Nutmeg_logoA Q&A with Nutmeg founder and CEO Nick Hungerford. The London–based company was founded in 2010 and last week announced the closing of a $5.3 million funding round. Investors include Pentech, Tim Draper, and Daniel Aegerter of Armada Investment Group.

SUB: Please describe what Nutmeg is, and the value proposition you bring to online investing.

Hungerford: Nutmeg is the first online investment manager to be built entirely around the modern consumer’s needs. If you want to invest at the moment, you either have to pick stocks yourselves, which can be stressful and time-consuming, or you pay an adviser to do it for you. If you choose the latter, you often need to have a significant amount of money before they will take you on as a client.

Nutmeg offers a 21st-century alternative. We create smart, diversified portfolios for our customers, even with a lump sum as low as £1,000 or monthly contributions of only £100. Our customers can create separate funds for different goals—from buying a house to saving for retirement—and they can top-up, withdraw or transfer their money whenever they like. All they have to do is decide how much they want to invest, how long they might want to invest it for, and the level of risk with which they feel comfortable. Then we do all the hard work for them—choosing the best balance of funds, rebalancing regularly and keeping a close eye on performance. In short, Nutmeg brings the simplicity and flexibility of online banking to the world of investing.

SUB: Who are your target users?

Hungerford: Everyone, hopefully. We have already seen a broad range of interest, from high-net-worth individuals looking for lower, more transparent fees to those who have never invested before and may have said in the past that investing was ‘not for them.’ In the short term, we envisage that our typical early adopters will be between the age of 25 and 45, and comfortable handling their finances online.

SUB: Who do you consider to be your competition?

Hungerford: There are a couple of firms in the U.S. offering similar propositions. In the UK and Europe we face competition from industry incumbents such as stockbrokers, private banks and investment managers for people with assets of over £50,000. At lower levels, our only competition is apathy and a lack of time.

SUB: What differentiates Nutmeg from the competition?

Hungerford: We are the first online investment manager in Europe capable of offering diversified portfolios to individuals of almost any level of wealth.

SUB: When was the company founded and what were the first steps you took in establishing it?

Hungerford: I founded Nutmeg in a garage in Silicon Valley in 2010 just as I was graduating from Stanford Business School with an MBA. I moved back home to London later that year—partly due to the excellent support and networking offered by the UK government’s Global Entrepreneur Programme.

SUB: What was the inspiration behind the idea for Nutmeg? Was there an ‘aha’ moment, or was the idea more gradual in developing?

Hungerford: I pitched an embryonic version of Nutmeg to a Stanford class which included Google’s Eric Schmidt. He said that if he were 20 years younger, he would want to start such a company himself. It’s difficult to ignore that sort of advice.

SUB: What have the most significant obstacles been so far to building the company?

Hungerford: Finding the right partners was a challenge for us. It’s so important to have lawyers that you can trust, as well as an excellent custodial bank. We’re now delighted with our choices.

SUB: You recently raised $5.3 million in new funding. What are your plans for the funds?

Hungerford: We have an excellent team and we continue to expand as we gear up for full public launch later this summer. We will also be increasing our marketing spend nearer launch and making sure that the product is as close to perfect as we can get it.

SUB: Do you plan to raise more outside funding in the near future?

Hungerford: Unless something exceptional happens, we plan on this keeping us going for a bit.

SUB: What are your goals for Nutmeg over the next year or so?

Hungerford: We want to launch with a fantastic product that people love and talk about with their friends. We also want to make sure our service quality sets us apart. Both are big challenges, but with the right focus we can achieve them.

Nutmeg – www.nutmeg.com