Austin — At the helm of his fintech startup Honest Dollar, William Hurley noticed that a significant number of users who created accounts on the site dropped out in the middle of the sign-up process.
Honest Dollar is a website that offers small businesses retirement plans for employees. The startup opened for business in earnest last summer, when Hurley noticed the incomplete registrations. “It was when we were asking for the EIN (employer identification number) that they were dropping out,” he says. “The majority of them were 1099 contractors.”
That insight led Hurley and his team to rewrite Honest Dollar’s software in order to accommodate such freelance workers, the so-called 1099’ers, a tax form used by many contractors.
That led to a partnership with Lyft so that the ride-hailing company can offer its drivers retirement plans starting at $1 a month for the first 10,000 drivers. (After that, the cost is raised to $3 a month.) Using the Honest Dollar platform, drivers can control savings plans and transfer savings to checking accounts, as needed.
Honest Dollar joins a group of other technology companies seeing opportunity in connecting small to mid-sized employers with health and retirement plans that they can afford to provide their employees. About 14 percent of these companies currently provide some retirement benefits, according to the U.S. Government Accountability Office.
Among the startups out there trying to compete for the 80-plus percent who don’t offer benefits include Namely, a New York fintech that last week raised $30 million for its HR-software suite, which includes healthcare options.
Honest Dollar is focusing on retirement plans for now—IRAs or Simplified Employee Plan, or SEPs. The company charges employers between $8 to $10 a month per employee. “We provide a very clean financial product at a fair price,” Hurley says. “We are a software platform rather than a financial services company, so there are no extra basis points, no wrapper fees.”
At launch last year, the company raised $3 million in a seed round led by Expansive Ventures that included investors such as Formation8; Core Innovation Capital; Vikram Pandit, the former CEO of Citigroup, Mint founder Arron Patzer; and Will.i.am, the founder and frontman of the pop group The Black Eyed Peas.
(The company was founded with Henry Yoshida, a financial planner and founder of the Maresh Yoshida 401k Group, but Yoshida left the business last year. Hurley said this week Yoshida is no longer involved with the company in any capacity.)
Hurley says he and his partners were undaunted by the prospect of entering a highly regulated business. “One of the biggest items in my budget over the past year has been legal,” he says. “Dozens and dozens of lawyers.”
Instead, he adds, he and his team—who have worked at technology companies such as IBM, Tivoli, and BMC—focused on the technology. “We built the regulatory compliance in the code; we built it into the system model.”
