When Anil Arora became the chief executive officer of Internet finance startup Yodlee in 2000, data security concerns outweighed the convenience of online money management—and 97 percent of U.S. households lacked broadband connections. Then came the dot-com crash, the Sept. 11 terrorist attacks, and economic hard times that decimated tech startups. In 2008 the financial markets meltdown became Yodlee’s third near-death experience, says Arora, who joined the company from PC maker Gateway (2353:TT). “There were definitely times where we were down to, ‘Are we going to make it through the next couple of months,’ ” he says.
Privately held Yodlee isn’t a household name, but it’s well known in the financial-services industry. The company’s software is used by 600 corporate clients, including 7 of the top 10 U.S. banks, and Arora says 50 million consumers worldwide use it, unawares, to manage checking and investment accounts, pay bills, or track spending via the Web, smartphones, and tablets. Down the road from Oracle’s sprawling campus in Redwood City, Calif., the 750-employee company provides transaction data and account aggregation tools banks can use to personalize customers’ online investment and budget advice. In addition, Yodlee develops cloud-based services that banks can offer their customers to help with tax preparation and credit-history tracking.
Clients include Citigroup (C), JPMorgan Chase (JPM), Bank of America (BAC), and online financial manager Personal Capital. While startups may pay as little as a few thousand dollars a year for Yodlee’s services, depending on their user base, larger companies pony up millions. Yodlee’s experience collecting and analyzing transaction data, such as credit card purchases and loan payments, helps give companies a fuller picture of their customers. “They were way ahead of their time,” says Steve Schultz, the operating chief of bill-pay startup Check and former head of Yahoo! Finance (YHOO). “They started in the late ’90s aggregating financial data when people were still having trouble entering credit card information into a website.”
Yodlee was steadied by revenue from clients such as AOL (AOL), Citi, Chase, and Merrill Lynch (BAC) in its early years and survived the lean ones thanks largely to $50 million it received in January 2001 from investors including Chase, E*Trade (ETFC), and Intel (INTC). In 2002, after the stock market collapsed and the company slashed its valuation, private equity firm Warburg Pincus put in $20 million, bought out some early investors, and became Yodlee’s largest equity holder.
This year, Yodlee is on track to generate $50 million to $100 million in revenue, according to a person familiar with the company’s financials who wasn’t authorized to disclose them. It turned things around largely by moving early into the cloud, which cut hardware needs and software update costs for customers, outflanking older rivals such as Fiserv (FISV). In the last few years, increased data security and growing consumer interest in financial management tools have also made Yodlee’s services more attractive. USAA, a San Antonio-based bank and insurer with about 10 million members, signed up five years ago. Neff Hudson, USAA’s assistant vice president for emerging channels, says Yodlee helps them provide customers with an analysis of their bills.
Arora says Yodlee, with revenue expected to grow by 25 percent to 30 percent from 2012, will eke out a profit this year, and investors may push for an initial public offering in 2014. Compared with recent enterprise software IPOs, 30 percent revenue growth doesn’t stand out: HR software company Workday (WDAY) more than doubled in fiscal 2013; IT software maker ServiceNow (NOW) more than doubled in 2011, the year before its IPO. And while Yodlee competes indirectly with consumer finance management tools such as Intuit’s (INTU) Mint.com or MoneyDesktop, Arora says the bigger threat is competition from big software providers like Oracle (ORCL) and SAP (SAP), which are buying up cloud-based software companies. “They’re 100 times bigger than we are,” Arora says of Oracle and SAP. “I’d be crazy if they didn’t cause me massive stress.” Still, he’s faced down stress before.