EvoShare on SeedInvest
A financial platform that enables employees to save for their 401(k) when shopping locally and online..
Over a third of all private sector employees don’t have access to an employer-sponsored retirement plan. Even worse, about 30% of those with an employer-sponsored plan choose to not even opt in. Crucial retirement saving has become a complex dilemma of both access and motivation.
The structure of the current retirement industry is a fascinating experiment of human psychology. We’re myopic creatures by nature, so making costly sacrifices on an already modest paycheck can often seem dishearteningly fruitless. How can we realistically expect everyone to make the necessary retirement decisions with such limited access and means?
EvoShare, a platform designed to automate retirement contributions as a portion of personal spending, aims to close this gap. Founded by Ukrainian business partners and best friends Eugeny Prudchyenko and Dan Tseytlonok, the two have buckled down to reshape how individuals approach and understand their retirement savings in this age of digital consumerism. I had the pleasure of chatting with Eugeny and his CFO Robert Warner as the two walked me through their vision for EvoShare.
Eugeny, can you provide some background about yourself and how it came to be that you decided to found EvoShare?
EP: I used to lead one of the biggest companies in the Ukraine. We were one of the largest micro-loan providers in the ex-Soviet Union region. After some turmoil in the east side of Ukraine where we were located, my best friend and future co-founder Dan Tseytlonok and I uprooted the company and had to move everything we possibly could to the capital.
Quickly it became obvious that there was no market or future for us in the Ukraine anymore. At that time we decided to move to San Francisco and founded a new company. Dan and I had the idea for EvoShare, but it was completely different than what it’s turned into.
At the time, our business model was similar to a service like Amazon Smile, where a portion of purchases goes to the charity of your choice. Surprisingly enough, us two recent Ukrainian immigrants couldn’t compete with the likes of Amazon, so we failed with this initial model.
What happened after that, and how were you able to revive the business?
EP: I was actually about to close the whole project, and was taking wife and children to Lake Tahoe to clear my head. 50 miles down the road I saw this Prudential billboard saying “The best donation is a donation to your retirement.”
EvoShare was just doing donations at the time, and suddenly something clicked when I read that billboard. My wife hated me at the time and still does for it, I think, but I made a U-turn on that road to Lake Tahoe and drove directly to Dan’s apartment. We threw everything that we had done with EvoShare in the garbage.
In the next four months, we came up with an entirely new platform where people can save for retirement with just their daily spending. We started by offering our solution for student loans, IRA accounts, and closed fund accounts; and we are now incorporated with retirement funds, like 401k plans.
For those that don't know, how do you define EvoShare as a business?
EP: EvoShare is a platform that turns everyday spending into automated retirement contributions.
How did you decide to raise via Seedinvest and how has the experience been?
RW: The idea of democratization of finance is a wonderful idea. Raising money from accredited investors is great, but we think this is a story that will resonate with all people. This includes non-accredited investors that know firsthand how hard it can be to put money away for retirement. Our offering is solving a real challenge for a lot of people so we think the crowd will get behind us on this.
Non-accredited investors probably can’t invest $25,000 in a traditional offering. However, they can probably invest $200 in a crowdfunded offering. Since we think that we can be a billion dollar company in the near future, we’d like to provide that opportunity for huge growth to both small and large investors.
How do you plan to deploy the capital that you raise for this round?
EP: It will mostly be used for marketing and sales. To date, we’ve already raised $900K, which was largely spent on developing and testing the platform. The main focus now is getting it to market.
As you roll out to the market, are there any other competitors out there that offer automatic 401K contributions based on your spending?
EP: Surprisingly, we don’t have a single competitor. When we first came up with the idea, we went to our attorney and asked him if this was legally viable. He said to us that it was illegal and that we couldn’t put third party contributions into 401k plans.
According to him, only an employee or employer can do that. We found out that this, in fact, wasn’t true. We wanted to make it work, so Dan and I thought through it and came up with an idea of how to properly and legally allocate these third party contributions to retirement plans.
That model is exactly what we’re doing now. We checked back with our attorney once we were finished, and of course he said “You’re good to go—here’s my invoice” and then left. It was evidently a long process for us because no one had quite maneuvered through a similar legal process and many people were convinced that no one could do it. As it turns out, two crazy Ukrainians could.
The only offering I've seen that's mildly similar is the Fidelity credit card where they will contribute to your IRA. How does EvoShare differentiate from the Fidelity offering?
EP: Current legislation allows you to put money into an IRA account directly. For example, if you have an IRA account, I, or anyone else, can send money to it. The situation is the same with student loans and closed fund accounts, but you can’t do the same with 401K plans without a payroll deduction process in order to put the cash back.
Our process allows us to add money to the 401K without that same deduction process. The Fidelity credit card is actually a very popular credit card for Fidelity IRA account owners, but it’s restricted to Fidelity clients only.
EvoShare has the same benefits, but it’s open to everyone. And If you have Fidelity credit card and Fidelity IRA account, you can actually link the Fidelity credit card to an EvoShare account and we can give you even more rewards on top of what Fidelity already gives you.
What current channel partners do you have, and how have you been able to close deals with these organizations?
EP: We now have six channel partners signed and more than 50 companies in our pipeline—among those 50 is John Hancock, which is really exciting for us.
What differentiator are you providing your channel partners that gets them excited about this opportunity?
EP: The retirement industry, on paper, can be boring due to the nature of the market competition. If you’re a CEO of a company with a hundred employees, all you have to do is email or call five different organizations to obtain offers to establish your 401K, and you would most likely receive five incredibly similar 401K offers.
It’s not an easy thing to sell and market, because 401K programs have become commoditized and it is typically all about cutting cost. EvoShares offers a differentiator for 401K plans to be able to offer clients an added benefit to their program.
And in turn they can charge more for their plan and bring in more dollars for their business. It’s exciting because it’s something that can engage people around a boring concept like a 401K plan. When we increase contributions and participation, our partners make more money. We can also share revenue with them if it’s applicable as long as they are not financial advisors.
From a merchant standpoint, how do you you get them open to the idea of adding additional rewards to customers on a platform like EvoShare?
EP: Let’s imagine that your favorite restaurant starts sending 10% of your bill to your IRA account. That restaurant, then, is no longer just your favorite restaurant, but it’s also become a partner in your financial journey. That’s the idea that has really driven the acquisition and retention of our clients.
I’m sure you’ve heard of food delivery services like Uber Eats or Caviar. Those models charge 23% to 25% on each order to the restaurants. Then they also charge a 5% flat fee to the customer.
That 25% cut is a big deal for grocery stores with low margins. But for the restaurants and bars with 300% margins, the 25% fee isn’t a big deal. It’s been amazing to see how many people have understood this and are more than happy to offer cash back rewards to their customers through our platform.
EvoShare’s also likes to tout its ability to help manage the ADP and ACP testing. Can you tell us a bit more about what that means?
RW: For those that don’t know there is a law that exist that will fine organizations between $400K and $600K for not ensuring that higher income and lower income employees are contributing proportional amounts to their 401Ks.
The test looks at how many employees are contributing, and second how much on a dollar basis are they actually contributing. Employees with lower compensation often don’t contribute because they feel they need all their income for their expenses. This type of behavior isn’t healthy, which is why the government works to ensure corporations engage their lower income employees in contributing to their 401K too.
We think EvoShare’s helps to solve this problem because we allow employees to keep all of their income for their expenses, but they will still be contributing just by spending as they usually do and collecting reward dollars. And we’ve seen a higher percentage of lower income employees now participating.
As we look to the future, what other product features do you hope to offer customers?
RW: We’re planning on creating and selling retirement gift cards, where instead of redeeming the card in-store, that money will go towards a 401K plan. We’re also starting partnerships with corporate wellness companies that have recognition points that can also be converted into 401K contributions, and we are also working with the credit card companies.
The next project is to convert airline miles into a 401K plan. That’s our trajectory; we didn’t invent cash back, rewards, or 401K plans, but we did invent the platform and process that turns this cash back and rewards into 401K contributions. We’re a hub—that’s our service.
There are multiple layers of intrigue that EvoShare has triggered. With a business model that capitalizes on the entire realm of consumer purchasing, the expansion possibilities are immense. The prospects of linking up with additional channel partners and credit card issuers are exciting, but that’s a lengthy and winding road from a web browser extension. At least they’re on the right road.
Eugeny said it best himself, “EvoShare is a hub,” and their fintech service has the potential to empower a huge web of users to have much more control over their retirement funds. What is particularly striking, and EvoShare has evidently realized such, is the reality that the service is not just part of the financial technology market; it’s also financial education. That’s a valuable connection for a service that aids in building invaluable, and often misunderstood, retirement funds.
That “favorite restaurant” which Eugeny mentioned may indeed become a partner in one’s financial journey, and in doing so reimagine the way people save for retirement forever.
Will you invest in EvoShare??
About: Chris Lustrino
A Boston College Eagle for life, on a mission to democratize startup investing for all people at KingsCrowd, with a passion for Fintech, investing, social impact, doing well and doing good, and an avid runner, cyclist and writer.