An integrated wealth management platform specializing in performance reporting, analytics and data aggregation, Addepar is used by 400 finance services clients worldwide. It has been at the forefront of the expansion of FinTech and, according to CEO Eric Poirier, is only getting started in regard to the capabilities and insights it intends to offer investment managers.
The company was created by Palantir co-founder Joe Lonsdale and software engineer intern Jason Mirra in 2009. Poirier, at the time, served as director at Palantir, an enterprise software firm that worked with large banks and hedge funds like Thomson Reuters and Bridgewater. During their time together at Palantir, Lonsdale and Poirier noticed anxiety among portfolio managers who felt as though they were operating with blinders on and unable to see a comprehensive view of assets under management and how they were performing. It has been fascinating for me to see the company grow up from a garage in San Francisco. I was fortunate enough to be one of the first investors, but the reality is the team that was there and that is there is what has made this company so successful.
Expanding upon the technology built at Palantir, Lonsdale and Mirra created a platform emphasizing data-driven transparency and performance metrics so that managers can more clearly see how assets are performing and where they might be exposed. The company has since grown to include a client base of influencers and thought leaders across market segments such as single and multi-family offices, registered investment advisors, private banks, and super regional banks.
Despite its successes, the executive team at Addepar isn’t resting on its laurels. Poirier, who joined the company in 2013, believes there’s tremendous growth potential for Addepar’s proprietary platform.
I recently sat down with Poirier to discuss the origin of Addepar, how the company intends to complement its reporting capabilities, and the evolution of technology in the financial services sector.
Q: What are the origins of Addepar and how has it evolved over the past decade?
A: Joe Lonsdale and Jason Mirra started the company in late 2009, in the wake of the financial crisis. Joe co-founded Palantir and Jason was an intern on my team at Palantir. We tried to get Jason to drop out of college, and he said he’d be comfortable dropping out, but wanted to take on more risk.
So, Joe used it as an opportunity to have him co-found Addepar, because Jason’s a brilliant software engineer. And at Palantir in 2007, 2008, as I was bringing the finance platform we had built to market, we were spending a lot of time with big hedge funds and big banks – places like Bridgewater, Citigroup, and Thomson Reuters, and then talking with lots of other funds.
And what Joe and I both observed, especially as markets started getting jittery and then, of course, as things started crashing down is—there were two different observations that were related. One is when we showed funds and banks what we had built at Palantir, we showed them what we could see in the market data and how we could test different trading strategies to better make sense of what all was happening in a pretty specific way.
We were showing them things they’d never seen before but had some intuition – and that catalyzed some conservations, where they would just sort of open up to us about some of their biggest fears. And a lot of these people were the people managing very large portfolios, and their biggest fears were they simply couldn’t see everything they owned and how it was performing and where they were exposed and so forth.
So, they felt like they had blinders on. This was especially true in the context of wealth management. Outside of asset management, but where investors were allocated across a variety of investments, both liquid assets as well as illiquid investments and alternatives. There was a very obvious need to give people much more data-driven transparency into their portfolios both broadly and deeply.
The founding vision was a really ambitious one. The starting point was really the high end of wealth management because that’s where this problem is most exaggerated. This problem is pervasive. But you don’t have the principal agent problems when working with RIAs and family offices in the way that you would at larger banks or institutions. You have people who are actually able to affect change, meaning that hiring us as an ambitious technology provider to give them the visibility they’ve been looking for forever. It was a lot more plausible, a lot more attainable, to get that initial plan and iterate with them on the solution.
And once we had a solution that worked for them, bring it to more firms and then keep growing. The principle is: happy clients, and more of them. That’s my best retelling of the story of Addepar when it started 2009. I joined Addepar at the beginning of 2013.
Q: What does the world look like in general over the next ten years and how does Addepar play into that?
A: One thing I’ve been saying more often recently is that even though the company’s now turning 10, I honestly feel like we’re maybe in the second inning. There’s so much opportunity from what we’ve already built. And what we’ve already built is a pretty small indication of the ambition we have of things to build from here.
But the fun part is on the back of what we’ve already built, we have an amazing client base. We have some of the biggest influencers, thought leaders, trendsetters, etc. in each one of the market segments where we’re active. So single-family offices, multi-family offices and RIAs, private banks, big wirehouses and super regional banks, and other forms of broker dealers, all of whom are using the same version of the Addepar product and platform.
But the fact that we have one single foundation that’s powering all of our client instances and we’ve made the product and the platform that configurable to be able to accommodate the needs of a wide range of clients. It’s just a pretty profound thing that we built a stack that we can deploy in a common way across everybody.
And that’s really what makes it so that we can provide a single foundation, a unified data model and one language to describe the range of investments that people have and how they catalogue those investments, how they run analytics off the back of it to figure out how various parts of their portfolio are performing.
But it opens the door to how we complement the fact that we built an amazing rearview mirror for our clients who now really understand what they have in their portfolio, what they’ve had in the past, and how it’s performing, so they can see accurately the full picture now which they couldn’t before.
But saying it’s a rearview mirror that we spent ten years building minimizes what we built. It paints a picture but doesn’t do it justice. How do you expand that by saying, “what’s the windshield and what’s the headlights?” How do we enable people making investment decisions to think about the future in a much more data-driven way and be much more conscious of opportunities that exist, inherent trade offs they’re making if they were to allocate here versus there? We want to give them the chance to try on different investments.
And to complement our reporting capabilities, we’ve recently shipped a proposal tool so advisors can sit with their clients and say, “Well, what if we were to do this? What if we were to do that? Let’s incorporate this into your broader goals and objectives and preferences in your financial plans so that we can have a more proactive conversation about the future.”
And then to do one better than that if you choose to transact, especially for these illiquid assets that are notoriously hard to invest in the first place. And because monitoring existing investments you’ve already made is a pain and a variety of other related problems.
How can Addepar ease that so that we can build a more complete menu of investable opportunities on the illiquid side whether it’s private equity or hedge funds, whether it’s private stocks, both in primary and secondary investing? And just bringing together what had been a bunch of different menus of financial products.
And how do we bring that together into a streamlined and intuitive user experience, so it turns into a way more natural flow of like, “Where are we now? What are we trying to get to next? What are the various vehicles we can consider to get there?” And then how do we just replay that conversation over and over again in a much more data-driven way? That’s what opens the door to a two-sided marketplace. It’s kind of like the holy grail of financial services.
Q: What are one or two things that you learned when you joined Addepar that you could give to someone who is a CEO and/or a founder of a similar stage business?
A: There are a few things. For anyone who joins a really early stage company, if the vision of the company or mission of the company is clearly articulated, that allows that talent to withstand a level of change.
Whereas if the vision or the mission is muted or inarticulate, or just vague or clumsy, it makes persevering and grinning through the inevitable tough times harder. So, much to Joe’s credit and the early team, they all did a great job of painting a clear picture of the future and setting this level of ambition, drive, and deep culture of innovation. They put that in motion in long before I was here.
One of the hardest parts for me in the first year or so was to sort through who was up for the challenge of turning this exciting idea into a real business. And that required rotating in a pretty significant way to basically shore up how do we choose to build what we’re building, how do we tie to that tangible and specific business outcome, and how do we get better at saying no so we can put more time, more energy, and more effort into the things we’re saying yes to. Can we actually have those priorities land and stick? That’s easier said than done.
And the experience that I had at Addepar, I think it jibes with other non-founder CEO experiences. There was a spike of attrition at the time, like the early teams say, “You know what? I joined to be part of this really early experimental phase,” and now that we’re rotating into a real business and recognizing that our clients are relying on us day in and day out—that means we have to be here day in and day out, supporting what we’ve sold them and making sure that it’s lights on all the time so they can run their business.
That’s not for everybody. The next group of people we hired knew what they were getting into and were committed to building a scalable foundation that was going to persist for many years to come. That foundation is what we’re using to serve even bigger clients in even more ways. And that’s what it takes to actually turn it into a real business from an early incubation idea.
It’s really knowing where you are at the moment. If on day one you try to install the team that you need in year three, you’re not even going to get lift-off in the first place. But if at year three you still have the day one team in place, and you haven’t really changed the mindset and changed the orientation, you’re probably not going to make it to year five.
Q: What’s your sense in the general market perception of financial services firms? How should financial services be using technology?
A: I started my career at Lehman Brothers from 2003 to 2006. My experience at that point was technology within financial services. People working in tech were the low people on the totem pole, while business would drive the agenda. Therefore, a lot of the tech choices that were made were fleeting.
There wasn’t continuity to create the ambitious stuff that was built to last. It was more just like “build a thing to price this trade. Tape it together with the last 300 things we built and give everyone pagers. When any one of those pieces crashes, make sure that they get paged so that they log in any hour of the day, kick that component, and bring it back to life.”
And that’s basically my observation of how tech functioned at a big bank that was spending $5 billion dollars a year on tech. That was kind of the state of reality back in 2003, 2004, 2005, which I think is pretty representative of how financial services has been working for decades now.
And so now that FinTech is a thing, it shouldn’t be surprising that now that people’s eyes have opened up to the fact technology is a tool to help build stronger businesses, we should think of technology more strategically than we have in the past.
That’s why tech, I think, is on center-stage with firms large and small and they’re having to say things like, “How do we rethink our broader business strategy with tech as an explicit part of that?” From the perspective of financial services providers who’ve been around for many years and have been doing things in a more people-oriented way versus tech-oriented way, there’s an adjustment required, of course.
From the perspective of the youngest FinTech companies, which may have somewhat naïve understandings of how financial services work today, it’s been played out a number of different times over the course of the last couple years with the rise of FinTech, misinterpreting or misunderstanding the nature of financial services that are being provided and figuring out where tech fits to improve that, level it up, and make it so those services are more broadly available for a lower cost or a higher value.
More FinTech companies, I think, are opening their eyes to where there are opportunities to partner with more traditional financial services providers to deliver a lasting solution for clients. I think financial services firms that are not using tech strategically are just dying slowly, and that’s likely to accelerate over time.
FinTech companies that aren’t mindful of how financial services firms have come to be over hundreds and hundreds of years, or that are just blindly building a new gizmo or gadget are also pretty likely to die, because they’re not actually solving a deep enough problem in a sustainable way. Instead, I’m biased towards bringing together the tech innovators with the more strategically inclined financial services operators. That’s really how we’re positioning Addepar, and for other companies we partner with, that’s how they’re looking at it as well.
Q: Any last big points that you’d want to make that we didn’t cover?
A: The last thing I’ll say is what I’m most proud of with respect to Addepar, and I think the same can be said for any company that has a crazy ambitious mission or vision, it all comes down to the team; the talent, the culture, the environment, and making sure that we’re the destination for the best talent out there.
We stay true to our promise to our people, that we’re going to provide an environment where they can do their best work with incredibly smart, compassionate and driven colleagues. It’s really sincere. I think we do a great job on delivering on that. And one thing that we’re looking to build now is really explaining to the outside world what Addepar stands for, what it looks like, and what it feels like when you get here. I wouldn’t score us too highly on that just yet, but we’re actively working on it – so in the meantime, come visit us and see for yourself!