Human Interest Secures $55 Million Extension to Series C Funding

Human Interest, a 401(k) provider specializing in services for small and medium-sized businesses (SMBs), announced on Thursday a further $55 million addition to its Series C funding round.

This news is significant for several reasons. The San Francisco-based firm had previously secured $50 million across two funding tranches in 2020. Furthermore, the majority of existing investors participated in this latest capital injection, alongside a new investor: NewView Capital (NVC).

Valuation and Growth Trajectory

The recent extension, finalized in December but only now publicized, effectively doubles Human Interest’s valuation compared to its prior financing round.

CEO Jeff Schneble refrained from disclosing the company’s current valuation. However, he indicated that Human Interest is positioned to achieve “unicorn” status in its next funding round, assuming continued growth consistent with recent financings.

With this latest investment, Human Interest’s total funding since its 2015 founding now reaches $136.7 million.

Impressive Revenue Growth

Human Interest has demonstrated substantial growth. The company has transitioned from adding approximately $100,000 in net new revenue monthly in early 2019 to exceeding $1 million per month currently.

The startup aims to surpass $2 million in monthly net new revenue by the end of the year. Schneble stated the company has experienced roughly a tenfold increase in growth over the last 18 months and intends to maintain this momentum.

“Our objective is to achieve $100 million-plus in annual recurring revenue (ARR) within the next three years, paving the way for a potential public offering in the subsequent three to four years,” he explained to TechCrunch.

Impact and Customer Base

Since its inception, Human Interest reports assisting nearly 3,000 businesses across the United States in offering retirement accounts to over 80,000 employees.

Shifting Market Dynamics

The COVID-19 pandemic presented challenges, but also triggered a notable shift in the company’s business model. Prior to 2020, approximately 85% of its customers were establishing their first 401(k) plans. In the past year, this figure decreased to around 50%.

This indicates an increasing number of companies are transitioning from existing plans to Human Interest. Schneble noted that the company’s more affordable product offering proved particularly appealing during a period of economic uncertainty.

Human Interest serves a diverse range of SMBs, including tech startups, law firms, dental practices, and even businesses like dog walking services, manufacturing companies, and social justice nonprofits.

Examples of its clientele include an electrical company in the San Francisco Bay Area, a pizza chain based in Denver, and a chain of gas stations and convenience stores located in Seattle.

Long-Term Vision

Despite its relatively young age, Schneble emphasized that the company does not identify as a typical startup. “We are focused on building a substantial, enduring company with a long-term vision, including a potential public offering,” he stated.

“Our approach differs if our primary goal were simply to sell the company.”

Team Expansion and Future Plans

Currently, Human Interest employs approximately 300 individuals, a significant increase from just over 100 a year ago. The company intends to double the size of its engineering team in the coming year.

Looking forward, Schneble articulated a strategy of continued expansion and refinement. “We aim to simply continue doing what we do best,” he said.

“We don’t require new products. There’s considerable opportunity to gain market share by focusing on our existing strengths.”

The company also plans to enhance the technology underpinning its platform, which was transitioned from a third-party provider to an in-house solution in 2020. This move has reportedly doubled the company’s margins over the past six months, while also eliminating transaction fees for both plan administrators and participants.

“Our goal is to reverse the typical trend in financial services, where products often decline in quality over time. We are dedicated to continuously improving our platform,” Schneble explained.

New Offerings and Market Opportunity

Last year, Human Interest introduced two new service tiers, Complete and Concierge, designed to streamline retirement plan administration and broaden access to retirement savings for individuals across various professions.

“Traditional 401(k) providers like Vanguard and Fidelity have primarily catered to larger businesses. The administrative complexities and high costs make it prohibitive for smaller companies. Only 10% of small to mid-sized businesses (SMBs) currently offer 401(k) plans to their employees, despite representing one-third of the workforce,” Schneble stated.

“Human Interest provides simple, affordable 401(k) plans to the 90% of small businesses that currently lack retirement plans.”

Competitive Landscape and Investor Perspective

The 401(k) market is experiencing growth. In July, San Mateo-based Guideline, also focused on SMBs, announced an $85 million Series D funding round led by Al Gore’s Generation Investment Management and Greyhound Capital. American Express Ventures subsequently joined the financing.

New investor NewView Capital (NVC), with over $2 billion in assets under management, seeks to combine late-stage funding with substantial operational support. NVC previously invested in Plaid.

Ravi Viswanathan, founder and Managing Partner of NewView, expressed his admiration for the company’s ability to simplify the 401(k) process for SMBs and offer lower fees through software and automation.

The NewView team was also motivated by the company’s commitment to making 401(k) plans accessible to a wider range of employers. Ankit Sud and Christina Fa wrote in a blog post:

“Traditional 401(k) providers like Vanguard and Fidelity designed and priced their plans for large businesses. The administrative burden and high fees make it unaffordable for small business owners. In fact, only 10% of small to mid-sized businesses (SMBs) offer 401(k) plans to their workforce, despite employing one-third of the working population… Human Interest brings simple, affordable 401(k) plans to the 90% of small businesses that do not offer retirement plans today.”