M1 Finance Secures $75 Million in Series D Funding

Following a successful Series C round of $45 million several months ago, M1 Finance, headquartered in Chicago, has revealed a new investment. This Series D funding round totals $75 million and was spearheaded by Coatue.

Investor Participation

Existing investors, Left Lane Capital and Clocktower Technology Ventures, also participated in this latest financing effort.

Recent Funding History

M1 Finance experienced significant capital influx in 2020, completing two funding rounds. These included the aforementioned Series C and a $33 million Series B round.

Rapid Growth and Transparency

The frequency and magnitude of M1 Finance’s fundraising are particularly noteworthy in the current investment landscape. The company has consistently shared its growth metrics and insights into its business model.

This transparency has allowed for consistent tracking of the company’s expansion over recent quarters.

The consistent flow of capital demonstrates strong investor confidence in M1 Finance’s trajectory and potential within the financial technology sector.

M1 Finance’s Expansion

During February 2020, M1 Finance reported surpassing $1 billion in assets under management (AUM), having begun the year with $800 million. At that time, CEO Brian Barnes communicated to TechCrunch the company’s objective of achieving revenues approximating 1% of its total consumer AUM. This benchmark allowed for effective monitoring of the startup’s revenue scaling alongside its asset growth.

In June 2020, the firm publicized its Series B funding round alongside a new AUM milestone of $1.45 billion. This represented roughly 50% growth in under six months, a significant achievement.

Later in the same year, upon securing its Series C funding, M1 Finance had increased its AUM to $2 billion. This doubling of its earlier-year figure garnered increased attention. Subsequently, in January 2021, the company announced reaching $3 billion in AUM.

Calculating this, 1% of $3 billion equates to $30 million in annual revenue, assuming M1 is meeting its stated revenue targets.

Today, as part of its Series D funding, the company has announced reaching $3.5 billion in AUM.

How was such rapid expansion achieved, with a $500 million increase in AUM occurring within a few months? According to Barnes, this growth is partially attributable to a broadened product portfolio. The startup introduced a cash-management solution in early 2019.

This service has accumulated hundreds of millions of dollars in assets, as stated by the CEO. Furthermore, the company’s borrowing product has experienced substantial growth, increasing fourfold as a proportion of total assets over the past year.

The expansion of AUM has also been fueled by the company’s growing user base. Barnes informed TechCrunch that M1 Finance currently has approximately 500,000 funded accounts.

This increasing number of accounts has contributed to positive word-of-mouth marketing in recent quarters. Finally, AUM growth is also a result of existing users increasing their capital within their M1 accounts over time, according to the CEO.

It’s important to note that M1 Finance isn’t the sole entity experiencing growth within the savings, investing, and spending sectors. Robinhood and Public have also performed well in the investment arena, while Chime has rapidly scaled within the spending and savings markets.

Future Outlook for M1 Finance

Following this funding round, M1 Finance possesses a significantly increased capital reserve. The company’s CEO communicated to TechCrunch that seeking additional funding wasn't initially planned, and the existing Series B funds remained largely unused, with the Series C round still entirely available.

However, this new influx of capital allows M1 to potentially increase its advertising spend, supporting continued user acquisition. The additional resources will also prove beneficial in navigating competition from well-funded rivals aiming to develop comprehensive consumer fintech platforms.

Growth Projections

M1 Finance is currently tracking its assets under management (AUM). We will revisit M1 Finance’s progress once it achieves $10 billion in AUM.

The CEO anticipates the company could reach a valuation in the double-digit billions of AUM by the close of the current year, or in early 2022. Monitoring the speed at which this next benchmark is attained will be key.