How ‘Product-Led’ M1 Finance Plans to Evolve and Spend $33 Million in Fresh Funding

The fintech company says it has primarily grown organically and spent little on marketing. That’s about to change.

Chicago, IL/Bigstock photo

Chicago, IL/Bigstock photo

M1 Finance, a Chicago-based financial services company, has raised $33 million in a Series B round of funding with plans to hire more employees, bolster its marketing, and grow assets beyond $2 billion before next year.

Founded in 2017, the fintech company offered free portfolio management which, unlike most traditional discount brokerages, enabled self-directed investors to build custom stock and ETF portfolios. Since then, M1 has added securities-backed lending and traditional banking products, like checking accounts. Its goal is to better consolidate personal financial services under one company, lowering cost and complexity.

The $33 million Series B round of funding was led by New York-based Left Lane Capital, a growth equity firm focused on internet and technology businesses. Growth equity firms typically invest in companies too mature for venture capitalists but not developed enough to attract private equity firms.

Jump Capital and Clocktower Technology Ventures also participated in the fundraise, as well as existing investors. M1 Finance did not disclose a valuation. The latest round of funding brings the total raised to $58.17 million, according to PitchBook.

The robo-advisor has primarily relied on word-of-mouth, organic growth to attract just under $1.5 billion in assets and $650 million in customer deposits. But the growth strategy is about to change, as the company transitions to a new phase of its business lifecycle and puts the $33 million cash infusion to work.

“I think we were able to do a lot with a little. That next step is maturing the business. Can you do a lot with a lot? We need to prove that the next dollar is as valuable as the last dollar,” Michael Savino, vice president of operations at M1 Finance, told RIA Intel.

Savino said the company expects it will have over $2 billion in assets before next year, as it hires across the organization, ramps up marketing spend, and runs more paid advertisements.

M1 Finance has about 55 employees and anticipates that number will double over the next 18 months, according to Savino. The company will continue to hire developers and other product-focused employees, but it also plans to keep adding to its leadership team (it hired Bob Armour to be its chief marketing officer in January), and others.

Employees have been working from home since the Covid-19 pandemic began rapidly spreading in the U.S. earlier this year. However, M1 Finance will seek to hire employees in the Chicago area, out of fear for what might happen to the company’s culture if it doubled in size but suddenly half of its employees never come to the office.

Along with new employees, the fintech firm will use the new funds to grow the business inorganically. M1 Finance, like most of its peers, will seek to find the middle ground between boosting sustainable growth and overspending its money. “In financial services, customer acquisition cost is the name of the game,” Savino said.

M1 Finance has been a “product-led” organization thus far, but for the company to keep its trajectory “you need to have product and marketing working alongside,” Savino said.

Before the fundraise, M1 Finance was an active marketer. In May, the robo-advisor made a push on social media to coax clients from Motif, who were destined to be transferred to Folio Financial.

Investors were on pace to invest as much money in the first quarter as they did in 2019, even though they did fewer deals with established fintech firms. However, far less money was invested and fewer deals were done with the fintech segment focused on the wealth management industry than the same period last year.

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