Aqua, an AI-native startup that helps wealth managers offer and manage alternative investments, has raised $15 million in a Series A led by Arthur Ventures, with participation from Alumni Ventures, it tells This Week in Fintech exclusively.
The New York-based company has now raised $18.8 million altogether, including a $3.8 million seed round in 2021 backed by Gradient (Google’s AI fund), Y Combinator and others. Alongside the funding, Aqua also announced today that it is launching what it described as a “turnkey alternative investments platform(TAIP).”
The startup grew out of a problem CEO and co-founder Rohan Marwaha encountered while working at Blackstone, which describes itself as the world’s largest alternative asset investment manager. He realized more individual investors were becoming interested in alternative investments, but the systems used to manage those investments weren't designed for that kind of scale.
So in 2021, he and Dev Patel, who previously worked at Bank of America on the capital markets technology team, joined forces to found Aqua. Initially, the startup served as a two-sided marketplace that helped private equity firms deal with the back office, logistical work of handling smaller investors, while giving those same investors access to opportunities, according to a TechCrunch article at the time of the startup’s seed raise.
Today, Aqua helps financial advisers manage alternative investments for many clients in one place by replacing separate portals, spreadsheets, and emails. Advisers can use it for a variety of functions including making investments, processing transfers and redemptions, managing documents and handling ongoing investor needs.
"We started in the D2C space and pivoted as we realized the need for streamlined alts was greater and more pressing in the advisory space,” Marwaha told This Week in Fintech. “This pivot is fairly recent.”
For the unacquainted, alternative investments are assets outside traditional stocks, bonds and cash. They can include private equity, venture capital, private credit, hedge funds and real estate funds, among other things. They can also include things like financing films or cryptocurrencies.
Today, Aqua’s platform is used by about 8,000 financial advisers and other investment professionals and serves roughly 170,000 wealth-management clients, according to Marwaha.
Its advisory customers include DAI Securities, Arkadios Capital, Concord Investment Solutions and Independent Financial Group. Investment-manager customers include three of the five largest private fund managers in the world, as well as U.S. Energy Development Corp., Cantor Fitzgerald, T. Rowe Price, Inland Real Estate and Hamilton Point Investments.
The company declined to discuss its revenue model and didn’t disclose its year-over-year growth rate. Marwaha said only that “we're growing really, really fast” and that Aqua continues to add wealth-management firms and investment managers to the platform.
Image Credit: Aqua. Left to right: Co-founders Rohan Marwaha (CEO) and Dev Patel (CTO)
‘Business as Usual’
Historically, alternative investment funds often raised money from a relatively small number of institutional investors writing large checks. But as more individual investors gained access through wealth managers, those funds began dealing with more investors writing smaller checks.
As a result, the process became far more complicated to manage.
“Regardless of what asset type within alts you want to transact in, we can support all of it…,” Marwaha said in an interview with This Week in Fintech. “The focus is very much on how we mold this around a firm's internal processes, so that way they are able to essentially continue business as usual.”
In Marwaha’s view, the first big problem in the industry was simply giving advisers access to alternative investments. He believes that part has largely been solved.
“Problem number one was access. Like, ‘hey, how do I even invest in the products that I want to? It's really hard for me to even get a hold of them,’ and that's largely a solved problem today,” he said.
The challenge now, Marwaha said, is helping advisers manage a growing number of those investments across many clients without creating an equally large amount of manual work.
“What if all of that was centralized into one place across all of their products and all of their clients, so they could do all of their actions in one place?” Marwaha said.
That is also what Marwaha sees as Aqua’s main difference from platforms that have primarily served as marketplaces for alternative investments.
“Every alt is pretty unique. Every alt process is pretty unique. How do you standardize all of that and put it all in one place for the advisors?” he said.
Using AI
Artificial intelligence has been part of Aqua’s product since the company’s early days, before the recent generative AI boom.
Early on, the company saw an opportunity to use AI to take over repetitive work employees otherwise did manually, often across multiple systems, Marwaha said.
“We were some of the earliest in the space to believe that where AI has a lot of value is in repetitive manual tasks,” he said.
Aqua uses AI to automate more of that tedious work, so that advisers can spend more time with clients and grow their businesses.
The startup is now also working on helping wealth managers give clients access to private companies before they go public.
The move stemmed from the observation that pre-IPO investing has become a growing area of interest among Aqua customers looking to give their clients earlier exposure to companies, Marwaha said.
“That has been something relatively new for us, and has been very fast-growing on our side,” he added.
Putting the capital to work
Aqua plans to use its Series A to further develop its business and technology, grow its engineering and partnerships teams, and expand its connections with custodians and investment firms.
The company has 23 employees today, up from six a year ago.
“Demand is really high,” Marwaha said. The company is hiring, he added, to support new customers and increased platform activity.
Ryan Kruizenga, general partner of Arthur Ventures, believes that Aqua is working on solving “one of the hardest and largest problems in the wealth management space.”
Members of the Arthur Ventures team have actually worked directly in the space, Kruizenga added.
“So we have intimate knowledge of the constraints in this arena today,” he said.
Kruizenga said platforms have traditionally required clients to adapt their internal processes to fit a more generic solution. By contrast, Aqua’s configurable platform and onboarding process are designed around how a firm already operates, allowing clients to get up and running “from day one” without having to “rewrite the rules.” He called that approach “a game-changer.”
When asked why none of the company’s backers invested in Aqua’s latest round, Marwaha said that the Series A was oversubscribed, and the allocation was largely committed to the lead investor, leaving “limited room” for additional participation.
