In the summer of 2019, my sister was looking to invest some of her savings and wanted to see if she could invest in some of the stuff I was invested in. To my surprise, there was no easy way for her to do this, as she was not an accredited investor — Regulation deemed these vehicles too risky to have her become an investor.
This sparked my interest as it seemed strange that one could walk into a casino and bet x number of dollars on red, or buy y dollars’ worth of lottery tickets and be almost guaranteed to lose that money, and yet, my sister could not invest her money into vehicles managed by professionals just because she didn’t have a million dollars? — Something just didn't seem right.
And so, I started to get a better understanding of the regulatory and technological landscape, only to learn that while it was hard, it was not impossible to provide access to these investing solutions to people like her; however, the question was whether it was worth it.
At the time, I was having lots of fun doing other things, and simply put, starting a company was not on my radar. However, I was curious to see if there were other people out there who wanted something similar to what my sister was looking for — Maybe a robo-like platform powered by best-in-class hedge funds…or something like that.
After doing some research and studying the elements that would make a solution like this possible, quickly led me to realize a couple of things:
- The average 25 to 45-year old I spoke to did not know, nor did they care about hedge funds
- Most of the people I interviewed had close to 80% of their investable money just sitting in cash
The second finding really intrigued me. For context, the people I had interviewed were mostly young professionals that understood that having money sit in cash was earning them virtually nothing (it was a negative return if you adjusted for inflation), but most importantly, it was hindering their ability to achieve things like buying a home or becoming financial independent — It didn't matter, they could not be bothered to put their money to work.
When I asked them about why it was that their money was mostly sitting in cash, there were a few common themes that started to appear:
- Investing seemed too complex and time-consuming to do it on their own
- The traditional bank experience left much to be desired
- Incumbent robo-advisors were simply not sophisticated enough to do what they wanted
While the first two made sense to me, the third one was quite surprising. I myself had a couple of robo-advisor accounts that I thought did a great job of simplifying the investing process.
After doing some more diligence, one of the people I was interviewing framed it in a way I had never thought about before. She simply showed me a screen of her robo account. The screen displayed the balance amount contained within her RRSP, TFSA, and Non-registered accounts…and….THAT, was the problem.
As she described it, each one of the accounts being displayed on her phone contained dollars that had been mentally earmarked for various goals, and the thought of putting more money in made the mental accounting she was performing more difficult as time passed by.
With this insight, it became clear that investing was still a painful process.
While robos had made it easy to start investing (much like discount brokerages had made it easy to buy shares of companies in the early 80s), the people I was talking to felt there was a gap in the market for a something that would automate portfolio construction in the context of a person’s objectives, while dynamically figuring out the best accounts to use and the actual amount of money required to achieve these goals.
Understanding that there was an opportunity to create a business, the next step was to find someone to share the journey with. While I was lucky to have a network of people I thought would be good co-founders, there were not many of them that were at a stage where they could take the financial and professional risk of doing so.
I was lucky to have @yiweiyao buy into the idea and help me shape the vision of what we wanted to build, along with how we wanted to build it.
As we explored how we’d build the business, it was critical that we turned the insight gained from talking to people into something tangible that could validate our intuition around what a product could be like.
To that end, we dove into creating high-fidelity prototypes and mapped the technical specs to the pixels we were seeing on the screen.
After moving into an office instead of working off downtown Toronto foodcourts (The CF Eaton Center does have wonderful Wi-fi though), we began building the first version of the product and iterating on functionality, aesthetics, and feature set. This process was guided through various user interviews that helped us understand the problem surface area at a much deeper level.
It was through these interviews that we came across another interesting insight — It turns out people not only want a more intuitive investing experience centered around their goals; but more and more, they want to share and track the progress made towards these goals with their friends and family.
Think about a group of friends planning a trip to Bali, wouldn’t it be cool if the group could manage the trip through a centralized experience instead of WhatsApp, e-transfers, and Pinterest? Or, how about a couple looking to save for their first home? What if they could come into the app and have algorithms automatically figure out how much money to put away into which account while taking into consideration the couple’s ability to contribute into each other’s RRSP, their combined tax situation, or even more, what if they could invite the “Bank” of mum and dad to chip in once they’ve met some milestone — It would be a magical experience.
Our thesis is centered around the belief that money is not the taboo subject that it used to be (think resumes before LinkedIn), and that there’s a growing population of digital-first consumers who want to save, invest, and “do money” with other people in a more frictionless manner (to a large degree this is already happening within apps like WeChat, AliPay, and Pinduoduo in Asia, and in NorthAmerica we see evidence of this in within WhatsApp, Reddit, and Discord).
What makes this such an attractive opportunity is that these consumers are usually written off for being broke, yet they stand to inherit much of the wealth created over the past 50 years, while at the same time increasing their earning power as they become a larger proportion of the working population — Our bet is that the intersection of finance and social will drive the next evolution in financial services across consumer and enterprise applications.
To find out more, check out our site at kalsa.co
👋 Hi! My name is Daniel Nieto // I’m a Toronto-based entrepreneur and creator — I write about building businesses, technology, and investing.
If you’d like to connect you can find me here https://linktr.ee/dnieto ✌️