TAP Innovation Series
Alpha Pages Innovation Series: Acorns

TAP Innovation Series
Alpha Pages Innovation Series: Acorns

Garrett Baldwin

America has an investing problem. An overwhelming number of millennials claim that either they lack the education to make their own investment decisions, or they lack the confidence to do so. In accordance with our goal of helping investors find innovative ways to gain traction in the markets, improve their financial intelligence, and obtain actionable insight, we are spotlighting financial technology innovators who aim to solve today’s challenges.

Earlier this year, the Alpha Pages conducted an interview with Acorns, a fintecy company that won the "A Penny Saved, Penny Earned" category the Benzinga FinTech Awards in April 2015. The firm was also a finalist in two other categories: "Robo Advisor Tools – Best in Class," and a nomination for "Founder of the Year," which was shared by its co-founding father and son Walter and Jeff Cruttenden.

Founded in 2012, Acorns has a simple advising platform designed to bring new investors to the markets and help existing ones boost investment capital. The firm’s app invests the change from every day debit/credit card purchases into the markets.

And these small, frequent investments can have large impacts overtime. We sat down with Acorns co-founder Jeffrey Cruttenden to discuss how the company’s technology is shaking up the investment industry, and what opportunities lay ahead for new investors seeking an edge on the markets.


The Alpha Pages (TAP): How Did Your Company Get Started?

Jeffrey Cruttenden (JC): At a young age, my father [Walter Cruttenden] exposed me to the world of investing by allowing me to pick a stock and watch how it performed. Needless to say, the venture didn’t pan out favorably but it helped shape a fundamental understanding of how the financial markets work.

While attending college, I was surprised at how many of my peers took an interest in investing but had no real life experience in investing. Barriers like high minimum balance requirements, fees and pre-existing knowledge of the stock market prevented them from getting started.

This is what ultimately sparked the idea for Acorns. Essentially, creating a simple, automatic way for young people to get started investing earlier. It’s our goal to create a mechanism that will enable everyone to invest; no matter how much money they have in their bank account.

My father and I co-founded the company in 2012 and officially launched the app in 2014. [Editor’s note: Walter Cruttenden is the company’s CEO and is a financial markets innovator. He founded and served as CEO of Cruttenden Roth, now Roth Capital Partners.]

TAP: Why the Name Acorns?

JC: The company name came from the idea: ‘From acorns mighty oaks do grow.’ Our services align with the natural concept that small investments add up over time.

TAP: What Makes Acorns Different?

JC: The following outline our top differentiators against other services in the marketplace as well as the key benefits of becoming an Acorns investor.

  1. Acorns Is The First And Only Micro-Investing Platform. We enable users to invest small amounts at high frequency. We’re able to do this through our proprietary platform that makes sub-dollar investments in fractional shares scalable. While some are skeptical of the benefits of investing such small amounts, we find that letting go of $1, 50 times is much easier than parting ways with a $50 lump sum. Small amounts invested frequently can add up over time, making contributing to an investment portfolio a seamless part of everyday life.
  2. Competitive Fee Structure. Different from traditional financial advisors and other automated investing services, Acorns investors are able to deposit or withdraw funds at any time with no penalties or fees. In addition to no commissions, our fee structure is minimal. We charge $1 a month on accounts under $5,000 and 25 basis points or .25% annually for accounts $5,000 and above.
  3. Mobile-First. More and more, millennials prefer digital interactions on everyday services, with financial management being no exception. Our app is available on iOS, Android and Amazon Fire, appealing to our market’s usage preferences. This distribution channel ensures more frequent interaction and engagement with an individual’s financial management.  
  4. Self-Clearing Brokerage Firm. All transactions and transfers are handled internally, drastically decreasing processing times (between 1-3 days). Other automated services use a third party, which makes process times more lengthy.
  5. The Most Natural Way to Invest. A sign of the times, young people are much more conservative and cautious with their money. The barriers of traditional financial management – high fees, balance requirements, investment knowledge – further provoke this careful approach. Acorns provides a stress-free investing mechanism that aligns with natural human spending behavior. The app requires no pre-existing knowledge or funds to get started and makes it easier to start building a nest egg slowly and steadily.

TAP: How Does Acorns Make Money?

JC: We have a competitive fee structure that charges $1 a month on accounts under $5,000 and 25 basis points or .25% annually for accounts $5,000 and above.  

TAP: Who is Your Target Market?

JC: Our service was initially designed to cater to a millennial cohort, although that market has since expanded. We’re finding that Acorns is an attractive product to all ages as it can be used as both a kick-starter investment account as well as a supplemental account to other investment portfolios.

In fact, the median age of our users is 30 years old.

Therefore, our market opportunity is huge. This age range is the largest generation by population size – according to the latest data out from the Census Bureau, there are 74.3 million 18-34 year olds in the US, making up 23.5% of the population.

TAP: Tell Us About Your Team…

JC: We’ve built a strong and dedicated team [65 employees] that is passionate about our mission.

In addition to involvement from well-known financial minds, like Dr. Harry Markowitz, Nobel Prize winning economist for Modern Portfolio Theory, we also have an extremely talented team of designers and developers.

The fact is, the app we’ve collectively built can have an enormous impact on individuals’ lives and futures – to a magnitude that we all understand and take very seriously. Everyone on the team is professionally and emotionally invested in what we do.

There is no room for error or question of failure. 

Every day, at noon, employees are welcome to participate in a meditation session. It helps clear the mind and improve the ability to focus for a better workday.

TAP: What is Acorns’ Next Milestone?

JC: We’re in the final stages of fine-tuning our web-app, which will enable users to access their accounts via their desktop.  


Additional Information on Acorns

Stage (seed, pre-Series , post-Series A, etc.)  / Pre-revenue or In revenue

Series B; In revenue

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