All entrepreneurs dream of building a product that can improve the world in some way. Few take on the challenge of disrupting an industry rife with regulations and unreceptive to change.

But that’s exactly what the founders of Wealthfront set out to do.

The year was 2008. Unemployment rates had been steadily climbing for months. Bear Stearns was bailed out in the spring, and by fall, Lehman Brothers collapsed, sparking a financial crisis that reverberated around the world.

Most of us remember the widespread panic that followed in the months to come. Newly minted college graduates were sitting on $200,000 degrees without job prospects. Retirement savings all but vanished in many households. The last thing that anyone wanted to do was throw more of their depleting savings into a sector that had failed them.

Despite the grim financial outlook, Andy Rachleff and Daniel Carroll were determined to get people excited in investing. And they wanted to make some big changes. They wanted to bring transparency to ambiguous fees that ate away at earnings, use sophisticated software that could crunch numbers more efficiently than any human banker can, and broaden up access to investing tools that had traditionally been open to just the ultra-rich.

In short, they wanted to upend a $20 trillion industry.

Andy and Dan have since become pioneers in the fast-growing fintech space with Wealthfront, an automated investing platform. Built as a software product, Wealthfront eliminates the need for retail locations and personalized advisor-to-client advice. Their secret sauce lies in the algorithms used to manage money, and while there are very smart people behind the algorithms, Wealthfront targets tech-savvy users who prefer software over advice from a guy in a suit.

Many have brought into their vision. Wealthfront manages over $4.6 billion dollars from nearly 100,000 users. They have raised $129 million in capital and forged a new class of “robo-advisors,” attracting much industry buzz and concern from major financial institutions.

The journey hasn’t always been smooth. But the team’s unwavering belief in their mission and ability to experiment and move fast helped them tackle uncommon challenges.

One of Wealthfront’s early hurdles was breaking out of its first iteration as an American Idol-style investing game to become the trailblazer it is known as today.

A bold pivot that defined the brand

Wealthfront recognized early shortcomings and adjusted quickly

Wealthfront first launched as kaChing, a social investment platform that let amateur investors create portfolios and try their hand at beating the market and each other. It had a “talent discovery” aspect and a real investing functionality—users could pick and choose which portfolios they wanted to invest in. KaChing started out as a game on Facebook, before deploying a standalone site and expanding to other social platforms.

KaChing became the most popular investing app on Facebook and attracted nearly half a million portfolios altogether.

Underneath its popularity, there were a few looming problems with kaChing. It was hard for users to know what was real and what was a game. The kaChing team had also hoped that users who realized they were bad investors would become paying customers, but only 5 people converted.

Andy Rachleff, CEO and co-founder, realized that kaChing, lacked a defining characteristic of a high-growth product: it wasn’t disruptive.

Andy, who is also a professor at the Stanford Graduate School of Business with a 25-year career in venture capitalism, later described his realization to TechCrunch:

I thought I’d found the formula with Wealthfront’s initial service, which was meant to be disruptive to mutual funds. In hindsight, we built a better product than the alternatives, but it wasn’t disruptive.

Contrary to conventional wisdom, startups with better products seldom succeed unless they are also disruptive.

We hadn’t been growing as fast as we had wanted to, and then I happened to reread a Christensen chapter on competition to prepare for a class I was about to teach. It immediately hit me that our initial service had no chance.

Meanwhile, kaChing had attracted the attention of professional financial advisors who were interested in using the tool to broaden their user base. As more professional investors joined kaChing, it became clear that working only with professionals would be the key to growing the business.

Goodbye kaChing

Then CTO Pascal-Louis Perez told Eric Ries on Startup Lessons Learned that while the decision to go with professional advisors was made quickly, the team felt good about the new direction because they had talked to hundreds of users, churned users, and prospective users and had interviewed professional financial advisors extensively.

Furthermore, the change wasn’t a departure as much as it was a shortcut to what they wanted to achieve, as Andy explained:

Some people weren’t comfortable because it wasn’t as fun, and one senior engineer thought we’d be losing the part of kaChing that was an enabler for anyone who wanted to make it as a pro.

But what we really wanted to change was not who manages the money, but who has access to the best possible talent. We’d originally thought we’d need to build a significant business with amateur managers to get professionals to come on board, but fortunately it turns out that wasn’t necessary.

Shortly after switching over to professional advisors completely, the team ditched the name kaChing and launched as Wealthfront. As founder Daniel Carroll explained to AllThingsD,

KaChing is a fun name, but it can connotate fast money. And we wanted our brand to stand for long term investing and be a trustworthy brand.

While kaChing and Wealthfront sound like drastically different products today, the founders’ mission of making investing more accessible and transparent remained the same. They simply realized that one approach would get them there much faster; once they saw the opportunity, they acted quickly to shift gears. This commitment to delivering the product’s core value allowed them to recognize the shortcut and navigate through a drastic rebranding.

The challenge of making investing viral

Wealthfront drew inspiration from successful freemium apps

With a newly defined product in tow, the team knew that they had to build up large-scale buzz if they wanted to disrupt an established market. They needed the kind of demand that products like Facebook and Airbnb experienced, but there was one obvious hurdle: most people don’t like managing finances or talking about their money.

Wealthfront looked to Dropbox, which had achieved tremendous growth through a successful referral program (even though storage isn’t an inherently viral service either).

Under Dropbox’s freemium business model, users get a certain amount of storage free. They gain more storage with every person they successfully refer to Dropbox. The invited user starts off with a little more storage too. According to Sean Ellis, Dropbox's first marketer, this was inspired by an experiment conducted by Jamie Siminoff, founder and CEO of Ring.com, who tested several different referral structures and found the 2-way incentive structure to be the most effective.

In a presentation from 2010, Dropbox CEO and founder Drew Houston explained that the referral program increased signups by 60%. 

Similarly, Wealthfront manages $10,000 of users’ assets for free. For every successful referral, Wealthfront users gain an additional $5,000 managed for free; the invited user also gains that amount and starts off with $15,000 managed for free.

Much of Wealthfront’s growth has been credited to its referral program and word-of-mouth buzz. While he didn’t share how many people refer a friend, Andy told the Top podcast that around 15% of people who are invited take up the offer and start investing with Wealthfront. At the same time, Wealthfront has made the product more appealing to more users by dropping the account minimum by 90%—from $5,000 to $500.

Armed with a deep understanding of target users

Wealthfront wasn’t afraid to imitate what worked for Dropbox and modify it for their own needs. Wealthfront was likely able to succeed with a referral-driven freemium model because they honed in on their target market. The executive team has described their ideal users, time and time again, as millennials who work in the tech industry and dislike human advisors.

The freemium business model, while widely used in SaaS, is much less common in finance. Financial products tend to come with fees and a high barrier to getting started. Wealthfront’s foray into freemium reaffirms its software-driven approach to investing, while delivering on its promise of accessibility.

Constant experiments to improve the user experience

When user onboarding can’t lose its friction

Wealthfront’s team has described its onboarding as being super difficult, and with good reason. Onboarding best practices advise giving users value as soon as possible, but with Wealthfront, users have to fork over $500 (previously $5,000) and their social security number before they can start to gain value.

Here's a look at part of their onboarding flow: 

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Even then, users won’t really get the value of the service until they see the needle move on their portfolio. This is Wealthfront’s aha! moment, or the magic moment, as described by VP of growth Andy Johns:

We have these [magic] moments with Wealthfront. One day, I went to bed and woke up to see it had harvested $3,000 in losses for me while I slept. It didn’t ask me to do anything or charge me; it just did it. That’s when I realized two things: One, how cool that I’ll have more money left over at year’s end and, two, I have to work on this product! That’s how investing should be.

Because of regulations, Wealthfront can’t make the onboarding experience any less intrusive. And since they can’t control the market, they can’t really speed up a user’s aha! Moment.

"Experiment, experiment, experiment"

Wealthfront’s team instead ran growth experiments on things that they could control. They ended up doubling their conversion rates in one year with these tactics (described in this video on Growth Hackers—worth the 17 minute watch):

• Know the key metrics and watch closely. The team had four metrics that were monitored hourly. Not only were metrics defined, but the goals for each were clear. Doing so helped them distinguish which ideas to pursue.
• Double-down on what’s working and cut what’s failing. When they saw one product, tax-loss harvesting, perform well, they threw more resources into improving it even more, instead of marking it as done and redirecting resources to something that wasn’t working.
• Experiment. One growth hack offered: take what someone else has built, but isn’t monitoring, and test which one works better. They did this with their homepage, when they found out that 3 different versions had been built but wasn’t tracked.

Looking at the product, it’s clear that Wealthfront tries to make an advanced service as easy-to-use as possible. Wealthfront does a few things to keep returning users engaged and drive them deeper into the product. Notice how many prompts, from the top banner to the slideout style survey, the user sees when they log into their account:

Given the team’s history of experimentation, it’s likely that they are testing which messages have the greatest effect on users.

When growth is worth sacrificing

Wealthfront has come a long way in pioneering changes to personal finance, but some are still unconvinced of the company’s success or its high-tech approach to money management. Google “robo-advisors” and you’ll find no shortage of commentary about fiduciary laws and the high-tech comebacks of more established investing firms, including Vanguard and Fidelity.

Wealthfront probably hasn’t maintained the crazy 450% annual growth it achieved a few years ago, but what may be more telling is what the team values. Andy Rachleff will be the first to admit that despite Wealthfront’s success, it still has a long way to go in capturing market share. Andy broke down the numbers to The Top podcast:

I think that Vanguard manages $4 trillion, and Charles Schwab manages something like $2.5 trillion, so that’s a tiny drop in the bucket relative to these behemoths, and I think retail investors have more than $20 trillion invested. But as a venture capitalist, what I focused on was rate of change of numbers, not absolute...each new technology tends to adopt at a faster rate.

Andy seems less concerned about their past stats, including how much captial they've raised, than he is with the future ahead:

We still have $60 million in the bank, so we’ve been a heck a lot more efficient with our capital than any other player in our space, and that’s something we’re playing a lot of attention to. Some people are acting like it’s the late 90’s, and I’ve been through that.  We want to build a sustainable business, and I’m willing to sacrifice growth to make a sustainable business.

There’s something awe-inspiring about Wealthfront’s spectacular growth. It’s the kind of achievement that attracts attention from industry analysts and growth teams alike. But Wealthfront’s 100,000 users are probably more excited by their focus on sustainability.

Wealthfront knows that it still has a lot of ground to gain before the product truly revolutionizes investing, but they seem prepared to continue taking on disruptive growth, with a view towards the years to come.