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Acorns: The Dollar Shave Club of Fintech

By David Yockelson | February 18, 2018 | 0 Comments

Non-Tech to Tech ProvidersGTMGo To Marketdigital disruptionDigital Business

What if you could open and maintain an investment account on your phone that was funded automatically by the spare change between the price of your latte and the next whole dollar?

What if 2.9 million of your friends thought this was a good idea?

You’d have Acorns, a company that is disrupting – yes, that oft used term, disrupting – the financial services industry. I first blogged about them in passing ~2 two years ago here, but I’ve done more research, spoken to the CEO, and written a more in depth “disruptor profile” on them recently. That can be found here. The conclusion? By selecting, targeting, and (by all appearances) winning a segment (or an opportunity – or business moment – across segments) that either major investment firms are ignoring or can’t see/understand well, Acorns is a disruptor and appears well positioned to continue being so.

Here’s the skinny: Acorns has primarily targeted the young mobile millenial, someone that either doesn’t have time or isn’t interested in the traditional mode of investment or related vehicles. Make no mistake – invested accounts created in Acorns can be pointed at 5 different schemes, whose portfolios are overseen by some really smart people (smart people – and celebrities like Ashton Kutcher and Kevin Durant – are also investors). Investment advice is available, but dispensed primarily as snippets in the context of events like the recent stock market roller coaster ride (more in depth research/information is also available). The main goal is to make it painless for customers to create, maintain, and increase their accounts. Further, Acorns offers “Found Money” – money given by partners in the Acorns ecosystem (150 of these including Dollar Shave Club,, 1800Flowers) and who add money to customers’ accounts when they purchase their goods or services through provided links. How does Acorns make money? It draws a fee from investors (for example $1/month) and is paid by Found Money partners for their ability to participate.

Traditional financial services folks scoff at the $900 average Acorns account, often believing that the customers Acorns has (many of whom earn $100K or less) aren’t desired by the bigger investment firms (they’re not profitable, is the argument). Acorns is also often classified as a “roboadvisor” akin to Wealthfront or Betterment; major firms also offer robadvisors. But lumping Acorns into this group misses the point; they’re not simply trying to automate an existing process, they’re transforming and disrupting it.

This is the first of a few interesting parallels with Dollar Shave Club (ah, finally). DSC applied a subscription model to men’s shaving/razors/blades, which was not a revolutionary development in itself.  But paired with some powerful analytics and (what became) viral videos, DSC transformed and disrupted a segment that had a great degree of angst, taking market share from the leaders and ultimately being acquired for $1B by Unilever. Let’s look at the list of similarities (which correlate to our Elements of Disruption — technology, business/economics, industry, society):

  • apply an interesting business model to a traditional business (elements: business/economics and industry)
  • augment that business model with some fierce technology (for DSC, it was analytics; for Acorns, it’s their proprietary broker dealer that is up to ~1B trades per year) (element: technology)
  • appeal to the audience in a novel way so that they’re not only attracted, they’re retained (Acorns has a >90% retention rate for its 2.9M customers) (element: society)
  • drive the acquisition of the audience and establish a base that can both grow and (more importantly) be primed for subsequent products/services (Acorns will follow with new products for retirement and likely youth investing over time) (element: industry).

In both companies’ cases, the founders were disturbed by the either poorly supported or ignored state of their customers/market segments. Who knows how many untapped segments or business moments exist within industry value chains? The moral of the story for strategy, technology, and marketing leaders is either to find them through determined analysis or be smart enough to address them (exploiting the Elements of Disruption) when they are more accidentally discovered (which I believe is more likely).

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