Truebill secures $17M to enhance its personal finance app

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The fintech startup Truebill on Thursday announced a new $17 million round of venture capital funding, bringing its total funding to $40 million.

The San Francisco company plans to apply the money to its evolution from a bill- and fee-negotiation service to a full-service budgeting and personal financial management app. Investors include Bessemer Ventures and Day One Ventures.

"We’re strong believers that companies with a primary focus on customer well-being actually do better," said Bessemer partner Kent Bennett, who will take a board observer seat at Truebill.

Truebill now has more than 1 million active users, and it’s signing up between 5,000 and 10,000 users a day, according to co-founder and Chief Revenue Officer Yahya Mokhtarzada. It’s grown to more than 70 employees.

Yahya Mokhtarzada, co-founder and chief revenue officer, Truebill
"It's not enough to just tell people where their money is," says Yahya Mokhtarzada, co-founder and chief revenue officer of Truebill. "We need to build a product that measurably changes people's behavior and by extension improves their financial health.”

“We’re very heavy on engineering, and in the last year we've invested in building out our data-science team,” Mokhtarzada said. “Plus, obviously anytime you get north of a million users, you have to scale up operations in customer support.” More than 10 people now handle live chat, subscription cancellations and bill negotiation.

Evolution of the business model

Truebill started out in 2015 by providing subscription tracking and cancellation, as well as bill and fee negotiation. Using the data aggregator Plaid, the company would gather a user’s bank account and card account data, identify all the subscriptions a person was paying for and, when authorized, cancel duplicates. It would also learn about a user’s monthly bills — everything from satellite radio to pest control — and find ways to lower them. Truebill would take 40% of the savings.

The company still does all of those things, with one exception: in the beginning, it tried to take on bank fees and would negotiate on users’ behalf to get various fees waived. Banks successfully blocked this service, and Truebill had to roll back the feature. Its app now offers a button customers that can use to call their bank and ask for a refund, offering a script for what they should say.

But Truebill has also pushed to rebrand itself as a more holistic financial management provider, what Mokhtarzada calls "Mint 2.0."

In addition to Intuit's Mint, Truebill now competes with apps from fintechs like Personal Capital, Moven and You Need a Budget, as well as offerings from banks, such as Goldman Sachs's Clarity Money and PNC Financial Services' Virtual Wallet.

In 2018, Truebill started offering a savings account — through its bank partner, NBKC — and automated savings. This feature, which is designed to help people get to $1,000 in savings, is popular with lower-income users.

“An important component of financial health is having $1,000 for unforeseen income disruption or unexpected expenses,” Mokhtarzada said.

Truebill recently launched a feature that provides users' credit scores. The firm also offers pay advances. It will forward users up to $100 of their next paycheck with no interest, no credit check and no penalty.

“It’s on the honor system, essentially,” Mokhtarzada said.

This week, Truebill is launching the ability to track users’ full net worth, including the balances in accounts at other banks and brokerage firms. (Again, Plaid does the data aggregation.)

“The first thing people do when they come into the app is get a complete picture of where they stand in terms of savings and debt, where their money is going in terms of spending by day and by category. They see their upcoming bills, and they address inefficiency,” Mokhtarzada said.

But what the company wants to do next is help customers change unhealthy financial behaviors.

“Today Truebill is really powerful for giving you a snapshot understanding of where your finances stand, but what's missing from that picture is your financial trends over the course of six, 12 or 24 months,” Mokhtarzada said. “Are you making more than you're spending? Are you paying down your debt, or is your debt going up? How do you think about this big picture, and how is it shaping out over time?”

The company plans to introduce a bonus program for savings, for instance.

“Our big push for 2021 is giving people information about their finances, and it's definitely helpful, but information doesn't necessarily lead to behavior change,” Mokhtarzada said. “Ultimately if we want to make people more financially healthy, it's not enough to just tell them where their money is. We need to build a product that measurably changes people's behavior and by extension improves their financial health.”

The savings bonus, which will reward users when they hit pre-selected savings goals, will give people an incentive to set aside more.

Another example of behavior shaping involves overdraft fees. Today, Truebill will alert users that they have a low balance and are at risk for an overdraft.

Eventually, Mokhtarzada would like to push money automatically from the user’s savings account into their checking account to avoid the overdraft. He would also like Truebill to predict that an overdraft is likely to happen in the future, and encourage people to change their spending patterns to eliminate that risk.

“Once you have the data science resources, you can start looking at the different ways in which displaying that information actually changes behavior and then measure your success, not by how many users you have or, or by how many times someone opens the app, but actually by tracking the markers of financial health and seeing if you're able to measurably improve financial health,” he said.

In Truebill’s original business model, it didn’t charge monthly fees, but collected a cut of whatever savings it could scavenge off its billers.

Today, Truebill’s biggest chunk of revenue is from its premium subscription. For certain extra features, such as custom budgeting categories, people pay a monthly fee of $3 to $12. Customers choose what they want to pay within that range. Less than 1% of customers choose to pay $12, Mokhtarzada acknowledged. How many people pay $3?

“I don't want to say a percent, but it's certainly the most popular,” he said.

Truebill's ability to produce revenue has impressed principals at Day One Ventures.

“When we invested in the company three years ago, they didn’t have revenue,” said Masha Drokova, founder and general partner at Day One. “We expected quick growth, but Truebill surpassed our expectations. They’ve grown their revenue over seven times since a year ago, and more importantly, they’ve brought financial health to millions of people.”

All in the family

Truebill was founded by Yahya Mokhtarzada and his brothers Haroon and Idris. When they started, Yahya was CEO and Haroon was chief product officer. A few years in, they changed roles and today Haroon is CEO. (Idris remains the chief technology officer.) The shift is a study in family dynamics and communication.

“I had wanted Haroon to take over as CEO, but I didn't want to ask him because I didn't want it to seem like I was giving up,” Yahya Mokhtarzada said. “Haroon actually wanted to be CEO, and he didn't want to ask me because he didn't want me to feel like he was taking it from me. So I think we had a solid year where we both wanted this change but didn’t talk about it. And then finally, the idea got floated and we both said yes, each of us wants that.”

The brothers founded an earlier company and have been working together for 20 years, all told.

Yahya Mokhtarzada's advice on working with siblings is this: “At the end day, you just have to remember that your relationship with family is more important than the business. Each of us understands that, so we would never let business friction interfere with our brotherly bond. As long as our priorities are squared there, I think that helps you avoid conflict. The other thing is it's important to have really clear division of labor. My younger brother is a great engineer, and I trust him explicitly on all things engineering. My older brother is really strong on product and has the final say there.”

The brothers have not figured out how to avoid bringing work to family gatherings.

“It definitely comes to Thanksgiving,” Yahya Mokhtarzada said. “That's probably the biggest downside. We took a family trip this summer and even with all my nieces and nephews and my parents there, we still talked about work way too much.”

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