The first acquisition by Acorns Grows Inc. will plant the Irvine startup in the retirement-planning business.
Acorns, which describes itself as the country’s fastest-growing microinvesting app, with more than 2.4 million accounts, plans to roll out an individual retirement account offering early next year built on technology developed by Portland-based startup Vault that allows consumers to automatically invest part of their paychecks into a retirement fund.
“Vault aligns with Acorns’ mission of offering users simple ways to make smart financial decisions today,” Chief Executive Noah Kerner told the Business Journal via email.
The deal also provides a path for Acorns to gain ground in the Portland market, where both companies plan a hiring push as they expand offerings.
“It’s a growing hub for developer talent, as well as top tech and engineering talent,” Kerner said.
Vault employs eight in Portland, while Acorns employment has zoomed to nearly 140 with additional offices in New York and Australia. Most of its workforce is in Irvine.
Acorns has a waiting list on its website for those interested in establishing an IRA account or testing the product. Acorns Later will offer a Roth IRA that allows account holders to access funds without a tax penalty; a traditional, tax deductible IRA; and a Simplified Employee Pension, or SEP IRA, for business owners seeking retirement benefits for themselves and/or employees.
Acorns is one of Orange County’s closely followed and highest funded startups.
Local investment banking pioneer Walter Cruttenden and his son Jeffrey launched it in 2014 to bring microinvesting to the masses through a mobile app that features nominal fees and no minimums.
Acorns Grows attracted more than 850,000 accounts and $150 million in investments in its first year.
The company initiated a new program last year, Found Money, with partners that include Hulu and Walmart. In the latter partnership, a retailer automatically rounds up a customer’s change and invests the amount in ETFs, such as Vanguard’s S&P 500.
Acorns ranked No. 22 this year on the Wall Street Journal’s list of the Top 25 Tech Companies to Watch.
The list, which highlights companies less than 6 years old and with the potential to grow, weighed such factors as founders’ experience, track record and company buzz.
Experience
Walter founded Cruttenden & Co. in 1984 and grew it into OC’s largest investment bank and a major player in financing emerging companies with under $100 million in market value. It later became Cruttenden Roth, then Roth Capital, perhaps best known for the investment conference it launched 29 years ago. The event draws bankers from around the world to the Ritz-Carlton in Dana Point to hear pitches from startups to established publicly traded companies.
In 1998 he sold a stake in the firm for $5.8 million to Fidelity National Financial Inc. in Santa Barbara. He ultimately exited the company altogether, cashing out for more than $100 million.
The elder Cruttenden also was founder and chief executive of E-Offering, the investment banking arm of Menlo Park-based E-Trade Group Inc., which became the top provider of online initial public offerings before its $328 million sale in 2000 to Wit Capital Group in New York. It was later sold to Charles Schwab Corp.
Walter was also a partner in a $1 million acquisition of audio technology assets from Hughes Aircraft in 1992, which led to the establishment of SRS Labs Inc. The Santa Ana-based company was acquired in 2012 by DTS Inc. in Calabasas for $148 million in a cash-and-stock deal.
Acorns charges users a $1 monthly fee for its original service. It declined to discuss revenue but confirmed it’s profitable.
The company has raised $96.9 million in venture capital from lead backers, such as Jacob Asset Management, which manages about $600 million through several funds from headquarters in New York and an office in El Segundo; San Jose-based PayPal Holdings Inc.; and Greycroft Partners, a venture capital firm with offices in Los Angeles and New York that manages two funds totaling nearly $570 million.
PayPal announced last week that its massive customer base can link their accounts to Acorns’ platform, allowing recurring or one-time investments for long- or short-term expenses. PayPal closed the third quarter with more than 218 million global customer accounts.
Vault has raised $1.8 million since its 2015 inception. Financial terms of its sale were undisclosed.
