As small- to medium-sized business 401k provider Human Interest pushes toward an eventual initial public offering (IPO), the San Francisco-based company just announced it has raised an additional $200 million in a Series D round, which sees the company valued at $1 billion.
It comes just six months after the completion of Human Interest’s Series C, bringing the total amount raised over the last 12 months to $305 million. The Series D round was led by The Rise Fund, TPG’s global impact investing platform, and joined by SoftBank Vision Fund 2.
The financing included participation from new investor Crosslink Capital and existing investors NewView Capital, Glynn Capital, U.S. Venture Partners, Wing Venture Capital, Uncork Capital, Slow Capital, Susa Ventures, and others.
In an Aug. 4 statement, the company said the funding reflects the gravity of the retirement savings crisis and Human Interest’s progress in addressing one of the most critical problems in our country.
“The Rise Fund determined that Human Interest has the potential to deliver outsized societal impact by helping SMB workers build retirement savings that significantly outpace what they would be able to save without an employer-sponsored plan. By making retirement plans accessible, affordable, and easy to use, Human Interest is creating a path to a secure financial future for people in all lines of work,” the statement said.
While 31.7 million SMBs in America make up the majority of businesses, only 14% of companies with fewer than 100 employees offer retirement benefits, and 74% of people near retirement do not feel they have enough saved. Human Interest said it is “eliminating barriers that have kept SMBs and their employees from adopting retirement plans” in addition to offering “several advantages” over legacy providers:
- Increased participation rate: Eligible employees with Human Interest 401ks have 2x the industry average participation rate as a result of a streamlined onboarding experience and built-in investment advising, the company says.
- Eliminated transaction fees: Human Interest says it was the first 401k provider to eliminate transaction fees, doing so for both participants and plan sponsors.
- Reduced costs for employers and employees: By using technology to automate 401k plan onboarding and administration, Human Interest says it offers a complete solution at a fraction of the price charged by legacy providers. The cost of a Human Interest 401k plan is 40%+ lower than the industry average, the company claims.
“Promoting financial health is a core investment pillar for The Rise Fund. Human Interest delivers one of the most compelling solutions to the persistent problem that roughly half of Americans will not have enough savings when they reach retirement age,” said Maya Chorengel, Co-Managing Partner at The Rise Fund. “Despite recent legislation, primarily at the state level, legacy programs have not, to date, produced the same participant outcomes as Human Interest. We are proud to join Human Interest in its mission to empower more Americans to save for retirement.”
The company is seeing strong adoption in verticals that have not had retirement benefits, including construction, retail, manufacturing, restaurants, nonprofits, and hospitality. For example, over the past three quarters, Human Interest has seen 4.5x customer growth in the restaurant sector. Since the start of the pandemic, the company has experienced 2x higher enrollment growth among hourly workers than salaried workers, and hourly worker assets have tripled.
“Without Human Interest, millions of employees, especially those below the 70th percentile in income, would never have access to a retirement account from their employer,” said John Flynn, Partner at TPG. “Human Interest is poised to have significant societal benefit, specifically for the employees of their customers. In addition, the company has a very attractive, predictable, and scalable business model due to their early investments in advanced technology and automation.”
“The need for a simple, affordable retirement benefit for employers and employees is clear,” said Jeff Schneble, CEO of Human Interest. “Sales have tripled over the last year. Our priority with this funding is to fulfil customer demand by advancing our product and dramatically scaling our team.”
The company will be making significant investments to expand its network of integrations and partnerships with financial advisors, benefits brokers, and payroll companies. “By headcount, we more than doubled in size over the last 12 months to 350 employees and we’ll add another 200 employees nationwide by the end of 2021, primarily in our product, engineering, and revenue teams,” said Schneble.
Human Interest also announced the appointment of Chief Financial Officer Mike Armsby, former CFO at Personal Capital and Yodlee, who brings public company experience as Human Interest prepares for its IPO.
SEE ALSO:
- SHRM Launches ‘401k Marketplace’ for Small Employers
- SMB Market 401k Provider Completes $105M Series C After Breakout Year
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
