Company Name: Onramp Invest

One-Liner

Onramp is building the infrastructure to enable registered investment advisers (RIAs) to easily service their clients’ crypto-asset needs.

Summary & Key Takeaways

Website: Onramp Invest

Pitch Deck: Onramp Pitch Deck

Raising: $25M

Valuation: $TBD [This is an early preview of the deal; the team is currently negotiating terms with several potential leads]

SPV Allocation: $1M

Previous Investors:
SoftbankCoinbase Ventures,
Gemini, Galaxy Digital,
WisdomTree,
Fox Ventures,
Eterna Capital, and
Ritholtz Wealth Management.

New Investors (This Round): TBD

Previous Funding: $7.2M (Across 3 SAFEs during Jan – Aug 2021)

Problem:

  • Registered Investment advisers (RIAs) lack access and knowledge to fully serve their client’s crypto-asset needs and demands.

Market:

  • There are 13K+ RIAs, and 330,000 individual Investment adviser Representatives (IARs) working in RIAs.
  • RIAs have $110T Assets Under Management (AUM).
  • 79% of RIAs fielded questions about crypto assets from their clients.
  • 47% of high-net-worth clients are dissatisfied with their financial adviser’s digital maturity concerning crypto assets.

Solution:

  • Onramp provides a platform and tools to connect RIAs to the crypto ecosystem along with educational resources to help individual investment advisers better understand the crypto landscape.
  • The Onramp offering consists of the following:
    • Onramp Infrastructure – provides RIA “plug-in” access to the crypto ecosystem enabling buy-sell, custody, and portfolio management of crypto assets.
    • Onramp Tools – provide for real-time pricing & market data, open APIs, and modeling and forecasting tools.
    • Onramp Academy – Educational resources geared to financial advisers enabling better preparation to address their clients’ needs.

Management Team:

 

The co-founders and senior team have more than 75 years of experience in RIAs, including 3 certified financial planners in addition to blockchain and fintech expertise. Onramp currently has 41 employees.

 

Fundraising & Use of Funds:

  • Raising $50M Series A at $TBD in a priced round.
  • Pro-rata rights confirmed.
  • 60% – scaling the team to 150 employees
  • 20% – platform engineering
  • 10% – academy development
  • 10% – marketing

 

Introduction

Onramp is building a crypto-asset integration platform (IPaaS) to provide secure and seamless access to the crypto ecosystem for registered investment advisers (RIAs). RIAs provide financial advice to high-net-worth individuals and institutions and manage their financial portfolios. Onramp’s platform offers access, education, and tools so RIAs can service their clients’ crypto-asset needs. They are creating the interoperability layer between RIAs and crypto-asset ecosystems.

 

Problem & Market Opportunity

Financial advisers and their firms are ill-equipped to incorporate crypto-assets, such as Bitcoin and Ethereum, into their service model. Currently, there is no practical way for financial advisers to model, trade, or bill when it comes to their clients’ crypto-assets (e.g., crypto held at Gemini, Coinbase, Metamask, or other exchanges and wallets). Additionally, data on crypto-assets cannot be linked to the RIA tech stack, including CRMs, financial planning, and portfolio management software. This tech stack is integral to the majority of RIAs.

  • 92% of RIAs offer financial planning and use financial planning software.
  • 54% of RIA firms utilize a CRM application.
  • An increasing majority of RIA-influenced trades occur at the portfolio management provider, rather than the custodian.

Wealth management clients understand their financial advisers lack the resources to effectively manage their crypto-asset needs. Only 6% of advisers currently provide advice about allocating crypto-assets as part of the service offering. Despite this, client demand for crypto-assets is high:

  • 79% of financial advisers took questions from their clients about cryptocurrencies in 2018-2019.
  • 71% of institutional investors plan to invest in crypto assets in the future.

 

Several inflection points highlight the increasing need for integration of the crypto ecosystem and the RIA universe.

  • 6% of venture capital was in crypto in H12021
  • The total value of retail assets topped $53.8T.
  • 65% of Millenials indicate they will begin using a financial adviser in the next 2 years.
  • 48% of US consumers and 72% of high-network individuals (HNWI) are invested in crypto assets.
  • 47% of HNWI are not satisfied with their firm’s crypto maturity.
  • More than $70T in assets will be transferred to heirs by 2042.

 

Currently, financial adviser clients have financial accounts, including crypto-assets, held outside their financial plan.

  • 95% of financial advisers field questions from clients on “held-away” assets.
  • Typically 20-40% of a client’s traditional portfolio is “held away” (i.e. outside the financial plan). Onramp estimates 40-60% of crypto portfolios are held away.
  • $1T of client assets are held in cash, which is earning zero or very small interest.
  • More than 31M people use Robinhood and 60% of the accounts trade crypto.
  • Coinbase has 68M users with $223B in assets.

 

While counts of RIAs vary, Statista reports approximately 13,000 SEC-registered RIAs with roughly 43 million clients in 2020. Also, there are approximately 17,400 state-registered RIAs. Note, firms with greater than $110M AUM a required to register with the SEC, and firms with less than $110M AUM must register with the states where they operate.

  • 330,000 Investment Adviser Representatives (IARs) work in RIAs. The IARs are the actual individuals who provide the service, while the RIA is the firm.
  • 92% of assets are held in firms with more than $5B Assets Under Management (AUM).
  • Total AUM is $110T in 2021 in more than 61M client accounts being managed.

 

The market opportunity is immense, both in terms of the user population, but also assets under management.

 

Solution

Onramp customers are RIAs, that is the registered entity that provides advice and portfolio management services. RIAs have a fiduciary responsibility to always act in their client’s best interests, which includes ensuring the best execution of client transactions and ongoing monitoring of the portfolio.

 

The RIA ecosystem lacks infrastructure-level access to the crypto-asset ecosystem. Additionally, many IARs don’t fully understand the crypto universe, which is evolving at a rapid pace.

 

Onramp provides three channels to address these shortcomings in the ecosystem.

  • Platform – Onramp provides the core infrastructure to connect RIAs to the crypto ecosystem, this includes access to custodial services, buy-sell capabilities, and integration with the RIA tech stack including portfolio management and CRM systems.
  • Tools – Onramp natively, and through partnerships, provides access to real-time pricing and market data.
  • Academy – Through original and partner-provided content Onramp provides educational resources to help IARs learn about and navigate the crypto universe. partner

 

Business Model & Traction

Onramp charges on a per-seat basis for access to the platform, tools, and Onramp Academy:

  • Annual $5000 charge per firm for the first 5 advisers and 1000 linked accounts. Per-seat discounts are available for up to 40 users ($800/seat annually). Firms with more than 40 users are offered custom enterprise-level pricing.
  • Onramp Academy can be accessed independently of trade-enabled seats for $50/seat/yr.

Additional sources of revenue include:

  • Payment for order flow –
  • Managed portfolios
  • Onramp Investment Products
  • White-Glove Services

 

Traction

As of September Onramp has brought on 258 organizations, including 103 RIAs, and 290 individual advisers. These RIAs represent $221B in total AUM. About 35% of these customers have AUM greater than $1B, including 8% with more than $5B AUM; and several of these firms are on Barron’s “Top 100 RIA Firms of 2021”.

Key metrics for Onramp include:

  • # of firms, RIAs, IARs, accounts, and platform AUM are the primary drivers of revenue.
  • Expectations are for a diversified revenue stream over the next 5 years with 1/3 coming from the platform and related services, 40% from diversified investment vehicles, and another 20% from DeFi channels via revenue sharing agreements.

The Go-To-Market strategy is to service RIAs with value-added services and then bring additional services to help investors succeed in the crypto markets through diversification and yield generation.

 

Competition

Onramp has a real first-mover advantage as this space is nascent, but rapidly evolving. So while direct competition is limited there are emerging alternatives. They include:

  • Large Custodians: Firms such as Schwab and Fidelity have millions of user accounts and the free cash flow to develop and offer similar services. These firms probably represent the biggest threat. To counter this threat Onramp is currently in talks to provide its services to some of these firms. Making the argument that buy vs build is a better option.
  • Turnkey Digital Asset Management – The crypto market is evolving rapidly and legacy asset management providers have developed in-house or spun out subsidiaries intending to centralize the financial adviser experience. This is very likely a flawed strategy as centralizing services on legacy platforms will be fragile from a technology and operational point of view.

 

Funding

Onramp is raising a $50M Series A round at a $TBD valuation with “a firm to be named later” as the lead investor. They have $X committed and previous investors who are following on in this round include Softbank, Coinbase Ventures, Gemini, Galaxy Digital, and others.

 

Use of Funds:

Hiring: 60%

Platform: 20%

Academy: 10%

Marketing: 10%

 

Onramp raised $7.2M in the first half of 2021 across 3 SAFEs. This Series A would be the first priced round.

 

Why we are investing

The demand and need for Onramp’s proposed offering are evident and growing. RIAs and individual advisers are going to need the access and tools to manage clients’ investments in crypto. They will also need to stay on top of an ever-changing crypto ecosystem and require continual access to educational resources in the space.

 

The overall market opportunity for Onramp is immense and this company could easily be a unicorn within the next 24 months and a deca-corn within 5 years. Revenue projections 4 to 5 years out exceed $500M annually. The company is building a fantastic team with deep knowledge and understanding of the financial adviser universe and the blockchain/crypto ecosystem.

 

Their GTM strategy to focus on RIAs, onboard wealth management client accounts is sound. Layering value-added services and monetizing the massive AUM Onramp will have is the logical next step.

 

Onramp will need to establish itself in the market quickly and then grow even faster to maintain its first-mover advantage. This round of financing will provide sufficient resources to fuel that growth.