The Building of Betterment: Overcoming Obstacles and Achieving Success in Two Years

The journey to building the initial version of Betterment was a marathon, not a sprint. It took close to two years, with multiple phases and significant challenges, to bring the vision to life. This article delves into the story behind Betterment, the challenges faced, and the keys to its ultimate success.

Launch and Initial Team

Betterment was launched in May 2010 at TechCrunch Disrupt in New York City. However, the idea and initial development began much earlier, in May 2009, when the founding team began working together to transform an idea into a reality. The first week of the launch saw 500 customers onboarded. The team included Eli Broverman, Anthony Schrauth, Kiran Keshav, and myself. We started with a small office in Union Square, and we bootstrapped, working without a large salary for ourselves.

Technical Challenges and Prototypes

The technical foundation of Betterment was established by Sean Owen and Eli Broverman. Sean, an engineer at Google, developed the backend in Java and MySQL, including the architecture for users, positions, ACH transactions, and more. I focused on the frontend, initially using Flash to build visual prototypes and display historical performance and future balance growth.

Our timeline to complete the product was set for just three months during the summer. However, the critical turning point came in January 2010 when we brought on our first beta testers. The pressure from this experience pushed us to refine and finalize the product, setting our sights on the launch at TechCrunch Disrupt.

Regulatory and Structural Challenges

The true complexity of Betterment lay not just in the technology, but also in the regulatory and structural framework it needed to operate. We had to determine whether we would be a mutual fund, bank, broker, or another type of entity. Ultimately, we decided to become an SEC Registered Investment Advisor (RIA) and a FINRA Broker Dealer (BD).

During this phase, we worked closely with many partners to set up our service. However, it was not until we met Ryan O’Sullivan in 2008 that we made significant progress. Ryan and his partners owned and operated Broker Dealers (BDs) and had deep industry knowledge that guided us through the regulatory process, which took over two years from August 2008 to the day before our launch at TechCrunch Disrupt.

Keys to Success

Several key elements were crucial to the success of Betterment and its launch:

TLDR Timeline: We had a specific timeline to complete the product during the summer of 2010. Regulatory Expertise: Working closely with Ryan O’Sullivan and his partners was instrumental in navigating the complex regulatory landscape. User-Centric Design: We focused on delivering a seamless user experience that allowed customers to invest in a diversified portfolio with ease.

These efforts, combined with the determination and teamwork of the initial team, laid the groundwork for Betterment’s success. The long and winding path to TechCrunch Disrupt was a testament to the dedication and persistence of the founders.

Conclusion

While it is tempting to look at the initial launch as the start of the story, the real journey began much earlier and involved numerous challenges and successes. The two-year journey from inception to launch underscores the importance of perseverance, technical expertise, and regulatory understanding in creating a successful financial technology service.

Betterment’s story is one of innovation, hard work, and the willingness to take on complex challenges. Whether you are a tech startup or an entrepreneur, the lessons learned from this journey can be applied to other ventures, ensuring that you are well-equipped to achieve success.