DealmakingWealthtech

Coatue leads $75 million Series D for M1 Finance

M1 will deploy capital to launch the M1 credit card and double headcount

Wealthtech startup M1 Finance has reeled in another $75 million in funding, bringing its nine-month VC haul to more than $150 million.

Chicago-based M1 announced the $75 million Series D round March 9. Coatue Management led the round, with participation from previous investors Clocktower Technology Ventures and Left Lane Capital. Other companies in Coatue’s fintech portfolio include Ant Financial, Chime and Databricks.

Last June, M1 revealed a Series B round of $33 million. Four months later, the startup announced a Series C round of $45 million. In all, its three most recent funding rounds total $153 million.

“Wealth is built through long-term ownership, not gambling on short-term price movements,” Brian Barnes, founder and CEO of M1, said in a news release. “Our mission at M1 is to empower people to improve their financial well-being. We do this through free automated investing in a customizable portfolio, lower-cost and accessible borrowing, and flexible spending with great rewards.”

Barnes said the $75 million round will enable his company to almost double its headcount from more than 160 today to nearly 300 by the end of 2021, up from 40 employees at the beginning of 2020. Currently, M1 is trying to fill more than 60 job openings. 

Barnes told FinLedger that some of the Series D round also will go toward development of a new offering—an M1 credit card. In December, the company introduced its automated cash management feature, Smart Transfers.

M1 says its wealthtech app has empowered more than 500,000 users to improve their financial well-being through investing, digital checking and lines of credit. The startup, founded in 2015, has more than $3.5 billion in assets under management.

“2020 was an incredible year of growth for us, but that growth is only accelerating, and we’re going to continue pushing forward in that same direction,” Barnes told FinLedger. “We’re nearing $4 billion in client assets, just five months after hitting $2 billion, and we got where we are today with a product-first growth strategy.”

Barnes said M1 views its competitors as investment giants like Charles Schwab and Fidelity, rather than wealthtech upstarts such as Robinhood.

“We pride ourselves on helping people, of all ages and backgrounds, improve their financial well-being in a sustainable way,” Barnes said in an interview. “Our investors know that building wealth takes a mindset that values time, patience and knowledge, not impulse. People are coming to us not to time the market, but to change their financial habits for the better by automating their money and investing over the long term.”

While M1 views its competitors as Schwab and Fidelity, consumers often think of M1 in a similar group as wealthtech startups like Public.com and Robinhood – though M1 may be a better fit for “long-term investors that want to select a portfolio and get on with their life.”

In a recent interview with Sruthi Lanka of Public.com, FinLedger reported on the topic of payment for order flow – a component of M1 Finance’s business model. In January, New York and Texas attorneys general issued civil investigative demands related to 13 companies in relation to stock trading halts as a result of r/WallStreetBets run-ups. Robinhood caught a majority of the attention in this coverage, but M1 was also named.

Last week, M1 Finance competitor Betterment deepened their B2B play with a new partnership with Zenefits. Betterment, which offers banking, digital wealth management products and advice, is entering the B2B retirement planning space by making its 401(k) offerings available to clients of HR and benefits platform Zenefits, which reaches more than 10,000 businesses.

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