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Since rescuing the company from the dot-com ash-heap in 2002, Warburg Pincus LLC has been largely untroubled by online personal finance site Yodlee Inc., and the company has steadily grown its business in partnerships with banks and expansion of services to their customers. The company raised a small additional round of capital since Warburg Pincus' initial investment, but has for the most part been self-supporting while building a solid brand as the banking industry's partner of choice in account aggregation and personal financial management services. But Yodlee's new $35 million round with strategic investment from Bank of America may be what it needs to get it over the hump to finally support a public offering. In addition to Warburg Pincus, BofA joins Accel Partners, which was the only one of 10 early investors to participate in the original recapitalization, kicking in $4 million to Warburg's $20 million, and Institutional Venture Partners, which participated in a $6.05 million follow-on round in Sept. 2006. Yodlee's initial recap essentially wiped out about $75 million in five rounds of dot-com era funding, and a valuation that once was pegged at $342 million CEO Anil Arora, who has stuck with Yodlee since joining amid its early promise in 2000, said the company has operated profitably with existing products and done well with adoption by financial institutions, but that the new investment is targeted specifically to supporting a new online bill payment system introduced this quarter that is expected to goose additional customer adoption, as well as increase transaction volume among existing users. That kind of critical mass could go a long way to making the company palatable to underwriters for a stock offering in the near future. Arora said Yodlee's Web-based personal finance products are currently offered through 32 of the top 50 financial institutions in the U.S., and its bill payment system is targeted to expanding its customer base and volume of transactions. Yodlee derives revenues from banks based on either the number of users or volume of transactions. The company expects that the new service, which consolidates a customer's bill payment information on one site, will offer banks cost savings and customer service benefits. Arora said the investment came about through an existing operational relationship with Bank of America, which is among Yodlee's largest customers. "We already have investors with very deep pockets and didn't need to bring in anyone else, but they bring a great deal of strategic value," Arora said. "We think there is very significant demand for the new service, and right now the assumption is we have enough to scale to what we expect." Arora said the total household bill payment market is about $20 billion, with a transaction cost of about $2 per bill paid by traditional methods. Only about 20% of all bills are currently paid online, and he said banks have been slow to introduce innovations to systems that are typically a decade old. Yodlee's new product is a logical migration for the company, which began as an aggregation site for linking information for users' multiple financial accounts, and which has over the years become a full service personal financial management site. -- Clifford Carlsen See June 4 funding announcment from Yodlee See Sept. 17, 2002 story from TheDeal.com
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