the larger players, and therefore more & more attractive down the road)
  • Dave: Agreed, and I don't think Mint is necessarily at risk, given its high profile.

    I also don't think Yodlee will decide to compete directly, as it were. That's up to the banks. I think there -is- a little built-in arrogance in the web developer group (not to mention my own group, web media) that the old guard -- established industry -- will never figure out the game. That's not true; it just takes time, and the banks are in a much better position to grow the market. They start out with the users. All they have to do is not lose them. And for the most part, the independent sites don't have a lot of traction yet.. even Mint is pretty small, comparatively.

    Of course, there are also investment services to look at. If anything, it seems more likely that one of them might want to acquire a Mint or Geezeo outright. Makes plenty of sense for their customers.
  • Someone else that has access to "the pipes" would make sense as a suitor should anything happen to put Mint.com, Wesabe or Geezeo in play (e.g. Yodlee or CashEdge deciding to go direct-to-consumer in a big way) - but wouldn't it be an extraordinary slap in the face to an Intuit or a Microsoft should they decide they have to buy one of these upstarts? eBay is a very interesting possibility, though - I'm shocked they aren't doing something in this area already...

    Ultimately these plays will be about who owns the customer relationship - the closer you are to products and to key functionality, the better your chances of creating meaningful value will be. I am a big fan of what the guys at Mint.com are doing, but nothing they've built is critical in the way a checking account is. And all the analytical tools in the world can't close that gap absent some other kind of "critical" service. It will be very fun to watch this space develop.

    re: Yodlee's valuation, as Chris mentioned, the previous round essentially wiped the slate clean. It would be somewhat surprising if this round was down (given that the business seems to be performing decently well) but I seem to recall that the last one was. The last time I heard Anil speak in a meeting (nearly two years ago) he was convinced he had a $bn+ company on his hands - I certainly hope he gets there.
  • Didn't Yodlee used to do consumer device-sync services and software?
  • Not that I know of. From what I understand, they started out doing something close to what they do now, in 1999. Yodlee is a pretty anonymous name, could have been something similar.