Parsing the US$35 million investment in Endowus

Written by Kapronasia || August 17 2023

Investors are bullish on the potential of Singapore-based digital wealth management platform Endowus. Though the company’s current revenue is modest, and profitability remains very much in the future, Endowus still managed to recently raise US$35 million from some huge banks and four Asian billionaire families.

Founded in 2017, Endowus is a digitally native independent wealth adviser and fund platform that serves retail, HNW and family office clients. Despite difficult financial market conditions, Endowus says it has experienced strong growth over the past year, and that its group assets now exceed US$5 billion. In 2022, the company says that its revenue grew 80% organically and that group revenue tripled as it completed the acquisition of the multi-family office Carret Private.

Compared to other digital wealth advisories – of which there are no shortage – Endowus says it differentiates itself as the only one that serves both private wealth and public pension sas the first digital advisor for Singapore’s Central Provident Fund Investment Scheme (CPF), on which it manages more than S$1 billion of pension assets.

As for monetization, Endowus makes money from both its robo-advisory and traditional advisory fees. Interestingly, while the company heavily highlights the robo aspect of its business, it seems to make most of its revenue from traditional advisory services. Kapronasia learned from a source that US$4.5 million of Endowus’s revenue in 2022 reportedly came from its acquisition of Carret in Hong Kong, and that only US$1.6 million of its revenue can be attributed to robo.

Endowus is apparently also the only platform of its kind in Singapore and Hong Kong to provide a 100% rebate of all trailer commission fees, paid through cashbacks. Surely customers appreciate the policy, but we wonder how that affects the company’s profitability prospects.

It doesn’t exactly sound like a surefire recipe for success, and yet the above metrics and business model were adequate to attract US$35 million in funding from the likes of Citi Ventures and MUFG Innovation Partners, as well as UBS Next, Singapore’s EDBI, Prosus Ventures (owned by Naspers), Lightspeed Venture Partners and Singtel Innov8, bringing the total Endowus has raised to US$95 million.

Meanwhile, undoubtedly encouraged by the new funding, Endowus’s co-founder and chairman Samuel Rhee told TechCrunch that the company is now “multiple times the size of the next player and now competing with large banks and incumbent players.”

That's a bold assertion. We wonder which large banks, as JPMorgan and UBS respectively have about US$3 trillion in assets under management (AuM), while Morgan Stanley has US$1.2 trillion.

To be sure, there are legitimate wealthtech disruptors who are carving out new market niches in a sector where the barrier to entry has traditionally been extremely high. There are lots of potential wealth management clients when you no longer require a minimum of US$500,000 to US$1 million in liquid assets.

However, whether Endowus can truly rise above the competition remains to be seen, and we would like to see evidence of a business model focused on maximizing profitability per customer rather than what looks like a growth-first strategy.