PayPal to Lead $30 Million Funding Round for Acorns Grow
April 21 2016 - 6:10AM
Dow Jones News
PayPal Holdings Inc. is leading a $30 million funding round for
investing mobile app Acorns Grow.
Acorns offers an app targeted at young investors, allowing users
to deposit small amounts in a brokerage account that automatically
buys a diversified group of exchange-traded funds.
The robo advisory company—online-only firms that make automated
investment decisions for clients—has raised $30 million from PayPal
and Rakuten Fintech Fund, a unit of the Japanese Internet firm,
Acorns is set to announce on Thursday. Early investors Greycroft
Partners and e.Ventures are also participating in the fundraising
round.
The investment doesn't yet include any specific partnership
between PayPal and Acorns, but the two firms see possible future
integration with PayPal products such as its Venmo unit, the
peer-to-peer money transfer app, and other PayPal accounts.
"There's lots of potential between Acorns and Venmo, and Acorns
and PayPal," incoming Acorns Chief Executive Noah Kerner said in an
interview.
PayPal split from eBay Inc. last year and now has one of the
largest market values of any financial technology company, about
$48 billion. The San Jose, Calif., company has been seeking ways to
keep adding new customers who haven't used the service to make
payments in the eBay marketplace. PayPal shares are up about 11% so
far in 2016.
A PayPal spokeswoman said that the company is "looking forward
to developing a strategic partnership" with Acorns. PayPal will
have a minority stake.
Mr. Kerner is moving into the chief executive role after joining
Acorns as an adviser last year. He has previously advised companies
including WeWork on marketing to millennials. He sold his marketing
startup Noise in 2014.
Acorns, which was founded in 2012 by Walter and Jeff Cruttenden,
who are father and son, said that 75% of its 850,000 active
investors are between the ages of 18 to 34. Its customers have
average annual income between $50,000 and $99,000.
Its assets are still relatively small compared with some other
robo adviser startups. Betterment Inc. is the largest robo adviser,
with roughly $4 billion in assets under management. It raised $100
million in new funding earlier this year. Acorns has now raised $62
million in total venture funding.
But Acorns is growing quickly, rising from about 475,000
accounts with $74 million in assets at the beginning of January to
more than 850,000 accounts with more than $150 million invested. It
first launched the investment app about 20 months ago.
Acorns charges $1 a month for accounts with less than $5,000 in
assets, and 0.25 percentage points on accounts larger than
that.
Mathias Schilling, co-founder of e.ventures, said that Acorns
aims to stand out in the growing robo adviser niche with a focus on
investing via mobile phone, rather than the web.
A number of big investment houses, including Charles Schwab
Corp. and Fidelity Investments, have also launched automated
allocation programs.
"We strongly believe mobile-only is the right approach for this
market," he said. "It's a laser-focus on the target millennial
group."
Most people deposit money into their Acorns accounts by rounding
up their small purchases to the nearest dollar, Jeff Cruttenden
said. The typical deposit is $50 a month. "We want to make a big
decision small," he said.
PayPal has made previous venture investments in companies
including Loop Commerce, which enables users to make online
purchase gifts, and Pulsate, a marketing software firm.
(END) Dow Jones Newswires
April 21, 2016 06:55 ET (10:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
eBay (NASDAQ:EBAY)
Historical Stock Chart
From Apr 2024 to May 2024
eBay (NASDAQ:EBAY)
Historical Stock Chart
From May 2023 to May 2024