SmartAsset launches financial decision-making engine

Y Combinator startup unveils platform to help people make home-buying decisions

If you're in the market to buy a new home, besides going online to get some good ideas, you probably also search for a mortgage calculator to determine the monthly costs. But there's few sites, if any, that help you not only determine whether you can afford to buy a home, but what home price you should consider, depending on income, debt and where you want to live, or whether you should buy versus rent, or how your decisions impact your taxes.

One startup does just this.  

SmartAsset, a Y Combinator-backed launches Tuesday morning. The NY-based startup wants to provide advice to people for major financial decisions, such as buying a home, or a car, or paying for children's college tuition. 

"SmartAsset is the next generation in financial decision-making," said Michael Carvin, co-founder and CEO of SmartAsset, in an interview with me. "We help users make big decisions by modeling their finances forward. We then use the forecasts to answer specific questions and provide recommendations on strategies designed to accelerate a user’s path to wealth."

Carvin, whose background is private equity, built SmartAsset initially for himself after he couldn't find any useful tools around home buying. "I went online looking for a tool that could tell me what made most sense to me, and tell me what I could afford," he said. "All I could find was a lot of content and financial calculators." So Carvin set out to build a complex spreadsheet that basically answered his own personal questions about what he could afford with his income, and whether buying or renting made better sense and how his taxes would be affected.

He teamed up with his co-founder, Philip Camiller (CTO), who built the software based on Carvin's spreadsheet, and in July 2011, they quit their jobs to pursue SmartAsset, which is part of the current class of Y Combinator companies still in session. SmartAsset also raised funds from angel investors in NY and Silicon Valley. Carvin would not disclose the seed amount.

SmartAsset is pretty slick, compared to other similar-but-less-robust-and-personalized tools offered by LendingTree and Bankrate.com. Those services look very old school. SmartAsset has an elegant user interface that makes understanding financial decisions super simple. It also asks minimal questions to start with, though over time, it'll likely ask more questions to provide better answers.

For now, SmartAssets asks for you for your income, debt, down payment amount, credit score and zip code. After it receives this information, it will show a person what they can afford. A person can then toggle the downpayment amount to see how this affects the monthly payment and taxes. While this is something other calculators do, it's the additional information and the up-to-date user interface that makes SmartAsset more useful. For instance, it's hard to give advice on whether someone should buy or rent unless local economic variables are taken into account. 

"We take into account all variables that can be 'known' (local real estate taxes, local transaction expenses, local income taxes etc)," said Carvin. "For forward looking variables like 'how much will your home appreciate in value' we provide a default assumption but allow users to adjust the assumptions to fit their view (the sliders on the buy vs rent page).  As all markets are local and expectations from house to house
can be different, we wanted to make sure users have the flexibility to change the key assumptions."

Additionally, SmartAsset helps consumers understand how their taxes will be impacted.

Market opportunity

SmartAsset reminds me a lot of Zillow, which attracts consumers by giving them a way to check out homes for free. While Zillow offers consumers different information (information on available homes), both companies act as mouse traps for mortgage brokers and realtors. Both companies are essentially lead-generation platforms. Zillow is not a bad comparison, given that it's valued at $1.2 billion and generated $22 million in the quarter ending March 31.

The startup also reminds me of FutureAdvisor, which launched in March, and is another YC-backed startup that is an online financial advisor that consolidates your investment holdings, savings, 401Ks or other investments and helps you make decisions about them.  

SmartAsset is also similar to Mint, in that it's just revamping the old way of getting financial information. In Mint's case, it's replaced Intuit's Quicken, at least for many consumers. This is why Intuit paid $170 million to snap up Mint. In like vein, SmartAsset is a new-and-improved Bankrate and LendingTree, though SmartAsset isn't just about home buying and the user experience is more friendly. For instance, at least according to Carvin, users won't get be bombarded with phone calls from potential mortgage brokers, unless the user opts in to be contacted. 

SmartAsset also hopes to move into other verticals, such as family planning decisions about marriage and children, as well as self investments, like the cost of school.   

So how will SmartAsset acquire its users? "User acquisition is challenging," said Carvin. "We're looking at a number of strategies from paid search to SEO (search engine marketing)."  This strategy sounds like the right direction given that most people search for online for such financial tools. But is there a social component that can help distribute the service? That's something for SmartAsset to work out in the future.