In volatile times, the micro-investing company has doubled its valuation — and its mission has never been more relevant.
Over the last few years, people across the United States have been managing a perfect storm of financial challenges. And even in this first quarter of 2022 alone, we’ve experienced volatility in the public markets, rising interest rates, and continued inflation driving up the cost of living.
It’s no wonder, then, that the need for financial tools like savings and investing app, Acorns, is more urgent than ever. Acorn announced its $300M series F funding last week, and the company’s revenue grew 61% between 2019 and 2020 alone.
When I first invested in Acorns in 2015, the company had no revenue. Their CEO, Noah Kerner, didn’t have a typical fintech executive background — he was a brand marketer, a published author, and a DJ with a deep understanding of the millennial audience. But the value of Acorns — both as a business and as a resource for individuals — was obvious. At the time, a study showed that about 70% of Americans had less than $1,000 in a savings account, and just over half were financially literate. Acorns promised a simple, intuitive way to teach people how to save, and give them access to good mutual fund products. It also didn't require a lot of wealth for customers to be successful.
And years later, Noah and his team are no less determined to provide critical information and services to people and help them create financial stability. As Acorns has grown, Noah has never compromised that goal. And while there have been bumps in the road (there always are!), my belief in that foundational mission has never wavered either. Thanks to his leadership and ability to hold constant to that founding mission, Acorns is poised for even more growth in the future — and along the way, will have a sustained and meaningful impact for millions of customers.
Rethinking the Finserv Paradigm
Acorns didn’t have a business model when Noah took the helm in 2014. And his vision of being a true partner to customers was somewhat in conflict with traditional business goals. Growth means acquiring customers and monetizing them over their life cycle; the more services that generate revenue, the more profitable the business becomes. And in the world of financial services, that business model is well-established: One that favors wealthy customers and gathers revenue from things like overdraft and ATM fees.
But Noah found a way to create a financial services product that worked differently, architecting Acorns as a subscription service for banking. Users save the ‘spare change’ of their transactions (the difference when rounding up to the nearest dollar). After just two years, Acorns had 1.5 million customers who had invested $310 million.
Over time, Noah and the Acorns team have introduced new services to grow the business while benefiting the customers. Retirement investment services, for example, offered support to the 2 in 3 Americans who aren't saving for later life. And while Acorns started with an audience that didn’t have a lot of money, part of the business model is also to offer content that increases their overall financial literacy as well as grow their savings. So in many ways, the profits and the growth will come in the back end of what Acorns is building.
The Leadership of the Enthusiast
Growing a financial services business can be something of a minefield. You're dealing with people's savings and money, so you have to try to be perfect in order to maintain customer trust, while growing incredibly fast. All the while dealing with constantly scaling a complex infrastructure, dealing with regulatory and security compliance, significant customer care demands and a volatile macro environment
With Noah at the helm, Acorns continues to forge ahead through these challenges. He’s an enthusiastic leader — a true and genuine believer in what he's doing and in the mission of the company. You can feel it in his presence. He carefully constructed the Acorns brand to reflect his vision and attract more users. He worked to forge partnerships with brands popular among a heavily millennial customer base, like AirBnb, Jet.com, and Blue Apron. He also developed an influencer strategy where celebrities told stories of their own financial struggles and many, including Ashton Kutcher, Bono and Kevin Durant, became investors.
I’m very confident that Noah’s steadfast commitment to Acorns and its customers persists as the company grows towards its goal of reaching 10 million customers and its eventual IPO. As he told the Wall Street Journal, “Acorns will be on the right side of history. We are not a grow-at-all-costs company.”
And with this $300M in funding, Acorns is called to double-down on its founding mission and use this funding to build more tools for customers to manage their financial portfolios, from offering more robust family savings plans to making it easier to create custom portfolios. Today, 40% of Americans have less than $300 in savings. And 64% expect to retire with less than $10,000 in retirement savings. These are just the data points we know. We're living in a time where an unprecedented amount of money has been printed by the government. We don’t yet know what the long-term impact will be. The more people are financially literate, have savings, and have financial tools to create stability for themselves — the better off everyone will be no matter what comes next.