Combining a $ 400 million IPO raise by SPAC and a $ 165 million hedge fund placement, the Irvine, Calif.-Based robo-advisor needs a reboot after nearly a decade, the AUM has grown to only about $ 5 billion.
Acorns is raising $ 565 million to perform an urgent overhaul that feels like a mix of Robinhood, SoFi, and a roll-up.
The robotic advisor for Irvine, Calif., Micro-accounts will receive $ 400 million through an initial public offering through a merger with a special-purpose acquisition company (SPAC). The deal values Acorns at $ 2.2 billion.
A private placement will fund the remaining $ 165 million. Combined with previous fundraising activities totaling $ 202 million since its founding in 2012, it will have $ 767 million to fuel its ambitions.
Acorns only made $ 71 million in revenue in 2020, but projects $ 126 million this year and $ 309 million in 2023, reports the Wall Street Journal.
The company also forecast that its user base will exceed 8 million subscribers by 2023, up from around 4 million today. See: Aware of ‘Snapchat’ dynamic, BlackRock takes large stake in Acorns after micro-robot wins 2.2 million investors in 12 months
When NBCUniversal invested $ 105 million in acorns in 2019, the the valuation was $ 860 million.
Acorns started out as a specialist in 2014 with a paradoxical inclination that is both hyper-idealistic and cynical.
It has become the only – ideally – micro-balance-focused robo-advisor for Gen Z investors with low financial literacy, low income, low balances, and high debt.
It was also the robot-advisor – cynically – who believed investors had to rack up credit card spending to bring down the medicine of savings and investing.
Investors were drawn to the opportunity to “round” VISA card purchases to the nearest dollar, with the extra pennies pouring into a robot nest egg.
Now that gimmicky start is giving way to a more traditional mission.
“Public listing accelerates Acorns’ ability to create a system of financial well-being for ordinary Americans,” says the SEC filed a discharge announcing the IPO of SPAC.
“Financial well-being” is the term financial services companies use to distill what a retail consumer gets out of doing business with a financial conglomerate.
In April, Acorns announced the takeover of Pillar, backed by Kleiner Perkins, a student loan manager. A month later, he bought Harvest, a fintech startup that uses AI to help users reduce debt and electronically negotiate bank fees.
He made retirement accounts an option after buying Portland-based Vault in 2017.
But part of that well-being is also giving – at Robinhood – investors a bigger agency.
Acorns plans to start allowing investors to choose individual stocks for 10% of their holdings, CEO told the Wall Street Journal.
“Acorns will be on the good side of the story,” Kerner said. “We are not a company that grows at all costs.”
Acorns might appeal to historians if it evolves its business model, says Will Trout, analyst at Javelin Strategy.
“If the ‘right side of the story’ angle refers to creating a one-stop-shop for banking, investing, and other functions at SoFi, then I agree with Noah. They can use the $ 565 million to grow the platform and include the self-directed investing angle with a crypto twist, ”he said.
Acorms casts a shadow over cryptocurrency on its website. “Because the value of cryptocurrency can fluctuate dramatically in a day, this is a speculative investment, and we don’t want to gamble with your money,” he said. States.
One thing that challenges Robinhood’s revenue model is the way it generates revenue, literally, a dollar at a time.
It sells subscriptions with the base level at $ 1 per month for the base investment and goes up to $ 3 to add retirement, banking and direct deposit. There is also a “family” rate of $ 5 which includes gifts and rewards.
Trout applauds the subscription model – even though it’s deviously expensive for low-balance investors compared to what they might pay on AUM in a Betterment or Wealthfront.
“It’s a model that has clearly paid off for the company,” he says. “But is it profitable for the investor given that a monthly fee of even a few dollars translates into high fees when converted to real basis points?”
The Acorns investments made so far will also be very beneficial for investors such as PayPal, Ashton Kutcher, Jennifer Lopez and BlackRock.