20VC Wealthfront and Benchmark's Andy Rachleff on Why Delight Is The Greatest Form Of Virality, Why Competition Does Not Matter & What The Future Holds For Automated Personal Finance

In this episode of the 20 minutes VC, host Harry Stebings reconnects with Andy Ratcliffe, co-founder of Benchmark and CEO of Wealthfront. Ratcliffe shares his venture capital background and his commitment to philanthropy and education following his tenure at Benchmark. He discusses the inception of Wealthfront, inspired by the investment strategies of university endowments and aiming to provide top-tier financial services to the masses through software. Ratcliffe also touches on his return to the CEO role, driven by initiatives close to his heart, and emphasizes the importance of customer delight over competition. Additionally, Ratcliffe introduces Wealthfront's new selling plan service, which democratizes access to stock selling strategies for employees, and their financial planning experience called Path. He envisions a future where finance is democratized through software, making high-end services accessible to all. Throughout the discussion, Ratcliffe offers insights on leadership, transparency, mentorship, and the impact of technology on leveling the playing field in finance.

• Harry Stebbings is the host of the podcast and invites followers to engage with him on Snapchat and his blog.
• Andy Ratcliffe, co-founder of Benchmark and Wealthfront, is the guest for the second time.

This is the 20 minutes VC with your host Harry Stebings.

Harry Stebbings introduces the podcast and himself as the host.

And if you'd like to see behind the scenes from all things here at the 20 minutes VC, then you can follow me on Snapchat at htebbings with two b's. Or check out the new blog mojitovc.com, where you can find an article from today's episode with some of the key takeaways.

Harry Stebbings invites listeners to follow him on Snapchat and visit his blog for additional content and key takeaways from the episode.

• Andy Ratcliffe is a co-founder and former general partner at Benchmark from 1995 to 2004.
• Benchmark is a leading investment fund with a portfolio including Twitter, Snapchat, Dropbox, Uber, and Instagram.
• After leaving Benchmark, Ratcliffe joined the faculty of Stanford Graduate School of Business.
• He co-founded Wealthfront in 2008, an online financial advisor and investment management solution.
• Wealthfront accumulated over $2 billion in assets under management in three years.

Now, Andy is the cofounder of Benchmark, where he was general partner from 1995 to 2004. Benchmark are one of the world's leading funds, with investments in the likes of Twitter, Snapchat, Dropbox, Uber and Instagram, just to name a few, from their incredible portfolio.

Harry Stebbings highlights Andy Ratcliffe's tenure at Benchmark and its successful investments.

Upon his retirement from Benchmark, Andy joined the faculty of the Stanford Graduate School of Business to teach a variety of courses on entrepreneurship. And in 2008 he cofounded Wealthfront, the online financial advisor and investment management solution, where he now serves as founder and CEO.

Harry Stebbings details Andy Ratcliffe's post-Benchmark career and the founding of Wealthfront.

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For me, that's X AI. They bring you Amy and Andrew, their AI-powered personal assistants, for scheduling meetings.

Harry Stebbings shares his personal recommendation for X AI's scheduling assistants.

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• Andy Ratcliffe was motivated to start Wealthfront after observing the investment challenges faced by successful individuals in his network.
• He recognized that premier university endowments managed capital exceptionally well.
• Ratcliffe aimed to democratize access to the best investment products and services using software, inspired by endowment strategies.

I believe that the premier university endowments are the best managed pools of capital in the world.

Andy Ratcliffe expresses his admiration for the management of university endowments.

With software, we could do an 80 20 on what the endowments do and deliver their capabilities to the masses.

Andy Ratcliffe explains how software could replicate endowment strategies to benefit a wider audience.

• Andy Ratcliffe recently returned to the role of CEO at Wealthfront after serving as chairman.
• He likens founding a company to having a baby, highlighting the emotional connection to the venture.

Starting a company is like having a baby. You feel an unbelievable emotion about.

Andy Ratcliffe conveys the deep emotional bond founders have with their companies, which influenced his decision to return as CEO.## Leadership Transition at Wealthfront

• Andy Ratcliffe returned to Wealthfront due to a strong passion for specific initiatives.
• Adam, the former CEO, stepped aside amicably and remained on the board of directors.
• The transition was smooth because of a shared understanding and respect between Andy and Adam.

And Adam was a prince about it. He understood my passion for those things. He agreed that I was the more appropriate person to make that happen and he stepped aside.

This quote highlights the mutual respect and understanding between Andy and Adam during the leadership transition, emphasizing the importance of clear communication and shared goals in executive changes.

• Successful transitions are often hindered by surprise firings and internal factions.
• Open communication and mutual desire for the transition can lead to a smooth changeover.
• Andy's involvement as executive chairman and his relationships within the company facilitated a natural transition.

If both parties want the transition, that usually goes smoothly.

This quote suggests that mutual agreement between the outgoing and incoming leaders is crucial for a seamless transition, avoiding the internal strife that can arise from unexpected or contested leadership changes.

• Andy Ratcliffe does not consider the leadership change a strategic inflection point.
• Inflection points are typically driven by environmental or technological changes.
• The proliferation of APIs has enabled Wealthfront to introduce new services.

I'm not sure I'd call it a strategic inflection point.

Andy's statement indicates that while the leadership change is significant, it does not represent a fundamental shift in the company's strategy or environment, which is what defines a strategic inflection point.

• Wealthfront's key strategy is to democratize private wealth management services.
• The company focuses on engineering resources to deliver value-added features for all investors.
• Wealthfront differentiates itself by enhancing its direct-to-consumer model rather than expanding through other channels.

We are the only player in the automated investment space that is taking private wealth management, investment and financial services and delivering them to the masses.

This quote encapsulates Wealthfront's core business strategy of making sophisticated investment services accessible to a broader audience, which is central to their unique value proposition.

• Andy Ratcliffe aligns with Reed Hastings' philosophy that focusing on customer delight is more important than fixating on competition.
• Delighting customers leads to virality and is more effective than reacting to competitors.
• The goal is to be the leader in the market, as being first is crucial in technology.

Competition doesn't matter, that you should spend all of your time focusing on delighting the customer.

Andy Ratcliffe echoes Reed Hastings' view that customer satisfaction is paramount and that a company's energy is better spent on innovation and customer experience than on worrying about competitors.## Virality and Network Effects

• Virality and network effects are distinct concepts.
• Network effects can drive virality, but delight in a service is another key driver.
• Products like Netflix, Google, and Apple products lack network effects but achieve virality through customer love and word-of-mouth promotion.

"I think people confuse network effects with virality. They're two very different concepts. Network effects often drives virality. But another thing that drives virality is delight. If you love a service, then you're going to tell all of your friends about it."

This quote explains that while network effects can contribute to a product's virality, the delight a customer experiences is a separate and powerful motivator for sharing the product with others.

• Wealthfront introduced a selling plan for rank and file employees to sell their concentrated company stock.
• The selling plan is commission-free and operates daily over extended periods, making it convenient and minimizing taxes and regret.
• This service was traditionally available only to executives through private wealth managers with high minimums, but Wealthfront has made it accessible to a broader audience.

"Well, a couple of weeks ago, we introduced a new service that we call our selling plan. Basically, this creates the opportunity for rank and file employees to have a chance to sell their stock, their concentrated company stock position, in a way that only their executives had access to."

The quote describes Wealthfront's new service, the selling plan, which democratizes the ability to sell company stock in a convenient and financially beneficial way that was previously exclusive to executives.

• Wealthfront announced a new user interface for financial planning called Path.
• Path makes financial planning more accessible, with a $500 account minimum, compared to the traditional $1 million minimum.
• The service uses APIs to gather financial data, eliminating the need for interviews and meetings, increasing convenience and accuracy.
• Path allows users to interact with their financial plan in real-time, without waiting periods.

"We just announced a new user interface or user experience for the entire wealthfront client base that's built around financial planning, and we call this financial planning experience path."

This quote introduces Wealthfront's Path, a new financial planning tool designed to offer a convenient, accurate, and interactive experience for users, democratizing access to financial planning services.

• Democratization of finance means providing everyone with access to the best terms and services.
• Software plays a key role in leveling the playing field in the financial industry.
• The speaker values the social good that comes from making high-quality financial services accessible to a wider audience.

"Well, it means that everyone has access to the industry standard, best terms and services, software levels the playing field. And one of the reasons why I loved being a venture capitalist was that a, I got insight into new technologies that leveled the playing field, and b, I got to be part of that."

Andy Ratcliffe highlights the importance of making industry-standard financial services available to all through software, reflecting on his experience as a venture capitalist and the fulfillment derived from contributing to this democratization process.## Challenges of Being CEO

• Being CEO is an all-consuming role.
• The responsibility and constant engagement with the business do not allow for 'turning off' outside of work hours.
• This level of commitment was unexpected for those transitioning from roles like venture capitalism.

"When you're the CEO, you can't turn it off. You're always thinking about the business. It's just totally consuming."

This quote emphasizes the intensity and the non-stop nature of being a CEO, where the role demands continuous attention and thought, leaving little room for detachment from work.

• Transparency needs to be managed carefully to avoid misinterpretation.
• Providing context is essential when being transparent to prevent assumptions of bad faith or negative outcomes.
• Setting the agenda is important to ensure transparency serves the organization positively.

"The challenge with transparency is if you let someone else set the agenda, it can work against you."

The quote highlights the potential risks of transparency without control or context, suggesting that without proper management, transparency could lead to misunderstandings or negative speculation.

• Mentors can be contemporaries rather than seniors.
• The best mentors are those who demonstrate qualities you admire and can learn from.
• A mentorship can stem from a long-term professional relationship and shared experiences.

"Closest mentor and best mentor is actually a contemporary. It's my partner from benchmark Bruce Dunleavy."

This quote illustrates that mentorship can come from peers, in this case, a business partner, and that the mentor-mentee relationship can be rooted in mutual respect and the desire to learn from each other's strengths.

• It's difficult to choose a single highlight in a successful career.
• Being part of multiple companies that have grown significantly is a collective highlight.
• The impact made through these experiences is rewarding.

"I've been associated with a number of companies that have grown their revenue to over a billion dollars."

The quote reflects pride in contributing to the substantial growth of several companies, which collectively represent a career highlight rather than a single standout moment.

• The goal is to create a social good through the services provided by Wealthfront.
• There is an ambition to make services traditionally available to the wealthy accessible to a broader audience.
• Innovation and effective marketing are key to reaching more potential clients.

"We need to keep innovating. We need to keep taking services that were traditionally only available to multimillionaires and through software, make them available to a much, much broader audience."

This quote conveys the vision of democratizing financial services by leveraging software to offer high-end services to a wider audience, emphasizing the importance of innovation and inclusivity in Wealthfront's mission.

• The interviewee has been a supportive figure in the host's venture journey.
• Expressing gratitude for the guidance and time provided by the mentor.

"Andy has been immensely kind in helping me navigate my time in the world of venture."

The quote is a personal acknowledgment of the mentorship and support received by the host from the interviewee, which has been valuable in the host's professional growth.

• The host encourages listeners to follow on social media for additional content.
• The podcast promotes AI personal assistants for efficient scheduling.
• Workable is endorsed as an all-in-one recruiting software for companies.

"You can add me on Snapchat at htebings to see behind the scenes footage of the show, or you can check out the article from today's episode on mojitovc.com."

This quote serves as an invitation to engage with the host through social media for more content related to the show, indicating a strategy to expand the podcast's reach and audience engagement.

"Yes, this is x AI, bringing you the AI-powered personal assistants for scheduling meetings."

This quote promotes a specific AI tool designed to simplify the scheduling of meetings, highlighting the benefits of technology in streamlining administrative tasks.

"Workable is the all-in-one recruiting software for ambitious companies."

The quote endorses Workable as a comprehensive solution for recruiting, suggesting its utility in making the hiring process more efficient for growing companies.