LA start-up: Acorns
Founders: Walter Cruttenden and Jeff Cruttenden
USP: An app that automatically invests your spare change, by rounding up card payments, introducing the idea of mobile micro investing to a new generation.
Here we ask President & Chief Operating Officer, Paul Spiller, about the success of Acorns and how to tackle the challenge of expanding a business internationally.
Has the success of Acorns been down to its location, or do you believe it's the type of business that has a universal appeal?
It's from a lot of hard work by a great team and universal appeal. Building Acorns in Southern California and away from the traditional financial companies, i.e. NYC, has made it easier to approach the business with a fresh lens and stay maniacally focused on creating the optimal user experience. Since we're a mobile product without any retail locations our users don't care where we're based, but perhaps there's a little nostalgia to building a consumer product in California.
The app already has over 1.5 million members, 75 per cent of which are in the millennial generation. Is there a much greater appetite to get involved with investments from this generation compared to ones who have gone before?
Millennials recognise that times are changing quickly and retirement won't be like that of Baby Boomers or The Greatest Generation. They can't rely on Social Security and pension plans. Millennials saw their parents lose close to half of their retirement savings in a blink of an eye. They recognise the need to save and invest in their future and they want simple and automated ways to do this.
Acorns seems to have done a good job of demystifying the process of investing, how much of a challenge was this when creating the app?
The app was created to be the lowest possible hurdle for people to get started investing. It takes a few minutes to establish an investment account using information that is top of mind and starting with the change in your pocket. Simple and transparent pricing helps because it's not the industry standard. We worked with Dr. Harry Markowitz, Nobel Laurette and father of Modern Portfolio Theory to construct five portfolios to choose from, versus countless investment options available from others. We tried to turn what has historically been a huge decision (first investment account) into a small decision that is appropriate for the masses.
What one tip would you give to an entrepreneur aiming to expand their business onto a national or global stage?
Focus is critical during the earliest stages of building a business. More times than not it makes sense to focus on the domestic opportunity given how large the US market is. Expanding internationally can get complicated quickly so you need to be well capitalised both in terms of cash and human capital to expand internationally without jeopardizing the core domestic business.
What are the pros and cons of starting up in LA?
Launching a start-up outside of the Bay Area is an advantage so long as two conditions are met; (1) you need the ability to raise capital and (2), you need the ability to attract and retain engineering talent. In terms of the former, there are an increasing number of VC firms based in LA and it's only an hour flight from Sand Hill Road.
In terms of talent, LA is the second largest metropolitan area, has great universities, and for some reason people seem to like the climate! One of the biggest cons to starting a business in LA is the culture around failing. It's somewhat celebrated in the Bay Area so there's a persistent support network whereas failing in LA is just flat out failing.
The first Business is an Adventure event, featuring Richard Branson and a panel of prominent LA business leaders, takes place in Los Angeles on February 18th. The event will be available to stream for free on virgin.com from 16:00 (PST).