Hot micro-investing app Acorns has raised another $30 million in a funding round led by PayPal, which made a strategic investment along with Rakuten.
PayPal contributed the majority of the investment.
The raise brings Acorns’ total funding to $62 million and aligns it with the biggest name in financial technology.
Acorns’ goal is to capture millennial investors by boiling down the act of investing to small decisions, cofounder Jeff Cruttenden tells Business Insider. The startup uses a portfolio of low-cost ETFs (exchange traded funds) to boil investing down to two questions: “how much” you want to invest and “how much risk” you want to take.
Acorns’ ETFs are wrapped up in a slick mobile package that has helped the startup open over 850,000 investment accounts, and almost 75% of those belong to millennials. Acorns costs $1 per month for accounts less than $5,000, or 0.25% per year on those over that. But if you are a student, or are 18-23 years old, it is free.
This $30 million will help Acorns expand both its reach and its team, but the partnership with PayPal is also significant, Cruttenden says. The companies have been talking for many months about combined initiatives, which will center around opening up avenues of personal finance up, primarily to young investors.
What does that mean? Cruttenden wouldn’t elaborate on the details of the partnership, but incoming Acorns CEO Noah Kerner, a serial entrepreneur who formerly ran WeWork’s strategy and marketing, repeatedly emphasised the idea of millennial investors getting funds from as many sources as possible. While a PayPal integration is the most obvious extension of this, Kerner mentions connecting Acorns to various consumer brands and rewards systems as well.
Acorns would also like to become the mobile financial hub for millennials.
“Investing is a powerful first step,” Cruttenden says. If millennials trust Acorns for investing, they will take advice from the startup about how to optimise other areas of their financial lives. “They will listen to us,” Cruttenden finishes.
Acorns isn’t the only fintech startup jockeying for position at the center of people’s financial lives. $700 million robo-advisor Wealthfront recently launched a major update its CEO Adam Nash calls “Wealthfront 3.0.” The core of the update is a dashboard, a control center for your finances powered by recommendations from Wealthfront’s artificial intelligence engine.
But Acorns thinks its advantage in the crowded ETF startup space is in being the first to effectively leverage mobile, Cruttenden says. And this strategic partnership with PayPal suggests Acorns isn’t resting on its laurels, and trying to provide different areas of value to its customers before competitors catch up.
PayPal, Rakuten Fintech Fund, e.ventures, and Greycroft Partners participated in the current funding round.
We recently did a walkthrough of how to use Acorns. See what it’s like below:
To start out, you need an email address and a secure password. Acorns will also let you create a four-digit passcode to log in on your phone.
Then you link your bank account and any credit or debit cards you want. Linking cards is key to Acorns' 'round-ups' feature, where it invests your spare change for you.
Acorns has to ask you certain investor questions before you get started. Cruttenden says the team spent two and a half years making sure the financial back-end was solid.
Acorns enlisted the help of Dr. Harry Markowitz, the Nobel Laureate and pioneer of 'modern portfolio theory,' to help build the different portfolios.
Acorns will ask you a set of questions about your life and give you a recommendation of which portfolio to choose from.
This was the one Acorns selected for me (though you can change it whenever you want, depending on how much risk you would like).
Then you start off with an initial investment. In order for Acorns to start investing your account must reach a $5 threshold. Acorns costs $1 per month for accounts less than $5,000, or 0.25% per year on those over that. But if you are a student, or are 18-23 years old, it is free.
To set up a deposit, just select whether you want it to be a one-time thing or you want it to occur daily, weekly, or monthly. You can also withdraw money any time you want, without paying a penalty. Though it will take 5-7 business days to show up in your checking account.
You can also select round-ups, either automatic or manual. Every time the total of your roundups hits $5, it invests.
If you don't want to wait, you can have your checking account make up the difference between $5 and your round-ups and 'invest now.'
Now let's take a look at your portfolio. In Acorns, you don't choose individual stocks, but rather, risk profiles. This one is 'aggressive.' An aggressive portfolio means that you have high risk, but high upside potential.
Here is a 'moderate' one. Acorns is showing me that with an average monthly deposit of $100, the projected value of my account will be $17,107 by the time I'm 36, having made over $5,000.
Once you have begun investing, Acorns will show you how your account is doing, allowing you to review time periods including one day, one month, six months, one year, and all time.
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