Growth Capital: Nutmeg - tech take on wealth management that lets you start with just £1000

Inspired by the tech world: Nutmeg’s co-founder Nick Hungerford (Photo: Glenn Copus)

Glenn Copus

9 September 2014

If you asked most Londoners to describe Vauxhall in a single word, “finance” would probably be pretty far down the list.

But hidden in the backstreets of one of London’s most colourful districts that also houses MI6 is Nutmeg, an online wealth manager causing a stir further east in the City of London.

Its south London HQ is nothing like the kind of office you would find in the Square Mile. Staff down tools once a week to watch an episode of the US drama Silicon Valley, eat ice cream at their desks and don’t wear suits.

It doesn’t take a genius to work out that Nutmeg’s co-founder, Nick Hungerford, takes inspiration from the tech world rather than the financial sector he left behind following stints at Brewin Dolphin and Barclays.

“It’s heartbreaking to see how antiquated the wealth-management industry is,” Hungerford says.

“For many years, there have been these assumptions that if you have less than £500,000 to invest, then you have to do it yourself. If you’re wealthy enough to afford it, you get an opaque relationship with someone you meet once a year, who charges you too much because they’re in a fancy office. It doesn’t make sense.”

After a period in the City, the 34-year-old moved to the US in 2007 to study for an MBA at Stamford, where he was able to watch the global economic meltdown while rubbing shoulders with the brains behind tech giants like Facebook and Twitter.

“There were people in my class who have gone on to build great businesses like Identified and Relate IQ, which were both recently sold for nine-figure sums,” Hungerford remembers.

“I came across the idea of smashing together traditional wealth management and DIY investing, and pitched it to my classmates and my professors, including Google’s Eric Schmidt, who told me to get on and do it.”

After punting the idea around the investment community, Hungerford — and his uncle and co-founder William Todd — eventually received $1.25 million (£760,000) in funding from Silicon Valley investor Tim Draper, who had previously backed Hotmail, Skype and Pentech Ventures.

They decided to launch in the UK rather than the US because of the availability of “financial and technical talent” and the willingness of the financial regulator to “embrace innovation”.

Nutmeg’s user-friendly website gives customers with as little as £1000 to invest the freedom to choose how much risk they want to take with their money, depending on what they are saving for and how long they plan to save.

Fees are low, people can take their money out at any time without penalties, and clients receive videos by email reporting on the funds in which they are invested. This approach seems to be paying off with 35,000 users in the UK.

“We’re different from a bank because we give people the opportunity to do more with their money than simply leaving it in an account with a feeble rate of interest,” Hungerford says.

“What we’re doing is giving people the chance for potentially higher returns [than a bank account] but making it obvious that those returns come at the price of higher risk.

“So we’re a nice stepping stone for people who don’t want their money locked up in an account earning next to nothing but also don’t want to risk everything investing in a stock they heard about in the pub.”

Nutmeg’s success was recently reflected by a $32 million fundraising, which was backed by some of the City’s best-known investors including Carphone Warehouse founder Charles Dunstone, asset manager Schroders and venture capitalist Balderton.

“Hopefully it will give us the fuel to turn Nutmeg into a really big business,” says Hungerford. “We employ 40 people at the moment but we should be close to double that by the end of the year. We will also be launching new products such as pensions.

“We’re ahead of the pack with our digital and innovative service but we’re still nowhere near people like Amazon in terms of understanding our customers,” he admits. “We should be right on top of this — for example helping you understand your changing attitude to risk when you move from single to engaged to married.”

When it comes to advice for would-be entrepreneurs, Hungerford believes that people should learn from their previous failures.

He says: “One of the most important things that I learned is that when you go from pitch to pitch, you should take away the feedback from an unsuccessful pitch, squash the problem, learn how to answer it, and then it’s not a problem next time... then eventually someone has to say yes.”

NUTMEG

Founded: 2011

Staff: 42

Turnover: £1 million Business idol: John Bogle, founder of Vanguard

Growth Capital: Nutmeg - tech take on wealth management that lets you start with just £1000

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