$3.5 Million in VC Pushes U-Nest Ahead

College savings app firm U-Nest has announced an investment of an undisclosed amount from Northwestern Mutual Future Ventures, which raises the startup’s total seed funding to $3.5 million. U-Nest, based in a WeWork space in North Hollywood, has created an app that helps users set up and manage 529 tax-advantaged college savings plans on their mobile phones. The company hopes to shorten and simplify the application process so all families feel comfortable saving in the long term for their children’s education. For Northwestern Mutual’s venture capital arm, the investment is part of a commitment announced in October to allocate $20 million into startup companies founded by women. Along with additional investment from Santa Monica fintech fund Group 11 and Unlock Venture Partners in Seattle, U-Nest received a total of $1.5 million in this most recent seed extension round. U-Nest is the brainchild of Ksenia Yudina, a former vice president at the American Funds division of asset management firm Capital Group Cos. – the largest provider of 529 savings plans in the U.S. She said her own struggles with student debt, and those of her friends and family, inspired her to create a solution that would consolidate and digitize the 529 process. “The student debt right now is around $1.7 trillion. It has become a burden on the entire generation including myself and a lot of my friends, and it can be avoided if people can start preparing early for their kids’ future,” Yudina said. 529 plans could help lift some of that burden, but the industry first had to overcome a major inaccessibility problem. Yudina called the process of creating a traditional 529 account “super complex” and “super inconvenient,” involving lots of paper forms and financial and legal jargon. U-Nest condenses the process down to about five minutes from start to finish, done entirely on a cellphone. According to U-Nest Chief Marketing Officer Peter Mansfield, only around 30 percent of Americans are even aware 529 plans exist. He said those folks are generally more affluent and may already have financial advisors. The remaining 70 percent, however, probably don’t have access to a financial advisor and may be put off by the complicated paperwork. U-Nest, he said, is an attempt to “democratize the availability of these plans” beyond wealthy customers. Mansfield said it’s no coincidence that 529 plans were largely left behind when the rest of the finance industry went through its digital revolution in the mid-2000s. “Financial advisors traditionally have not made much money when they sell a 529 plan. Couple that with the fact that they also have to do a ton of paperwork to get a family onto a 529 – that’s a bad combination,” he said. Where most financial advisors charge a commission rate of 5 percent on any funds a client puts into a 529, U-Nest instead charges users a flat advisory fee of $3 a month. Yudina said the VC funding has helped U-Nest round out its team, particularly in the hiring of Michael Van Kempen, formerly the director of growth at Irvine-based investment platform Acorns, as chief operating officer and head of growth, and Steve Buchanan, previously a fintech consultant at Union Bank, as chief technology officer. U-Nest currently has around 10 employees, including designers and compliance officers. The funding also helped finance the buildout and launch of U-Nest’s Android version, which recently entered its beta testing phase. It’s not every day a fintech startup pops up in North Hollywood. But Yudina, a Sherman Oaks native, has seen the area revitalized by a burgeoning arts district along Lankershim Boulevard and development projects such as the mixed-use lifestyle center NoHo West on Laurel Canyon Boulevard. She said the neighborhood was attractive in that it is “in the middle of everything,” and easily accessible by train for employees coming from downtown or Orange County. Plus, rent is considerably cheaper than in Santa Monica and other tech-heavy neighborhoods. “We’re not trying to go down the well-trodden path of being in Silicon Beach, paying the exorbitant rent, struggling for parking and struggling through traffic.” Mansfield added. “We wanted to step away from that and develop our own identity in an area that’s really evolving.” Other investors in U-Nest include Vested Ventures in New York, Draper Dragon in Silicon Valley and Artemis Fund in Houston.