Motif Investing, a new vehicle that allows you to invest in ideas, has raised $20 million in Series B financing led by Ignition Partners with participation from Norwest Venture Partners and Foundation Capital. This brings the company’s total funding to $26 million.
Motif, which is in private beta, was founded by former Microsoft executive Hardeep Walia and hedge fund analyst Tariq Hilaly to give individuals a new way to invest based on themes. Instead of choosing to buy stock in specific companies, Motif allows investors to invest in different portfolios of stocks, each called a “motif,” that are centered around everyday ideas. For example, motifs can be built around themes and ideas ranging from cloud computing to democracy in the Middle East. In addition, each motif can be customized to meet an individual’s ideas or needs.
Walia gives the example of “cloud computing” or “mobile internet” as growth areas that have seen significant gains over the past few years but he says most people don’t know how to map these ideas into an actual investment.
For example, there’s a lot of current buzz around the impact the debt ceiling negotiations is going to have on interest rates in the US. Suppose you were reading a news story about how interest rates are likely to rise and decided that you would like to invest in rising interest rates. How would you do this? If you have a money manager, you could call him or her, but it’s not an easy task.
Motif says that the challenge to investing in rising interest rates is that these rates have a negative impact on corporate earnings because they result in increased short-term borrowing costs. So rising interest rates can typically hurt stocks.
But the startup’s Rising Interest Rate Motif would include the small number of companies that hold very large sums of customer cash, and where interest rates rise they can actually increase their earnings. Specific examples of companies that hold large sums of customer cash include online brokerages such as Charles Schwab or E*TRADE, payment solutions companies such as Western Union or Heartland Payment Systems, payroll processors such as Paychex, prepaid cards such as Green Dot, and custodian banks such as Northern Trust.
Ignition’s John Connors, who was formerly Microsoft’s CFO and is a board member at Motif, said of the investment startup, “when introduced to Motif Investing, I recognized its potential to have a major impact on how people invest…I am excited about the experienced team assembled and their approach to disrupting the financial services marketplace.”
Walia says that the investment vehicle will focus on a variety of “ideas,” beyond just technology, and is still tweaking its pricing model and minimum investment amount. The company will be launching publicly in the Fall. Motif will use the new funding for product development and hiring.