It’s not uncommon for successful founders to forge a second career in venture capital; rarer to do it the other way round. Among the few that stand out is Andy Rachleff, a founding partner of Benchmark Capital. Through two decades of venture investing starting in the mid 1980s, Rachleff backed a string of high profile technology companies including America Online, eBay, Equinix and Juniper Networks. Together with colleagues at Benchmark, he raised an $85 million fund in 1995 that went on to deliver a return of $7.8 billion, making it one of the most profitable venture funds ever. After helping to raise and manage three more funds, Rachleff decided to retire and, in 2004, he took up a teaching post at Stanford Business School and a position on the University of Pennsylvania endowment board.
Clearly, though, he wasn’t done. His role on the endowment plus his own experience as a wealthy investor gave him exposure to services that investment firms offer their large clients. He wondered if emerging technology could be deployed to bring similar services to a wider market. Pairing up with a former bond trader and financial data expert, he launched a company, kaChing, to provide an online marketplace for US equity managers. The platform attracted around $30 million of assets over 18 months, but struggled to gain traction until Rachleff, responding to feedback from customers, shifted its focus to compete on fees rather than performance, and broadened its offering beyond equities. Renamed Wealthfront, its mission was to democratize access to sophisticated financial advice.
Fifteen years on, Wealthfront has $88 billion of assets on its platform and serves 1.3 million customers. Focused on digitally savvy investors, it offers cash management, investment advisory, borrowing and lending facilities, and financial planning via a digital interface. After a failed transaction in 2022 when an acquisition by UBS was called off, the company is now looking to come to the market via a public offering. Rachleff is chairman, having served two stints as chief executive officer along the way, and owns 15% of the company.1
As a case study of a venture-capitalist run company, it provides fascinating insights. Rachleff developed the idea of ‘product/market fit’, testing it at Wealthfront. He pivoted the company several times on its journey to IPO, experimenting with multiple products and services to refine it towards its current state. “I was not trained to be an operating executive,” he told Jason Calacanis in 2019. “I think I identify more as an investor than I do as an operator.”
To see how an investor builds and shapes a company, and what Wealthfront’s pivots reveal about building a modern financial institution, read on.