Acorns squirrels away $300M Series F after scrapping SPAC, now worth nearly $2B – TechCrunch

Savings and investing app Acorns has raised $300 million in a Series F funding round that values the company at nearly $2 billion.

The announcement of the raise comes about six weeks after the consumer fintech startup said it was shelving its plans for its $2.2 billion SPAC with Pioneer Merger Corp. in favor of an eventual traditional IPO. New York-based Acorns had last raised more than three years ago — a $105 million Series E round in January of 2019 at an $860 million valuation.

CEO Noah Kerner told TechCrunch this week that the company felt it “wasn’t the right time to go public.”

“As we go forward, we’re going to pursue a traditional IPO,” he said. “We think that makes the most sense going forward.” 

In the meantime, Acorns has raised money to continue to explore more acquisitions — it acquired two companies in the first half of last year — as well as to fund “growth and innovation,” Kerner said.

Private equity firm TPG led its Series F, which also included participation from BlackRock, Greycroft, Owl Rock (a division of Blue Owl), Senator Investment Group, Torch Capital, Industry Ventures, Bain Capital Ventures, Galaxy Digital, Headline and Kevin Durant & Rich Kleiman’s Thirty Five Ventures, among others. With the latest capital infusion, Acorns has raised over $500 million, according to Crunchbase.

While he declined to reveal revenue or income figures, Kerner said only that the company had “exceeded its public forecast” for 2021 and now has more than 4.6 million paid subscribers. Last year, when the company planned to go public via a SPAC, it had projected revenue of $126 million for the year, according to its deck, as analyzed by our own Alex Wilhelm. It had 4 million subscribers as of August 2021.

That deck also revealed that while Acorns was steadily growing its revenue, the process was an expensive one.

Alex reported that from 2019 to 2020, Acorns grew 61%, from $44 million in revenue to $71 million. Its gross margin improved from 71% to 78% over the same time frame. Alex also determined that Acorns’ pace of revenue expansion accelerated from 54% in 2019 to 61% in 2020. And the company anticipated that it could scale that figure to 77% in 2021. But since the company has abandoned its public plans — for now — we’ll have to wait to find out if it in fact did. 

At the same time, Acorns’ deck had also revealed that it expected its operating income to worsen by $20 million in 2021, to -$85 million, and its operating cash flow to dip from -$35 million in 2020 to -$70 million in 2021.

In 2022, Acorns plans to roll out customized portfolios, the ability to add crypto exposure “to a diversified portfolio” and more family-specific offerings. 

Historically, Acorns has automatically created portfolios for its customers. By giving them the ability to customize their portfolios, Kerner said the goal is to help them feel more engaged.

“Active engagement helps people learn more,” he told TechCrunch. “So at the moment of decision-making we’re bringing together educational content and product in the same place.”

Acorns plans to include “no more than 5% exposure” to crypto as an option for customers who would like to participate, according to Kerner, who emphasized there “will not be crypto trading on the Acorns platform.”

“It is an uncorrelated asset class so it makes sense to include it as part of a well-balanced, diversified portfolio,” he added.

The company also plans to continue building products that allow parents and their kids “to save and invest, and get educated together.” Since its 2012 inception, the company has evolved its offering to also include investment services, debt management and a product aimed at children, Acorns Early. 

Presently, Acorns has about 700 employees and will continue scaling up, particularly in product development, Kerner said.

As for going public, the executive described the company’s process of going public via SPAC “as a dry run at going public.”

“We developed that capability and muscle internally and we’re fully prepared to do it,” Kerner said. “So when the time is right, we are prepared to execute with extreme excellence.”

TPG Partner John Flynn said his firm invested in Acorns a number of years ago “given the work the company was doing to advance financial inclusion and financial health for everyday Americans through accessible and easy-to-use technology.” Since then, he said, the company has grown its product suite “meaningfully” and has built “a trusted, mission-oriented brand and platform that is beloved by its customers.” 

He added: “Acorns has established itself as a leader in long-term investing through an innovative and robust set of retirement and savings-focused products. With a clear value proposition, strong brand, and expanding product suite, we believe customers will increasingly see Acorns as an all-in-one account provider.  Additionally, the company enables financial education through its personalized, ‘gamified’ engagement model that helps customers develop and practice smart saving habits.”

Acorns is not the only fintech to recently abandon its SPAC plans. Kin Insurance was poised to merge with Omnichannel Acquisition Corp., a special purpose acquisition company, to go public. However, in January, the company decided not to move ahead with the deal and, last week, said it raised $82 million in a Series D round of funding.