April 28, 2017

Sallie Krawcheck was fired. Twice. It made the front page of the Wall Street Journal.

But her story didn’t stop there. After a brief hiatus, Sallie got back to work. She is still making headlines, but now they center around her fintech startup Ellevest, which has raised about $19MM in total funding over the last 18 months.

I had the great pleasure of listening to Sallie at the Empire Startups Fintech conference this past Tuesday. Given that the years I spent at Smith Barney (then Morgan Stanley) did not overlap with her time as CFO of Citigroup or CEO of Smith Barney/Citi Private Bank, I never had the opportunity to hear her speak until this week.

After working for years in giant corporations, and now as the Founder and CEO of Ellevest, she shared her perspectives on what it takes to build a great company and some history on the creation of Ellevest…

Origin of Ellevest

After being forced out of Bank of America (where she ran Merrill Lynch), she was told multiple times that she should start an investment firm for women. At the time, she did not agree and seemed offended by the idea that women needed to be pandered or talked down to when it came to investing.

However, Sallie had a realization while she was applying her mascara one day. Apparently, and I’ll take her word for it, insights often come in the few minutes it takes to apply mascara, separate your eyelashes, double coat, and everything else involved in the process.

Her revelation was that America’s retirement crisis is a women’s issue. Women on average live 5 years longer than men do, yet retire with only 66% as much money. In addition, women often experience different personal and career paths and milestones than men do. She had found the foundation for her vision of a new financial services company, meeting the needs of women in a male-dominated industry.

Making Mistakes

While her mistakes were early and minor, she affirmed her belief that launching a startup is harder than running Merrill Lynch. While Merrill could make many mistakes and still survive given its large amounts of revenue and profit, startups only have 3-4 serious mistakes in them before they could go under. As a new entrepreneur, mistakes are expected, and Sallie shared a few of her favorite lessons learned.

She initially thought that women wanted something like a “financial book club.” Reasoning that women loved to get together and talk, they must surely want to chat about their financial education with each other. As she learned, that assumption was wrong, and her head of design helped Ellevest work with users to understand what they really needed.

Sallie also initially believed that women needed to face their “emotional financial baggage” – women didn’t want that either. And while women ask for financial education more than men, they often never use the materials that they have and don’t want to spend time learning a bunch of financial lingo.

Sallie discovered these misconceptions as her team, especially her head of product and head of design, took time to listen closely and empathize with users. They have been able to pivot their approach and now are much closer to delivering what their target customers need.

Tips for Entrepreneurs

Now, eighteen months into building Ellevest, she has some advice for aspiring entrepreneurs.

First, be able to explain why your company does what it does. She referred to Simon Sinek’s famous TED Talk on “starting with why.” In short, customers don’t care about what you do — they want to know your vision and motivation for why you do it and how their lives will be different because you exist.

Second, and related, you must be purposeful about company culture. Culture doesn’t just happen (and often won’t be good if it does). Everyone in the organization must have ownership of the process and vision.

Third, hire diverse teams. While this does include demographic diversity, she also stressed the important of hiring people that think differently than yourself, saying your co-founder should be completely different from you. She cited the First Round review that showed that of the companies First Round invested in, those with female founders have performed 63% better than their all-male team counterparts.

This includes having the right mix of what Sallie calls “stress creators” and “stress absorbers.” She even recommended hiring a less-qualified employee at Ellevest because she thought that individual’s perspective would challenge the rest of the team more. Sallie believes that the ultimate goal should be to build the best team, not just find the best person.

Fourth, find a strong product manager who is an advocate for the user. The product manager must be willing to tell the rest of the executives “No” to balance realistic needs vs. desires.

By building strong teams, learning from early mistakes, listening to customers, and sharing the “Why”, Ellevest is off to a strong start as a differentiated financial services provider. I can’t wait to see what comes next.