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Ocho wants to redesign personal finance for entrepreneurs

Ankur Nagpal considered himself extremely fortunate after selling Teachable for $250 million. Then he felt hopeless as he attempted to master the institutional language of a nation he wasn’t a native of, and its complex financial systems, of which the natives spoke only the language of the affluent.

Later, after working for himself and establishing a venture capital business, Nagpal recalled that pivotal event as an inspiration for his most recent endeavour, Ocho. The startup is debuting publicly today with the goal of simplifying the process of creating and administering 401(k) plans for business owners.

That managing one’s own finances is challenging is a story as ancient as time and as resistant to change as the weather. Nagpal acknowledges that no “north star” firm has demonstrated how to address financial literacy on a massive scale, but he is optimistic that Ocho’s ten-person team may have a not-so-boring wedge to alter this.

Ocho has joined the ranks of other fintech firms with the stated goal of rebranding the retirement account away from the likes of Charles Schwab and Fidelity and other pricey alternatives like attorneys and advisors.

“I’ve started exploring the space, and we realize everyone – like Robinhood to Coinbase – is just spending unsustainable amounts of money to acquire customers, but are making no money themselves and continually sort of need these large funding rounds just to exist,” Nagpal said. “I’m actually expecting there to be a very rough 6, 12 or 18 months for fintech companies specifically.”

According to him, the thing that sets Ocho apart from similar products is the fact that it is primarily concerned with the consumer market. While “there are literally a new one starting every month or two all sponsored by big name VCs,” he continued, “no one is focusing on the company owner that is otherwise doing well but is neither a startup founder nor a startup employee.”

As an alternative, Ocho is drawing on Nagpal’s experience collaborating with artists throughout the development of Teachable. Instead of just helping artists develop revenue streams, like Teachable did, Ocho intends to assist those creators in investing, harvesting, and scaling those profits.

“At Teachable, we assisted in making money online for these folks, and now there are many opportunities for artists, freelancers, and entrepreneurs to earn money online – but how can we assist them in considering the long-term benefits of accumulating wealth?” A statement from Nagpal. Ocho’s long-term goal is to provide solutions that go beyond solitary 401(k)s and aid with the financial security of company owners.

Human Interest is a major rival to Ocho, since it just raised $200 million at a $1 billion value. According to Nagpal, Ocho stands out from Human Interest since it caters to sole proprietors, independent contractors, and artists rather than small and medium-sized enterprises.

Ocho’s current yearly charge for opening a retirement account is $199. The setup time is around 10 minutes, and the confirmation time is around 48 hours.

The most difficult task facing the company is encouraging the appropriate independent professionals to save for retirement. It seeks individuals who run successful enterprises but who do not require the services of full-time staff. You can open a 401(k) separate from your regular employer if you also work on the side, but you can’t contribute money from your regular employment.

The personal financial trends on TikTok are used by Nagpal as an example of the desire for more information among consumers, and he believes he can achieve early acceptance with clever educational content and outreach. According to him, 40% of Ocho’s employees are involved in marketing and education, and the rest of the team will remain in place as the firm grows.

People may question why Ocho is starting with a financial technology product if education is so crucial to its success. Deadlines are the obvious solution. The deadline for opening a retirement account in the year 2023 is December 31st, 2022, putting the fintech in a timely yet pressing position.

Because of the education product, investment flows into the retirement product like the ability to participate in startups and ETFs, and health savings accounts (HSAs), frequently described as a 401(k) for healthcare, Nagpal isn’t concerned about the seasonality of the 401(k) product.

In order to fund its ambitious product rollout, Ocho has secured $2.5 million in funding from Vibe Capital, Nagpal’s own venture capital business. He claims he planned to incubate a business or two out of Vibe Capital, which he did, and now it owns 20% of Ocho. Vibe Capital has raised $60 million for its inaugural fund.

For some, the founder utilising his own venture company to fund his own business may seem like the “mother of all conflicts of interest,” but Nagpal argued that this was not the case. He sent an email to all of the limited partners in his fund proposing the investment, received an overwhelming affirmative response, and closed the deal at a considerably cheaper price for the company than would have been possible in a competitive market. The practise of entrepreneurs selling their company to fund another startup is still relatively unusual.

Perhaps Nagpal’s attitude to personal finance can be inferred from the unusual chain of events that led from his first company to his firm to his most recent startup: diversify across different vehicles, reimagine what a supercharged investment could look like, and never stop learning.