Soon wants to put your sleepy cash to work in high-powered short-term investments
So you want to get into investing but you’re not a seasoned asset manager or market strategist. And you can see that the market can be an intimidating, volatile thing—like in the first quarter of this year, when the S&P 500 started at a record high and took a 12 percent year-to-date swan dive by the end of February, effectively drowning over six months of gains.
But you’ve got money in the bank. You can see it, just sitting there, lazily sipping margaritas when it could be out there earning you returns. If you only knew where to put it…
Soon’s founders were in the same place a few years ago when they came up with a solution: automated investing that utilizes that cash flow, putting idle money to work.
What to do with all that cash?
“We were frustrated with existing financial opinions out there at the time,” says Aaron Bylund, founder of Soon. “We were working professionals, making good money in our early 20s—not particularly wealthy because we all came from working-class backgrounds—but had a really strong cash flow. We were looking for ways to leverage our strongest asset at the time into building wealth for us.”
So they did what typical millennials do. The founders downloaded Robinhood, Coinbase, and a bunch of other apps and started investing directly. “We realized it’s really hard to choose what to invest in, how much to invest, when to sell an asset, how much to sell, what’s the exit strategy, etc.,” Bylund says. “There are so many decisions. The cognitive load for investing is high. Despite being really smart guys in our careers, we realized we needed to know a whole lot more about investing—and we learned that the hard way, unfortunately. We put our heads together to figure out how to make this easy for us first, and then for everyone else.”
To explore solutions, the Soon team downloaded their bank account transactions for the last few years. They instructed an algorithm to invest 20 percent or 30 percent of deposits. Whenever there was a spend event, the algorithm would figure out which of the current asset positions had appreciated the most and liquidate that asset.
“The end result was that we figured out there’s an entire investment strategy built into cash flow that doesn’t require the user to learn anything new,” Bylund says. “It was exactly what we were looking for because it ticks that box of, ‘I can throw money at this thing, and it will make the investments, and it will get the best returns that it can as I’m spending.’ In the end, the user experiences enhanced cash flow, building wealth without having to work on it directly.”
Soon’s approach will do one other important thing: reduce exposure to market volatility. “It’s a very safe way to invest,” Bylund says. “The way I characterize this is, imagine an investment account you’re putting $500 a month in. On Soon, it’s the same thing—your $500 a month is flowing in. Say that at the end of the year there’s a market downturn. In the investment account, 100 percent of your investment is exposed to that market volatility. In the Soon account, that market exposure could be greatly reduced to 30 percent, 20 percent, or as low as 10 percent, depending on the asset mixture and how much is being liquidated when it’s spent. Remember, we’re not just putting money in, which is what everyone else does. We are cash flow and short-term to medium-term investing. It could mean that there’s less money invested at any one time than what you would have in a long-term approach.”
Invest, spend, sell…rinse and repeat
So every time a user spends, Soon will look for an asset to liquidate?
Yep. As Bylund explains, “When we detect a spend event, our back-end system automatically keeps an index of all the assets you’ve invested in, and it figures out which of those positions has increased the most. We send a sell order to our custodial firm; we get a confirmation back. Then, the earnings from the sale are sent back to the user’s bank to bolster their checking account.”
Soon, which is set to officially launch its services this May, has garnered the industry’s attention and was recently accepted into the prestigious Y Combinator program with illustrious alumni that include companies like Stripe, Airbnb, and Doordash. Bylund says Y Combinator helped Soon refine its value proposition and decide to hold off on the release of its debit card. The company has now focused its upcoming product release on a “smaller portion of our product—what we’re calling a fully automated, attachable sweep account,” Bylund says. “This account connects to your existing bank account and monitors incoming and outgoing transactions. With the attachable sweep account, at the end of the week, we’ll send over the total amount of realized gains, which gets deposited into your account.”
An all-new kind of fintech
With its innovative approach, Soon will essentially be carving a niche in the fintech world. “We’re the first in how we’re approaching this,” Bylund says.
Bylund explains there are currently five silos in the fintech world. He nodded to banking companies like Chime and Sofi for providing enhanced banking to more people but says that in the end, “they are still just banks.”
He pointed to companies like Robinhood and Public that bring brokerage services to the masses, democratizing access and making free trading possible, but noted, “they’re still just brokerage accounts.”
As for wealth management, Bylund acknowledged that companies like Betterment and Wealthfront provide long term-savings investing strategies, but they’re just injecting technology into the mix to make investing more accessible to the average person.
And as for data aggregators like Mint, Finicity, MX, and Plaid, Bylund applauds these companies for their work in helping people plan financial lives better but noted their limitations as well.
“Eventually, what Soon will effectively do is take all of those silos and wrap them into a single intelligence layer that is then able to make decisions on users’ behalf,” Bylund says. “We can do more financial planning for the user—it’s like having a personal financial planner in your pocket all the time.”
Bylund says Soon will really be the only product that removes the need to time the market and speculate, eliminating the hassle and stress that’s required with all the other services out there. “We see this as a way to democratize investing across a broad spectrum,” he says. “Being able to unlock cash flow as a way to grow wealth is game-changing. It’s for anybody who has a little extra savings.”