Telis Demos reported in today’s Wall Street Journal that, “Acorns Grow Inc. is banking on the idea that tiny investments are the future of Wall Street.
“To prove that point, the latest financial-technology upstart installed as its chief executive an ex-disc jockey turned marketing guru who has never worked in wealth management.
“The company is generating believers: PayPal Holdings Inc., Rakuten FinTech Fund and other investors contributed $30 million in venture funding last week, bringing Acorns’s total funding to $62 million raised.”
The Journal article explained that, “The Irvine, Calif., company’s mobile app allows users to make regular deposits from their bank accounts into an Acorns account that automatically invests the money in a basket of exchange-traded funds.
“The typical customer adds ‘spare change,’ as the company puts it, averaging about $50 each month, by rounding up purchases to the nearest dollar and depositing the difference. The app links to an online bank account, tracks activity on the account and invests the rounded-up change from transactions.”
Today’s article noted that, “Acorns’s plan is to build up an enormous user base, then monetize it by adding more features as users demand more services. It also plans to earn fees from marketing partners such as retailers.
“That model hasn’t always worked out in Silicon Valley, where Internet startups that built up huge audiences, like Snapchat Inc. and Twitter Inc., see valuations shrink when they are slower to deliver big revenue or profit than hoped.
“Venture investments in startup U.S. retail investment services dropped from $317 million in 2014 to $152 million last year, according to Dow Jones VentureSource.”
The Journal article added that, “Nevertheless, Acorns’s business model is enough to put it on banks’ radar, many of which are desperate to figure out ways to attract and generate more revenue from customers, especially young ones just starting their financial lives.”
