Acorns unveils new micro-investing platform with $8.3M

Bambi Francisco Roizen · March 12, 2014 · Short URL: https://vator.tv/n/3593

New mobile platform is designed to help millennials invest as little as $5

Acorns, a new micro-investing mobile platform, is coming out of stealth mode. The company, founded in Newport Beach, Ca just over two years ago, lets people save dimes and invest small amounts of money from their mobile device. Its tagline says it all: Invest spare change from everyday purchases into a diversified portfolio. 

The company is also making public that it's raised $8.3 million, including a $5.5 million Series B round, led by Jacobs Asset Management, that just recently closed. The startup was founded by a father-and-son team. Watler Cruttenden, who was a founder of investment bank Cruttendon Roth (now Roth Capital) and also founder and former CEO of ETrade's online investment bank E*Offering, is co-founder and CEO, and son Jeff Cruttenden is COO.

"This is a mobile platform for investing," said Jeff, who designed the platform, specifically for himself and his generation of millennials. Millennials, also known as Generation Y, consist of those born between 1982 and 1993. They're basically in their early 20's and 30's, and don't have investment accounts.

"When I was in college, I found that people who demonstrated interest in investing didn't have investment accounts," said Jeff, who pointed to three reasons why they didn't. Firstly and secondly, the minimum account balances and commissions made it cost-prohibitive and thirdly, it's not that easy being a stock picker. 

With Acorns, there's no stock picking because the portfolios are designed for you, and there are minimal fees for having an account.

The other attractive feature is that Acorns is designed for mobile, meaning it's designed to pull out the most relevant information so you don't have to get lost (like most of us do) when logging into your brokerage accounts online. 

"The next step [in the evolution of banking and brokerage] is happening with the mobile phone," said the elder Cruttenden. Having started his own investment bank 40 years ago, Walter knows a thing or two about how the investment landscape has changed and is changing. In the '90s, the wave of online brokers, like ETrade and Schwab, brought the commissions down. Now on the mobile platform, commissions will go down even further as more and more people invest, he explained.

"Micro-investing is going to change the investment landscape," said Walter. "When you get the increments down really, really small, you're able to start collecting money from all sorts of different sources."

Besides just being a mobile-first platform, Acorns is also offering a pretty compelling product, particularly for investors who want to consume and invest at the same time. What I like about the idea is that it reinforces investing while a person is consuming. And maybe in some way moves our society to be less consumption-obsessed and more investment-focused. 

"Every time you're spending money, you're also investing," said Walter. "It creates a sense of progress. Saving and investing are difficult for most people. Yet people are very good at buying and consuming. By linking the two, we can help more people save and invest more."

The way it works is that whenever a person uses his/her credit card to buy, say a coffee for $3.50, Acorns automatically rounds it up to the nearest dollar and puts the delta into their account. As soon as that account reaches $5, it can be invested.

The investments can go into six ETFs (exchange traded funds). Depending on the investor's risk profile, Acorns creates a portfolio based on those ETFs. As you can imagine, with $5 chunks, there's no way to buy your own ETF, which can cost over $100 apiece. Acorns aggregates the investments and buys the ETFs, then distributes fractional shares to they buyers. With those micro-transactions and personalized portfolios, it's no wonder that of the 20 employees at Acorns, more than half are mathematicians. "This is a simple way to diversify the portfolio and get equity-market returns," said Jeff.

Acorns, which formed an affiliate broker/dealer, has not yet released its app. It's slated for the second quarter on Android and iOS. But when it does come time to download that app, you will receive $5 that you can start investing. Once you start investing, Acorns charges $1 a month. There will also be fees ranging from 1% to .25% annually, with lower rates being charged on accounts with over $5,000 in their accounts. There are no commissions on trades.

Each day, a customer will be able to log in and see the value of his/her account and change in real time. If a person wants to sell, Acorns will sell that person's portfolio and deposit the proceeds. No fees are charged for that transaction.  

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Bambi Francisco Roizen

Founder and CEO of Vator, a media and research firm for entrepreneurs and investors; Managing Director of Vator Health Fund; Co-Founder of Invent Health; Author and award-winning journalist.

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