Wednesday, June 12, 2024

How Does Acorn Make Money


Acorn, founded in 2012 and based in Irvine, California, has rapidly grown to become one of the most frequently used investment apps in North America. Acorns have raised $207 million so far while amassing an $860 million valuation. So, How Does Acorn Make Money?

Acorn is a platform for mobile-first investment that enables users to invest in their spare change. Members can also open a savings account (both for adults and kids) and an IRA account while saving money through the cashback program of the company. How Does Acorn Make Money? By charging users a monthly subscription fee, Acorns makes money. Three plans are offered by the firm, namely Lite, Personal, and Family. Other revenue streams include referral fees from its cashback program as well as an annual fee for accounts above $5,000 for management.

Acorns’ Industry

Acorns is a fintech company known best as a micro-investment platform that enables users through Round-Ups to set up automated investments in a portfolio: Acorns rounds up a debit or credit card purchase made to the nearest dollar on a linked card and invests the change on behalf of the member. Investments are made into one of five portfolios that carry different risk levels. Acorns are one of many fintech businesses, including Robinhood Markets, Inc. and Stash Financial, Inc., that focuses heavily on millennial investors.

As well as other people new to the world of finance, Acorns appeals to millennials, who do not have significant money to bring into their retirement. The purpose of Acorns is to encourage users to invest early and frequently and with minimal effort. Via Round-Ups, the company’s signature initiative, the average Acorns member spends more than $30 per month.

History and Leadership

Acorns were founded by the Walter and Jeff Cruttenden father-and-son entrepreneurial team and launched in 2014. Walter’s father also founded Roth Capital, an investment banking firm, and was the founder and CEO of E*Trade’s investment banking unit.

CEO Noah Kerner, who previously led the creative branding agency Noise and was Chief Strategy & Marketing Officer for WeWork, now leads the company. Kerner attracted investors, including high-profile celebrities such as Jennifer Lopez and Alex Rodriguez, as part of an attempt to expand Acorns’ user base to 100 million clients.

How Does Acorn Make Money: history

How Does Acorn Make Money

What Is Acorn & How Does It Work?

Acorns is a FinTech company offering a variety of financial products and services, primarily for investment, spending, and saving purposes.

Its Invest product is a micro-investment account that allows users to make their spare change available for investment. Acorns links to the credit card or bank account of the user directly. For example, if they buy a coffee for $3.50, Acorns automatically suggest whether they want to put a portion of that ($0.50 in this case) in their portfolio aside.

Within a few clicks, users may create an investment portfolio. Acorns then invest the money in a mix of exchange-traded funds, depending on the user’s investment strategy (conservative to aggressive) (ETFs). When their change pool totals $5, the company will start investing for a person.

Later, Acorns sets aside a selected portion each month (starting at as little as $5) and invests the money into the individual retirement accounts of the company (IRA). Based on the user’s age and proximity to retirement, the portfolio is selected.

Later, users of Acorns are permitted to transfer payments from their taxes into the IRA accounts (transfers are regarded as pre-tax income) and are taxed as income only when they retire, ensuring that users do not have to think about any taxable capital gains.

A checking account with a debit card associated with it is Acorns’ Spend. Some of the main characteristics of the account include:

  • Invest the spare change automatically in the current ETF portfolio
  • Smart deposit, enabling users to set cash aside automatically before spending it
  • FDIC-insured for up to 250,000 dollars

The account enables users to connect and view their checking, savings, and retirement accounts all in one single app.

How Does Acorn Make Money: how it works

Acorns and its so-called Find Money partners partner with For Earn. Such partners allow clients of Acorns to receive cashback bonuses whenever they make a purchase. The likes of Airbnb, Nike, Stitch Fix, Walmart, and several others provide examples of partners. Users may either use their credit cards or verify with Acorns. Lastly, as a Chrome extension, Earn is also available.

With Early, parents can open their kids an investment account. Families may decide monthly, recurring contributions that are automatically withdrawn from their bank accounts. Also, the organization has collaborated with CNBC to produce educational content for families, which encourages them to enhance their financial literacy.

How Does Acorn Make Money
How Does Acorn Make Money

Acorns is a mobile-first organization, meaning that its goods are mainly accessible via mobile apps. Either on Android or iOS, users can use Acorns.

How Does Acorn Make Money?

So, how does Acorn make money? Acorns run a platform that allows members to invest by saving small sums of money regularly, an approach called micro-investing, to save for retirement. At low fees, the website also offers basic banking services. The organization divides its services into three primary classifications.

The first allows members to invest in exchange-traded funds with spare change (ETFs). The second enables users, via the platform, to build and finance an IRA, and the third provides participants with a debit card issued by companies such as Visa, Inc. (V). For packages of various services, Acorns offers subscriptions for $1, $3, and $5 per month.

Via subscriptions, referral, and management fees, Acorns makes revenue. Let’s dig deeper into each of the following three sources of sales.

Subscription Plans

How Does Acorn Make Money from subscription? Acorns package its items monthly into various subscription levels that it provides. Lite, Personal, and Family are called at their stages.

Lite, which comes in at $1 a month, enables Acorns Invest to be used by members. Users will have their spare change rounded up automatically with Invest, and invest it in ETFs. When making a transaction at one of its 350+ Found Money partners, users can receive bonus investments. Companies such as Sephora, Warby Parker, or Dollar Shave Club include these.

Personal costs $3 a month and contains both the products of Invest and Later and Spend. Later, a retirement program helps holders to receive tax benefits. Spend allows members to build an account for reviewing. This account offers advantages such as no fees for accounts and ATMs, up to 10% bonus contributions, and an integrated investment account.

Family, costing $5 a month, includes all of the items as well as Early, previously stated. With Early, parents can build their children’s investment account, set up automatic recurring investments, obtain financial advice from the family, and receive future tax savings.

Referral Fees

How Does Acorn Make Money from referral fees? Acorns receive a referral fee if one of its 350+ Find Money partners purchases anything from its members.

How Does Acorn Make Money
How Does Acorn Make Money

The referral fee charged is bound by the individual agreements listed in the partnership agreement, but typically includes a small percentage fee of the total sales value.

Acorns then share with the member a portion of the referral income by either directly moving it to their account or spending that money on their behalf.

Management Fees

How Does Acorn Make Money from management fees? For accounts greater than $5,000, Acorns charges a 0.25 percent annual maintenance fee. This includes the time and effort that it takes for any given consumer to select the best investment opportunities.

The maintenance fee is lifted for any participant who has less than $5,000 in their account. Instead, one of the subscription fees highlighted above will be charged.

Acorns Funding, Valuation & Revenue

Acorns have raised a total of $207 million through 11 rounds of venture capital funding, according to Crunchbase. The likes of BlackRock, PayPal, Bain Capital Ventures, NBCUniversal, DST Global, and even Jennifer Lopez are investors in the company.

Acorns were able to amass a post-money valuation of $860 million during its new Series E funding round, which the company revealed in January 2019.

Acorns are not, as a private corporation, obliged to report its sales. But there have been many rumors in the past that the company’s annual revenue is closing down to around $100 million.

Fundraising and Financials

How Does Acorn Make Money from funds? Acorns had 6.8 million users as of February 2020, up from 4.6 million in the prior year. Of those accounts, 1 million held IRAs via the website. The firm says more than $1 billion has been invested to date across its website. According to Crunchbase, Acorns has had 12 funding rounds.

The business has received hundreds of millions of dollars in funding from supporters including NBCUniversal Media LLC, PayPal Holdings Inc. (PYPL), and Black Rock Inc. (BLK), yielding an $860 million valuation as of its new fundraising. The valuation of Acorns has exceeded that of Fintech competitor Betterment.

Recent Developments

How Does Acorn Make Money from recent developments? Acorns have initiated a new collaboration with CNBC over the past year to make more investment and finance knowledge accessible to a wider audience via Acorns’ Grow website. Kerner suggested as of June 2019 that Acorns was not seeking to go public.

Finally, How Does Acorn Make Money

How Does Acorn Make Money? To grow their wealth, Acorns offers a platform for members to invest spare change in a diversified portfolio. The company also provides savings accounts for retirement, a debit card, as well as other rudimentary banking services. Acorns make money using subscription fees for members. An example of a fintech company that specializes in micro-investment is Acorns.

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