HiddenLevers, a financial risk management and proposal generation SaaS company went from struggling to find customers to being acquired at an impressive 16x revenue. Founded in 2010 by Praveen Ghanta and Raj Udeshi in Atlanta, the company saw significant growth and evolution before its sale in 2021. This article explores the journey of HiddenLevers, its strategies, challenges, and the key decisions that led to its remarkable success.
Praveen Ghanta, co-founder of HiddenLevers
Early struggles and finding the right market
When HiddenLevers started, Ghanta and Udeshi had a tough time figuring out who would actually use their software. They spent 18 months trying to find the right customers and approaching different sectors of the financial industry. They knocked on doors at discount investment brokers, financial media, and retail investors but faced rejection at every turn. Despite these setbacks, they kept pushing forward. Eventually, they found their ideal customers: financial advisors. By 2012, about 200 advisory firms were using HiddenLevers, and this number grew to around 450 by the time the company was sold. The user base also expanded significantly, reaching about 3,000 financial advisors, a tenfold increase that demonstrated the software's value.
Creating a unique product
The idea for HiddenLevers came from Ghanta’s frustration with the lack of available data on how different economic factors affected investments. He wanted to know how changes in things like oil prices impacted energy stocks but couldn’t find this information easily. So, he decided to create a software tool that provided these insights, allowing financial advisors to see how various economic factors affected their clients' portfolios.
Even though the product was unique, gaining customers wasn’t easy. The company initially charged $30 per month for the software, but they raised the price to $300 per month by the end of 2011. This strategy helped them maximize revenue without relying on outside funding. Over time, HiddenLevers continued to improve its software, adding features like automated risk monitoring for larger firms and quick scenario-based stress tests to respond to global events
Building partnerships and growing the business
HiddenLevers formed key partnerships that helped it grow and gain credibility among financial advisors. They worked with firms like Carson Group and Focus Financial Partners, which expanded their reach and solidified their reputation in the industry.
One of HiddenLevers’ biggest strengths was its ability to adapt quickly to market changes. While larger competitors like BlackRock took months to react, HiddenLevers could update its software in less than 24 hours. This quick response time helped them stay ahead and attract a loyal customer base.
Steady growth and innovative hiring
For nine years in a row, HiddenLevers grew by 60% annually, reaching $8 million in annual recurring revenue by the time of the acquisition. A key part of this success was their innovative approach to hiring. The company employed many part-time workers, which equated to about 25 full-time employees. This flexible model helped them manage costs effectively and grow the business without the high overhead of a large full-time staff.
The big decision: To grow or to sell
In 2020, Ghanta and Udeshi faced a major decision: should they keep growing the company or sell it? To continue growing, they would have needed to build an enterprise sales team and possibly raise a significant amount of money, which they were hesitant to do. Instead, they chose to take advantage of the high-valuation market during the pandemic and sell the company.
Ghanta explained on the Practical Founders Podcast; “We decided that selling in a high valuation market to a strategic buyer was a better outcome for the company and team.”
With the help of their advisor, PJT Partners, they reached out to about 40 potential buyers. After multiple discussions, Orion Advisor Solutions emerged as the best fit. Orion had been a long-time partner, and integrating HiddenLevers’ technology into their platform was seen as a strategic move.
Checking the company and making a deal
Before buying HiddenLevers, Orion had to check everything about the company carefully. This was hard for HiddenLevers. Ghanta said it was like playing a very high-stakes poker game. As time went on, HiddenLevers had less power in the deal.
Ghanta and Udeshi had to be strong when talking about the price. They decided on the lowest price they would accept and refused to go lower, even when Orion tried to pay less.
HiddenLevers and Orion didn't say exactly how much money the deal was for. But they did say it was over $100 million. We know HiddenLevers was making $8 million a year, and Orion paid 16 times that amount. So we can guess the price was around $128 million.
Joining with Orion
Orion bought HiddenLevers to help compete with other big companies like Envestnet. Orion planned to use HiddenLevers' software in many parts of its own software system. This included tools for suggesting investments and checking how different economic situations might affect investments.
After Orion bought HiddenLevers, they kept using the HiddenLevers name, just calling it "Orion HiddenLevers" instead. Ghanta and Udeshi worked for Orion as high-level managers for a year to help everyone get used to the change. All the HiddenLevers workers got jobs at Orion too.
How Orion planned to use HiddenLevers
Orion had big plans for HiddenLevers' technology. They wanted to add HiddenLevers' investment proposal tools to their Orion Communities marketplace. They also planned to put HiddenLevers' stress tests into their existing systems for managing investments, like Orion Portfolio Solutions and Brinker Capital.
Orion's CEO, Eric Clarke, said that HiddenLevers would help them in four main areas: finding new clients, planning, investing, and helping clients reach their goals. He also said that HiddenLevers' technology would be used in many parts of Orion's system, from creating investment models to trading.
How this affected the finance industry
People who know a lot about the finance industry thought this was a good deal. Alois Pirker, who studies wealth management, said that buying HiddenLevers gave Orion some very good tools. He said HiddenLevers' software was good at looking at risks from the economy and also at how well advisory firms were doing.
Pirker also pointed out that Focus Financial was using HiddenLevers in a special way. They were using it to look at all the data from the advisory firms they own or partly own, to see where the risks were. This kind of business intelligence could be very valuable for the 2,200 advisory firms using Orion's platform.
Orion planned to use HiddenLevers' software in its tools for understanding business information and following rules. This would let companies check every account for risks and see how well the whole company and each advisor were doing.
What others in the industry said
Ron Carson, the CEO of Carson Group (one of HiddenLevers' big customers), said he was excited about the deal. He thought it would help advisors provide better service to their clients and make things simpler for the advisors.
Orion also said that HiddenLevers' approach to analyzing risk was better than just using a single number. This was seen as a dig at one of their competitors, though they didn't name the company directly.
What the founders did next
After selling HiddenLevers and working for Orion for a year, Ghanta started a new company called Fraction. He got this idea from how well hiring part-time workers worked at HiddenLevers. Fraction helps other new companies hire part-time workers too.
Conclusion
The story of HiddenLevers shows that small companies can become very successful. Ghanta and Udeshi started with just an idea. They had trouble at first, but they kept trying. They found the right customers, improved their product, and grew their company step by step.
HiddenLevers' success teaches us a few things. First, it's important to find the right customers. Second, it's good to keep making your product better. Third, there are different ways to hire people and grow a company.
The founders also made a smart choice when they decided to sell. They saw that the market was good for selling software companies. They also knew that growing bigger would be hard without a lot of money from investors. So they chose to sell at the right time.
Now, HiddenLevers is part of a bigger company, Orion. This means more financial advisors will be able to use their software. It also shows how technology in the finance world keeps changing and growing.
For other people starting companies, HiddenLevers' story is encouraging. It shows that with hard work, smart decisions, and a good product, a small company can become very successful. Even if it takes time to find the right customers or the best way to grow, keeping at it can lead to big results.
In the end, HiddenLevers went from two friends with an idea to a company worth over $100 million. Their journey wasn't always easy, but their success shows what's possible in the world of software and finance.
