Tim Chen wants to buy a house. This shouldn't be a problem: Though only 33 and shopping in the heart of bubblicious San Francisco, the former hedge fund analyst knows almost everything there is to know about personal finance. He's also worth something like $265 million on paper. But Chen, characteristically, wants to consider almost. Every. Option.
"I wanted to test out the process," he tells me, in the midst of a fast-paced yet halting monologue about shopping for, qualifying for, and closing on a home. Short and trim, his button-down and jeans accented by black hair in an unexpected hipster pouf, Chen is quietly intellectual, deeply self-critical, and the sort of conversation partner who struggles to keep pace with his own thoughts. It leads to a lot of elliptical discussions.
It's early October, and Chen and his girlfriend are in the latter stages of buying a single-family house in Corona Heights. As he started this ordinary but complex task, he wanted to really understand the range of financing available to him--so he asked three different lenders to prequalify him for a mortgage. It's what Chen's company, NerdWallet, does: review the strengths and weaknesses of financial products for three million monthly Web visitors.
Founded as a credit card marketing website, NerdWallet aims to become the information clearinghouse for everything financial--a more curated "Yelp for finances," as employees and analysts put it. The firm's credibility rests largely on the same exhaustive trial-and-error process that landed Chen his new home. That attention to every detail, and careful consideration of every possible decision, seems rooted in Chen's deep-seated anxiety about making the wrong choice. It also reflects a terrifying early failure--a layoff that cost NerdWallet a fifth of its employees. Now, Chen's even more determined to never underthink anything ever again.
That obsessive focus has also helped him break into the vast, if fractured, market for financial advice. The competition is led by Bankrate, the $1.4 billion market-cap company that owns sites including CreditCards.com, but which has taken some dings of late. There are other newcomers, including Credit Karma, and old-guard boomer investment houses (Fidelity, Vanguard, Schwab). There are Millennial-focused robo-advisers and wealth managers (Wealthfront, Betterment); lead-generating sites focused on mortgages or stocks (Lending Tree, The Motley Fool); personal budgeting advisers or insurance specialists (Mint, Zenefits); health data providers (WebMD); and tons of websites and magazines with personal finance advice, including this one. Not to mention that for decades, every major bank and insurance company, from Citi to Prudential, has tried to push the idea of a financial supermarket.
NerdWallet's approach certainly fits a post-financial crisis world facing demands, particularly from Millennials, for financial transparency. The company's appeal rests on its Yelp-like breadth of information, and its efforts to shine a light into some dark and cluttered corners of the money universe. Mercator Advisory Group analyst Alex Johnson praises its "spectacular transparency," and consultant Jo Ann Barefoot, a former deputy Comptroller of the Currency, says NerdWallet is "out in front on the whole issue of evaluating and rating and creating access to feedback on financial companies, which is a massive trend." Indeed, NerdWallet claims it can be "a source of truth" for pretty much any financial question, with "financial" defined broadly: What sort of earthquake insurance should you get if you live in California? What's the best sort of online loan if you want to open a second location of your business? Which credit card stands the best chance of yielding free seats to Maui?
Type one of those questions into Google, and you'll likely find a NerdWallet article written by one of its 70 staff writers. Or go directly to the site and find lists of NerdWallet's favorite travel credit cards, or recommendations of no-fee checking accounts, or rough quotes for car insurance by ZIP code. You can submit almost any other question about your finances, and await a response from NerdWallet's network of advisers. Chen's on a quest to anticipate every single one of those questions--and to have a clear, unbiased, logical answer for you. "It's just a waste," he says, "when people don't find the right answer--and no one is benefiting. Not the person who's fumbling around, not really any financial institution. Everyone loses, and it's stupid, and the internet should have fixed this a long time ago."
Of course, if it had, Chen wouldn't be running a consistently profitable business that investors currently value at $520 million. The company has 285 employees, with plans to hire an additional 135 by the end of this year, and annual revenue projected to clear $100 million by then. In early 2015, Institutional Venture Partners led the company's first outside financing, a far cry from the $800 that Chen used to start the company. "NerdWallet's still a medium-stage company, but with late-stage financials," says IVP partner Jules Maltz. "It's a little bit like the seventh grader who can dunk a basketball."
And like any precocious adolescent, NerdWallet has weathered some fierce aches along with its success. "It's constant growing pains, but it's different growing pains," says Jake Gibson, Chen's childhood friend and co-founder.
Those pains are not immediately evident today--the Market Street headquarters in San Francisco is brimming with the usual signs of startup achievement: the nap room, the foosball table, the dogs trotting after their owners, the endless parade of catered lunches and gourmet-yet-gluten-free carbs.
Less usual are the office's Soviet-size signs, exhorting employees to "Relentless Self-Improvement" and to prioritize "Consumer Company Team Self." Assembling for the Monday-morning all-staff meetings means having to pass NerdWallet's "fail wall," spotted by cheerfully bright Post-it notes marking mistakes serious and trivial, professional and personal. ("Forgot anniversary." "I did not secure a profitable exit for my last group of investors." "My first year out of college, I made $10,000." "I have overly aggressive timelines, because I am impatient.") Chen has at least four up there. It's a daily reminder of the many challenges facing NerdWallet's mission to be all things financial to all people. Or as Chen repeats, "We just keep iterating."
Searching for Answers
The self-proclaimed nerd met his co-founder in Atlanta, at the local math-and-science magnet school. Chen's parents, computer scientists who left Taiwan to study at the University of Oklahoma, had just moved the family from Houston, and Chen and Gibson bonded over teenage pursuits both nerdy and not: math and engineering clubs, "hanging out at the mall, doing things that are borderline illegal," Gibson recalls. After college, they both wound up in New York City, in finance, and in apartments on the same Murray Hill intersection.
Those quickly became dark days. Gibson survived a purge of JPMorgan Chase's trading businesses, but Chen was fired by his hedge fund in December 2008. "Half of my friends who had been working in finance were unemployed," Chen says. "We would go to Dave & Buster's in the middle of the day, because what else was there to do? They have half-price tickets on Wednesdays."
Eventually, Chen, who'd wanted to be an entrepreneur since his Stanford days, recovered the dream for family reasons: His older sister, whom he had followed to college, asked him for advice on which new credit card to get. His parents, around the same time, wanted his advice for buying into a mutual fund. His expertise was in trading tech and media stocks, not picking credit cards or retirement funds, but a quick online search quickly disgusted him--why wasn't there a better-designed, transparent, unbiased website that would answer his family's questions without trying to push a specific product on them?
Cue a lot of trial and error, a year spent subsisting on Subway sandwiches and Domino's pizza, some low-level recruiting of his other college buddies, and a Christmas week spent in a Starbucks, manually entering all the information he could find on the nation's then-7,400 credit unions into an Excel spreadsheet. "I spent six months trying to build a credit union tool, and only got 10 links out of it," he confesses on the fail wall.
Still, the marketing side of the credit card business was a lucrative launch pad. Banks pay steep finder's fees to partners that bring them the best customers, since what those consumers will spend every year far exceeds those fees. According to COO Dan Yoo, NerdWallet earns anywhere from zero to "hundreds of dollars" for every person who comes to its website, clicks through, applies for a credit card, and is approved. That business still accounts for the vast majority of NerdWallet's revenue. About 5 percent of people go from reading to buying a product; while the clickthrough rate has held steady, overall traffic has tripled in the past three years.
Chen was hardly the first to discover this source of revenue. "The base case was Bankrate 2.0," says Shiyan Koh, a Stanford friend of Chen's who now runs NerdWallet's business operations. Like Bankrate and Credit Karma, NerdWallet is benefiting from banks' willingness to flood the internet with money, creating rivers of funding for the third-party companies that bring them business. The likes of JPMorgan Chase, Bank of America, and Citi spent a projected $7.2 billion on digital advertising in 2015, making financial services the third-largest industry spender, according to eMarketer, which estimates that industry total digital spending will rise to $10.9 billion in 2019. "Banks really didn't fully anticipate this shift to digital shopping for credit cards or other products," says Mercator's Johnson. "It left the whole field open as to who would be the unbiased information provider."
And Bankrate, while still dominant, has had its struggles, ranging from a creaky website design to an accounting scandal that cost $15 million to settle with the SEC last year. That's left NerdWallet room to position itself as an honest broker for cards and other products, including checking accounts, insurance, mortgages, and online loans. The company gets paid on a percentage basis for some of those products, like the loans.
Where NerdWallet is trying to set itself apart is in the presentation, breadth, and transparency of the bank products it shills. While the company accepts money from big banks, it still points out the less attractive features of some of their products. Not all the time--on its website, many credit cards only have "pro" analysis, with no "cons" listed--but it's made more than a token stab at providing independent information along with the sales links. And Johnson argues that this devotion to objectivity and transparency actually makes it more valuable to the banks that pay its bills. "NerdWallet stands out," he says. "It's very nice, very clear; some of their competitors are busier. It helps them attract users, which is ultimately what any bank is going to care about."
Indeed, with its "newsroom" of staff writers around the country, NerdWallet is as much content creator as financial company. The company's journalistic endeavors are also the secret behind its fast growth--it can flood Google with a lot of professionally written news articles instead of buying SEO or paid marketing. It means that when you type in What's the best cash-back credit card? search results will likely produce NerdWallet citations first. And by hiring journalists to write stuff that many high-profile news companies would and indeed do publish (USA Today and Time Inc.'s Money.com among them), NerdWallet boosted its visibility and its credibility. "Most consumers want to know that they can trust somebody who is not beholden to one financial institution," says Yoo. "They're worried that they don't know the right answers and they're going to make a mistake. We want them to have the confidence that they're making a good solid decision."
While NerdWallet is benefiting from widespread distrust of the old financial establishment, Chen's motivations are simpler and broader: He absolutely loathes not having the right answers. "There are so many things I've done the stupid way," he says, "just brute forcing my way through, and then I turn and look and ask, 'Why in the world didn't someone tell me not to do that?' I just want to help people break out of that."
There's more than a little of the lonely, awkward teenager still peeking through Chen's designer sneakers and unfailing if sometimes stiff courtesy. "I have immigrant parents; they didn't teach me a lot of things," he says. "In my first finance job, I didn't know how to play the game. And in my current situation, it's the same thing. It's like, 'Why didn't someone just tell me what to do last year? It would have saved so many headaches for so many people.'"
Stumbling up the learning curve is a familiar experience to entrepreneurs of all backgrounds, although many would gladly swap their problems for Chen's: NerdWallet's growth is what occasionally threatens to outstrip his ability to manage it. As Koh puts it, "Tim has this great belief: 'Yeah, you're smart. You'll figure it out. You can do anything for a little bit of time.' But when you have 250 employees, it's a lot harder to say, 'Hey, smart people, go figure it out.'"
Chen and Gibson also had a fairly narrow definition of "smart" in the company's early days; the default was to recruit people with their sort of experience, who might have spent much of 2009 playing arcade games in Times Square while waiting for callbacks from big-bank headhunters. "Many of our early employees came from professional services and financial services, where you try to hire the same kind of person--the overachiever who is very performance-oriented," Koh says. "Building a company is totally different."
By summer 2013, about four years into NerdWallet's existence as more than a collection of spreadsheets on Chen's laptop, he says he became increasingly aware that his "hire smart people; let them figure it out" philosophy meant a fifth of his small company wasn't playing well with others. He'd instituted a very traditional management style: businesses organized by silos, with each silo leader responsible for his or her team's success. That structure soon led to some winner-take-all tactics among NerdWallet's different units.
According to Chen and his lieutenants, one executive in particular aggressively staked out content partnerships and projects that didn't fit into his idea of the company culture, and "treated conversations as things that had to be won, versus joint problems to be solved," Koh says. (That manager declined to comment.) Then, Chen says, the executive started hiring subordinates who compounded the culture-fit issue: "The first signal," he says, "is when your hirers start hiring people, and you're like 'Really?!' And what gets even worse is the second one, then the third one."
He tried bringing in management coaches to work with senior executives. He sought advice from other tech entrepreneurs. Finally, Chen realized, he was going to have to take more drastic action. "It's extremely gut-wrenching," he says, but it's also "the nature of startups. When you make mistakes, it affects other people and it's really terrible."
By December 2013, Chen finally let the ax fall, firing 11 employees--20 percent of his work force. It was two days after the holiday party. Then he had to tell his remaining staff what had happened. He's still visibly uncomfortable addressing groups--"He's not a 'Go charge the mountain!' leader," Koh says--but this meeting was particularly terrible. Hands shaking, voice shaking, more pale than Gibson had ever seen him, Chen got up to tell his employees that a bunch of their colleagues had been let go. His performance didn't get high marks: "He's just a bad speaker," says Maggie Leung, the ex-CNN journalist who runs NerdWallet's newsroom. As Gibson recalls, Chen tried "to give a reassuring speech about 'This is my fuckup. Now it's our responsibility to get better at this.' It was brutal."
That meeting was an inevitable turning point. Spurred into action, Chen set out to ensure he wouldn't make the same mistakes again: He hired more executive coaches; established a formal performance review; and, in March 2014, hired Yoo, LinkedIn's head of business operations, as chief operating officer. Yoo essentially replaced Gibson, though the co-founders call their split mutual and amicable; Gibson remains an adviser.
Perhaps most dramatically, Chen radically changed the company's organizational structure. Instead of silos, he fashioned a matrix, which contains a more horizontal--and more complicated--reporting structure that requires near-constant communication among NerdWallet's leaders. While that eased the company's old growing pains, it's created some new ones. Just ask NerdWallet executive Christina LaMontagne: "Sometimes the management team feels that we're in our own way."
She had a first-hand view of that last year, as the company developed, and then dropped, a health care project despite widespread customer interest. A former health care consultant and venture capitalist, LaMontagne joined the company in 2013 as its "entrepreneur in residence," in charge of what could be NerdWallet's most promising business: solving the complexities of health insurance, for both employers and their employees.
It's hard not to root for what NerdWallet could do here, if it can actually do it: While you might not need yet another way to pick a credit card, you absolutely do need help figuring out which health care plan to pick, how much you might spend on top of that, and whether you've been overcharged on one of those ridiculous "explanation of benefits" missives.
LaMontagne has helped the company develop tools to address those problems, including an advice section that responds to readers' questions; a tool that ranks and assesses the best health care plans by state; and a medical-advocacy service that deciphers customers' bills and argues with insurance companies on their behalf. NerdWallet says the service (for which it doesn't currently charge) has saved some 1,000 customers a total of $250,000 so far. "There isn't really a lot of good content out there about where your health meets your money," LaMontagne says. If, for example, "you have diabetes, our content can help you get ahead of what your costs will be for the year. Or, if you're pregnant, we have guides on the type of financial decisions new parents need to make."
For much of last year, she focused on launching a service for employers. The subscription-based program, which NerdWallet piloted with about 10 businesses, would have helped their employees manage the health care enrollment process.
That service attracted unexpectedly strong interest from "some of the largest companies in the world," including Silicon Valley tech giants, says LaMontagne. Yet by early December, as this article was going to press, NerdWallet had abandoned the pilot to focus more on its direct-to-consumer products.
Ditching or postponing new services is par for the course for expanding startups. But even in early October, customer interest notwithstanding, LaMontagne seemed to be bracing for disappointment. "In a different type of organization," she said then, practically vibrating with suppressed frustration, "we would be going full force. We have such a smart, intellectual group that there is a little bit of analysis paralysis."
That's a charge Chen readily cops to. "I'm not the greatest communicator naturally," he says. "The strategy part [of running the business] is actually the super easy trivial part. It's the organizational communication that's super hard." It's a strange admission for a CEO whose company mission statement includes "healthy relationships, hard conversations," but it's characteristically NerdWallet: transparent, glaringly self-critical, not always comfortable.
It's hard not to wonder if some of these conversations might be more comfortable with a more natural communicator at the top--or at least someone who hasn't written that his goal as a CEO is to "make myself obsolete." But Chen, whose employees regularly dub him the "conscience" of his company, plans to stay for the duration. Yoo claims that he could have sold NerdWallet and been "generationally wealthy"; instead, Chen's trying to finish closing on one house, while contemplating a responsible financial future with his girlfriend. His wealth as majority owner of NerdWallet might be mostly on paper right now, but he confides, as his personal success becomes more real, "I'm really afraid that my kids are gonna turn out to be some really fucked-up people. I want the company to do well. But at the same time, there is absolutely no upside of becoming filthy, stinking famous or well off."
And then there's his second, correlated big long-term fear--one that many entrepreneurs might recognize: "Just being a shitty CEO." It all comes back to a fear of not finding the right answers, like "setting the wrong direction and not being able to figure out what's impeding our growth," Chen says. "It's a new thing every two months. It's like, 'You better solve this thing, because something else is gonna pop up two months from now,' and it's just like this constant game of whack-a-mole. Experience helps, but sometimes, man, it's really hard."