Acorns Grow Inc., the Irvine-based fintech startup that pulled back from a SPAC-led public listing in January, last week announced it had raised $300 million from private investors.
The oversubscribed Series F funding round, led by TPG, an alternatives asset manager, gives Acorns a “private valuation” of $1.9 billion, officials tell the Business Journal.
“Our ability to secure $300 million in choppy markets at a higher valuation speaks to the strength of Acorns business,” Acorns Chief Executive Noah Kerner said at the time of the funding’s announcement.
“This capital helps us continue our commitments of building a generational company and putting the responsible tools of wealth-making in everyone’s hands,” he said.
Micro-investing platform Acorns says it has grown into the largest subscription service in U.S. consumer finance, with more than 4.6 million paid subscribers who invest a few dollars regularly through its app.
Acorns says it’s helped its customers save and invest over $12.5 billion.
It now sports $6.1 billion in assets under management, according to a recent filing with the Securities and Exchange Commission.
“Acorns stands apart in the fintech ecosystem,” said John Flynn, an Acorns board member and partner at TPG, which manages $109 billion in assets. “Entering a new chapter, we’re thrilled to continue our partnership with Acorns and help more Americans improve their financial health.”
Jumpy Valuation
The company’s valuation has shifted over the past year, as has its strategy for going public.
Last year, a prospectus valued it at $2.2 billion when it announced plans to go public through a reverse merger with a special purpose acquisition company, commonly referred to as a SPAC.
Wall Street has soured on SPACs of late, as many companies using the blank check vehicle to go public ended up with post-merger share prices lower than the value of their SPAC’s initial public offering prices, which are usually set at $10 per share.
Acorns pulled its potential public listing in January; filings indicate the company had to pay a $17.5 million termination fee to its SPAC partner. The company suggested at the time that a traditional IPO listing could be in the cards at a future date.
In January, Acorns said its “pre-market value” was $1.5 billion.
The latest cash investment in the Irvine firm should help the company weather the lack of a immediate public listing, which was expected to include a simultaneous fund raising deal that would have brought in more than $400 million.
The company last year burned an estimated $70 million in cash and had only $54 million in cash on hand as of June 30, according to SEC filings.
Besides TPG, other institutional investors in the latest funding round included BlackRock, Galaxy Digital, Greycroft, Senator Investment Group, Torch Capital, Industry Ventures, Bain Capital Ventures, Headline, Kevin Durant & Rich Kleiman’s Thirty Five Ventures, among others.
Acorns’ previous fundraise was a Series E deal that raised $105 million in 2019.
Future
The total addressable market for Acorns’ services is $100 billion, as 222 million American adults live in household incomes below $100,000, the company says.
In November, the company said its 2021 sales would climb 77% to $126 million. It predicts sales will reach $309 million in 2023. It has raised some red flags, such as predicting it won’t have adjusted profit nor positive cash flow from 2021 to 2023.
Acorns expects to expand its financial wellness system to include customizable portfolios, the ability to add crypto exposure to a diversified portfolio and family-specific offerings.
A recently disclosed expansion for Acorns into direct investing should help the app rival other mobile platforms like Robinhood Markets Inc., plus legacy services like E-Trade and Fidelity.
Robinhood (Nasdaq: HOOD) went public last year in a $32 billion IPO and its stock reached as high as $85 a share. At press time, it was trading around $12.27 and a $10.2 billion market cap.
Acorns was co-founded in 2014 by Walter Cruttenden and son Jeff Cruttenden.
Walter Cruttenden is known locally for starting in 1984 what eventually became Roth Capital Partners LLC, which is now the largest investment bank based in Orange County. Walter Cruttenden was also the founder and chief executive of E-Offering, the investment banking arm of Menlo Park-based E-Trade Group Inc.
