As the eight cofounders of Singapore-based Arta Finance got to know one another during their years together at Google, they recognized a massive market gap for investment services aimed at people like themselves: successful professionals who were doing well, but not well enough to access top-tier financial services. With a total addressable market in the trillions, they decided to launch a fintech start-up offering these elite services at scale, using a digital platform powered by AI. The venture quickly attracted prominent investors and venture capital (VC) funding in excess of $92 million, is already doing business in the United States, and will begin operating in Singapore by early 2024. In this episode of The Venture, Caesar Sengupta, CEO of Arta Finance, sat down with McKinsey’s Tomas Laboutka to discuss Arta’s mission to automate public-market investing and provide access to alternative assets by offering clients the services of a digital private bank and family office.
An edited transcript of the podcast follows. For more conversations on venture building, subscribe to the series on Apple Podcasts or Spotify.
Podcast transcript
Tomas Laboutka: Hi, Caesar. Welcome to The Venture. Great to have you.
Caesar Sengupta: Thanks so much for having me on. It’s wonderful to talk to you.
Tomas Laboutka: Caesar, you’ve had a really successful career at Google. For 15 years, you led Google Pay in India, and you were at the helm for the development of the Chromebooks. You could have kept going, but you decided to jump ship and go build Arta Finance. What’s the story behind this?
Caesar Sengupta: Great question, and I like how you’ve put it. When you find an opportunity that’s even bigger than what you’re working on, I think all things lead toward going and doing it. Arta, in many ways, originated out of some of our team’s experiences at Google. I have eight cofounders; we’re a rather weird company. And among the eight cofounders, we spent eight to 15 years working together and became friends.
As friends talk about finances and money, we realized there was a massive market gap for serving professionals who are doing well and will eventually have a much greater net worth. They are not quite at the $20 million to $25 million level, where a private bank would offer them great service, or at an even higher level where they would have their own family office.
These people were not being served, and we felt that need ourselves. And as we spoke to others, we realized there’s a huge global opportunity. We estimate several hundred million people worth trillions in the total addressable market (TAM) in need of a service like this, where we offer private banking or digital family office services to them at scale, using technology and AI.
Once we saw this opportunity, we felt like the timing was right, given where we were with technology, AI, and our careers. It was not quite in line with what Google does—Google is not a wealth manager—so we decided the best way to do this would be to start something up on our own, with a lot of support from friends and others at Google and elsewhere.
Tomas Laboutka: What does Arta actually do?
Caesar Sengupta: If you think about a private bank, or a wealth manager, it helps you grow and protect your money. What Arta does is help you grow your assets through investments in public markets. We’ve essentially automated all kinds of public-market investing, ranging from very simple robo-advisers all the way to very sophisticated quant strategies you can personalize by industry. But if all you want to do is invest in a direct index fund in the S&P 500 and use tax-loss harvesting, we’ll let you do that, too.
A lot of people are only invested in public markets. But we think many professionals—just like the ultrarich—should be invested in alternative assets, like private equity, private credit, and private real estate ventures. We give people access to these investments, but at much lower amounts. Instead of the millions you’d have to normally invest, you can start with $25,000, or $100,000 in some cases. It makes these investments much more approachable.
We also offer structured products that are timed investments, so you don’t have to understand the complexities of derivatives, calls, and puts. We also offer tax-advantaged investing, structured through permanent life insurance policies, and set up trusts and estates as well. Essentially, we offer a full value proposition you would expect from a family office or a private bank. We offer that to our members and users via a digital platform, with experts and others providing support wherever needed.
Tomas Laboutka: You’re talking digitally enabled wealth management. There have been robo-advisers and the like for ten to 15 years. What’s the unique value proposition you bring to the table? And what role does AI play?
Caesar Sengupta: As you mentioned, robo-advisers have been around for the last ten years or so. They took a very simple concept of taking balanced portfolios that were rebalanced on a regular basis, and used technology to scale it. What we’ve done is brought it a decade or two into the future. Essentially, we’ve automated all kinds of public-market investments, and also given people access to alternative assets, but at much lower ticket sizes.
In many ways, we are doing what a private bank does, but using technology to scale those services. The way we think about it is, for all those people who started using robo-advisers ten years back, Arta is where you graduate to. Robo-advisers served you well. But as you start thinking about your financial future, and start thinking about scaling up, Arta is where you would come for a full-fledged digital private bank or digital family office.
We use AI in a couple of different ways. We started two years ago, before generative AI came around, so it was mainly machine learning. If you think about a bunch of these very sophisticated quant investment funds, we apply machine learning to some of those technologies and techniques. We can now offer these at an individualized level starting at $25,000.
With generative AI, the potential is so exciting, and the world is just opening up. We’re doing a bunch of work using large language models to enable thematic investing. Today, for example, if you wanted to invest in a particular theme you were excited about, you’d need a fairly sophisticated investment manager to set it up for you, or find an appropriate hedge fund.
But what if you could just type a theme into a system, which then generated assets to fit that theme? You could invest your money, the system would keep an eye on it for you, and all of this would be done with AI. We’re just starting to scratch the surface of generative AI, and I’m super excited about what it can do in the future.
Tomas Laboutka: That is really fascinating. What are the capabilities you looked for in your cofounders and early employees? What gives you the right to not just play here, but win against the incumbents, against the other start-ups, or a competitor that might be thinking of entering this market?
Caesar Sengupta: When you’re choosing cofounders, there are a few things. First, it’s kind of like a marriage. And in this case, it’s an eight-way marriage. So you need to know your cofounders and believe they are the kind of people you want to spend the next couple of decades working with, deep in the trenches. But a lot of us have worked together for a very long time. About six of us started ChromeOS, and then we started Google Pay. We’ve had a lot of history building products together.
So the first part is the history, the chemistry, and the time you spent working together. The second part is about having the right skill set. In this case, we could see the problem, which was one we faced ourselves. And we could see what the solution could be: using technology. But to build it out, we needed three key skill sets.
First, you need people who can build deep tech, especially AI, at scale. Our CTO, Zelidrag Hornung, ran engineering for Google Pay, and before that, he ran ChromeOS. One of our engineering leaders, another cofounder, was an engineering manager for Gmail, and built and grew Gmail from tens of millions of users to billions of users. These are deep, deep tech people who know how to build and scale, and the team has expanded.
Second, you need people from deep finance. And there are some people on the founding team who came from deep within finance. Our CIO, Chirag Yagnik, has run algorithmic hedge funds. Our insurance business is led by another similar stalwart from the insurance industry, Samita Malik, who spent 20 years building insurance businesses.
The third critical function is driving growth. That requires people who can take these complicated financial tools and jargon and help people understand what this is all about, engage with users, and drive growth. This group includes a lot of the folks who built Google Pay and drove growth globally from zero to hundreds of millions of users. We’ve put together a team with these three skill sets of deep tech, deep finance, and growth drivers, and I think this combination is going to be very effective in creating a scalable platform.
The opportunity here is not to take users away from anyone, because this is a largely untapped market. Most private banks are not able to access, tackle, or cater to investors with a few hundred thousand to $10 million in net worth, profitably. Most consumer banks don’t know how to reach this market, so there’s a completely open space here, which needs a fairly sophisticated product. But you need these three things to build the market and grow the space for everyone.
Tomas Laboutka: How do you get the right resources in terms of funding? Many companies we see building ventures from scratch carry fairly strong balance sheets, and are able to fund start-ups. How are you actually thinking about resources from that perspective?
Caesar Sengupta: There’s one advantage of having a bunch of older people start a company, which is they’re slightly further along in their careers, both in terms of net worth, but also networks. Those two make a big difference. Initially, when we started, we funded ourselves and we knew we had enough funds for a team of about 50 people for about a year, which for most start-ups is actually a pretty amazing luxury.
But as we started talking to people at Google, and this includes Eric Schmidt, the previous CEO, Sundar Pichai, the current CEO, and partners we worked with for many years, two things happened.
First, they all said, “This problem resonates with us. We wish we had this in our lives ten or 20 years back when we were in our 30s and really hitting our stride.” Secondly, they said, “We would love to see this happen and be a part of this journey.” So we ended up getting a huge number of angel investors who came in to support us and help us grow, and we now have 140 of them.
As angel investors were coming in, we started talking to some of the VC funds we’ve worked with in the past and they ended up leading our seed round. After the seed round, we realized there were a number of partners who wanted to engage with us.
We ended up doing a quick follow-on Series A and raised about $92 million. One reason for that was, obviously, the fact we wanted these people on the journey with us. But secondly, when you’re building a wealth management product, you don’t want your users to—even for a moment—think you’re not going to be in the game. We wanted to make sure our users knew we were in this for the long run.
So we raised a lot more and maybe took a little bit more dilution than we otherwise would have. But our goal here is to build a generational company, not maximize the valuation for any of us. We want to see this product thrive. Obviously, we’ll make money doing it, but we feel the opportunity to create a fintech company starting with wealth management is immense.
Tomas Laboutka: I’m curious, how are you thinking about scaling? The industry you’re trying to revolutionize is a heavily licensed and regulated one, where every country has its own rules and regulations. How are you thinking about that versus other competitive solutions, when they see your traction?
Caesar Sengupta: First of all, just a quick point on the competition. As I said, this is a largely untapped market. We see the opportunity as largely greenfield, being able to serve this particular audience, professionals with hundreds of thousands to $5 million, $10 million, or $15 million. We think there’s a massive opportunity here, so we’re very focused on that aspect.
In terms of how we plan to grow from here, we have a B2C effort in the United States, which is direct-to-consumer and focused on a couple of segments. We think our direct engagements will work incredibly well with young professionals in tech, consulting, and finance—the 30-somethings and 40-somethings. We also just received approval to operate in Singapore, so we will be able to open up there sometime early in 2024.
In those markets, we will be going directly to the professionals. But we’re a very ecosystem-friendly and partner-friendly company, and we’re having some great conversations with very large banks and financial institutions around the world, where we will offer private banking as a service. It’s like software as a service (SaaS), but with private banking instead, which partners and banks in other countries will market under their own brand.
One bank in Australia wants to offer not just our technology and user experience, but all of Arta’s products, options, and features. They want to package it together in a box and instantly upgrade their wealth management offering to be competitive with the world’s best banks. We think that’s a pretty interesting option. So that’s the next stage of growth for us internationally, where we offer everything as a SaaS in each country.
Our ultimate goal within the next year is getting to a point where, within a matter of weeks, a bank can offer a new wealth management service in their country and focus on that segment very, very quickly. They handle the regulatory piece and client relationships, while we offer everything else as a service.
Tomas Laboutka: So there’s the B2C play, which is a big market in the United States. You’re getting licensed in Singapore. But you’re also tapping into a second market, which is B2B in a sense, with wealth management as a service. When you bring the whole suite of solutions, including the products in a box, then any partner ultimately unlocks the licensing and regulatory requirement for you, and with that helps you tap into the market. That is a fascinating approach.
Caesar Sengupta: It’s extremely symbiotic. We think partners unlock growth for us, but we also bring something very unique to the partners. This is a playbook we followed over the years at Google. One of my cofounders, Felix Lin, and I manage the partner side of our efforts, just as we did with ChromeOS. Although ChromeOS started as a consumer offering, we then partnered with OEMs and other big distributors to get into education and enterprises, and it created new businesses for everyone.
We did the same thing with Google Pay. We started with a pure peer-to-peer play in India, and today, banks are offering loans on Google Pay, and fixed deposit accounts. You can buy airplane tickets on Google Pay in India, and receive merchant offers through it in the United States. We ended up creating an ecosystem play that made everybody more productive, because we created more opportunities and connections.
This model of starting a B2C, then adding a B2B component on top of it so the overall ecosystem benefits, is something we firmly believe in. It’s part of our core. From day one, when we started talking to our angel investors, this was part of the plan. It just took us two years to get to a point where we could start having conversations with banks and partners in the ecosystem.
Tomas Laboutka: Amazing. This is exactly where you’re answering the question all investors ask: What’s your unique capability? What you’re talking about here is the ultimate triple-A answer from an investor’s perspective. You’re telling them, “Look, I’ve been there and done that multiple times at Google, and I’m doing it with my own venture. And I have the vision, the team, and the resources to make this happen.” It’s really compelling, and I’m keen to see how this story will unfold. Caesar, this has been a really insightful conversation. I’m very much looking forward to having you back on the show a few years from now to hear how the journey is going.
Caesar Sengupta: Absolutely, Tomas, thank you so much.
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