Investing service Betterment raises $3M round

Backed by Bessemer Venture Partners, Betterment moves forward with improvements for online investing

Online investing service Betterment announced Thursday that it has raised $3 million in a Series A financing round led by Bessemer Venture Partners, with participation from Anthemis Group, as well as several individual investors, including Thomas Lehrman of Alta Investors, Fabrice Grinda (a musing entrepreneur) and Dave Abner.

The new funding will be used to expand the company team and develop new products set to be released next year. One of the new products is reported to be an individual retirement account (IRA).

Betterment, a New York-based startup that just launched in May, acts as a personal investment account that lets customers invest their savings in stocks and bonds. To streamline the process of moving funds to the new account, Betterment charges no transaction fee for electronically linking the user account with his or her checking account. In fact, the company's only revenue is an annual 0.9% fee based on the account’s average balance.

“I created Betterment because after years working in financial services I was amazed that no one made saving and investing money as simple as it ought to be,” said Betterment founder and CEO Jon Stein.

Users decide for themselves, of course, whether to invest in the high-risk stock market or in low-return government-backed treasury bonds. At the same time, however, Betterment provides features like a broadly diversified market, allocation options between the two types of investments, and demographics data.

Since its May launch, the service has signed up thousands of users and manages millions of dollars of investments, according to the company’s own data.