A new cell phone technology company wants to take the small change from each purchase a user makes and invests it in the stock market.
Tech start up Acorns’ new app offering
Newport Beach, CA-based Acorns Corporation offers a new application that monitors daily credit card transactions and pockets spare change into an investment account. The first application of its kind, it is growing like a weed. The cell phone application, currently in beta and not promoted, has attracted 11,000 investors and $10 million under management in three months, according to the company’s founders Jeff and Walter Cruttenden.
Acorn recently received an $8.3 million in funding, $5.5 million of which was a Series Be round led by Jacobs Asset Management, a well-known $750 million fund that invests in financial firms, and clients of Digital Offering, a technology driven investment bank, also participated in this round.
“Our business is very simple,” co-founder Walter Cruttenden said in an interview with ValueWalk. “We think millions of people put off starting an investment account and miss years of compounding because they can’t pull together a lump sum, or they think they don’t have extra money to add each month or they just find the process too intimidating or complicated. The Acorns app solves all these problems.”
By taking just an average of $7 per day each week from investors, Acorn expects to see an average account size over $5,000 in two years. The application invests money for investors without taking any commission, has no minimum account balances and has no fees for withdrawal.
“We are easy to use,” Jeff Cruttenden, Acorn’s co-founder, said in an interview with ValueWalk. “People provide their credit card information and we do the rest.”
Tech start up: How does Acorns app work?
Acorns takes customer information then asks a few questions about risk appetite and then builds and maintains an investment portfolio. “We find this is an additional investment vehicle that often accompanies traditional investments,” said Walter Cruttenden. “People like our application because it is simple and unique.”
The company invests the money in the stock market, but this isn’t just any investment. It is investment in a diversified by Nobel prize-winning economist Harry Markowitz, renowned in investment circles for his sometimes criticized but generally respected Modern Portfolio Theory of diversification.
“Our goal is to build an application that complements a consumers spending habits,” said the younger Jeff Cruttenden. “Rather than waiting to invest until they have a large lump sum, we want to encourage people to invest while they build wealth.”
Different from other financial tech startups, Acorns built a proprietary advisory and self-clearing brokerage platform that not only enables micro investing, but also offers an end-to-end investment management experience via a mobile app.