Ksenia Yudina, the founder of UNest who abruptly resigned as CEO of the startup earlier this month, accused three board members of voting for a hostile takeover of the troubled startup that was ‘”illegal and unethical,” according to an email she sent to investors and board members that was obtained by Insider.
Yudina also stated that the company is insolvent and is in default by $3 million to Silicon Valley Bank, as Insider previously reported.
Reached via LinkedIn, Yudina said she could not comment on her email.
“This matter is very confidential and person who leaked the email can be subject to legal claims,” Yudina wrote. “I’m still in the middle of it and can’t share anything.”
No one on UNest’s board would talk either. Michael Doniger, the company’s chief operating officer, responded to questions via LinkedIn.
“The board and investors are examining the claims in Ksenia’s email carefully and cannot make any additional comment while that examination is still underway,” Doniger wrote. “The board, remaining management, and investors are working closely together to secure additional funding for the company.”
Doniger also said that despite the turmoil, customers have no reason to worry about the money in their accounts, which are held by a separate custodial partner, Apex Clearing.
“Accounts continue to be managed and invested as usual and are entirely independent of the company’s financial standing or ongoing discussions and changes in company management,” Doniger wrote.
UNest is hardly alone in its struggles as numerous financial technology startups have buckled in the last two years as they have faced the duel headwinds of a lack of venture funding and skyrocketing interest rates. More generally, some VCs have warned of a “mass extinction event” for startups as funding dries up and companies have a much harder time being acquired or going public. More than 500 startups have closed their doors so far this year, according to Crunchbase data.
What is unusual is a CEO accusing board members of encouraging her to do something that she claims was “illegal and unethical.”
Nearly $40 million invested, and then vaporized
Yudina, a former vice-president at the Capital Group, founded UNest in 2018 to make it seamless for families to save for college tuition. The app, which charges users $4.99 a month, later added features to build up nest eggs for other major expenses like weddings and down payments for homes.
Investors – including the Artemis Fund, Anthos Capital, Franklin Templeton and Northwestern Mutual – poured close to $40 million into UNest. NBA All-Star Baron Davis and actress Laura Dern joined as “brand ambassadors” and UNest acquired two smaller fintech companies, Littlefund and Kidfund.
The company last raised a series B funding round led by the Artemis Fund at a $126 million valuation at the end of 2021, according to Pitchbook. UNest boasted 400,000 users that year and said it was on track to hit a million users in 2022.
But this month, Yudina informed investors all their money was gone and she was resigning.
Two options to avoid bankruptcy
UNest had two options to avoid bankruptcy, Yudina told investors – a pre-packaged liquidation or a “hostile takeover from a new investor.”
Yudina said she initially supported the hostile takeover until the company’s legal counsel and executive team “highlighted multiple legal, compliance, regulatory and operational risks associated with the transaction which I relayed to the Board, but it was ignored.”
One issue was that Yudina said she was told not to enter into a binding agreement without approval from its senior secured creditor, Silicon Valley Bank. (SVB did not respond to a request for comment.)
“I wasn’t doing something that I perceived as illegal and unethical, therefore I stepped down from the position of CEO,” Yudina wrote.
Doniger, the COO, declined to provide more detail on Yudina’s accusations but said UNest has signed a term sheet with a new investor to be able to continue operations.
“They share our vision and conviction that UNest can and will be a tremendously successful company going forward,” Doniger said.
Business as usual on UNest’s website and a new crypto feature
On UNest’s website and social media channels, nothing seems to be amiss. The company is still accepting new customers and even advertises a new upcoming offering: Cryptocurrency college savings accounts.
Yudina’s only public statement since her email was an oblique reference to “tremendous challenges, both personally and professionally” she wrote in a LinkedIn post last week.
“Tech industry is navigating a lot of headwinds and even strong startup founders get affected,” Yudina wrote, before saying that people should be focused on supporting Israel.
“As we navigate the hurdles of our daily lives, it’s crucial to remember that there are people on another continent enduring unimaginable suffering and uncertainty,” Yudina wrote in the message.
Do you have more information about UNest or other startups in trouble? Contact reporter Ben Bergman at [email protected]
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