Human Interest raises $200M at a $1B valuation, plans for an IPO

Published August 4, 2021

Less than six months after raising $55 million in a Series C round of funding, SMB 401(k) provider Human Interest today announced it has raised $200 million in a round that propels it to unicorn status.

The Rise Fund, TPG’s global impact investing platform, led the round and was joined by SoftBank Vision Fund 2. The financing included participation from new investor Crosslink Capital and existing backers NewView Capital, Glynn Capital, U.S. Venture Partners, Wing Venture Capital, Uncork Capital, Slow Capital, Susa Ventures and others.

Over the past year, the San Francisco-based company has raised $305 million. With the latest financing, it has now raised a total of $336.7 million since its 2015 inception.

401(k) provider Human Interest doubles valuation with $55M fundraise

The company admittedly has an IPO in its sights, as evidenced by the appointment of former Yodlee CFO Mike Armsby to the role of CFO at Human Interest. It’s targeting a traditional IPO sometime in 2023, with execs saying the target is to have “$200 million+ in run-rate revenue before going public.” Currently, it’s at “tens of millions of run-rate revenue” now, and adding millions of new revenue each month.

Human Interest’s digital retirement benefits platform allows users “to launch a retirement plan in minutes and put it on autopilot,” according to the company. It also touts that it has eliminated all 401(k) transaction fees.

Demand for 401(k)s by SMBs appears to be at an all-time high, with Human Interest reporting that its sales tripled over the last year. The company has also more than doubled its headcount over the last 12 months to 350 employees.

The startup said it is seeing strong adoption in verticals that have not previously 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, Human Interest has experienced 2x higher enrollment growth among hourly workers than salaried workers, and hourly worker assets have tripled.

“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, in a written statement. “Despite recent legislation, primarily at the state level, legacy programs have not, to date, produced the same participant outcomes as Human Interest.”

The company said it will be using its new capital to expand its network of integrations and partnerships with financial advisers, benefits brokers and payroll companies. It also expects to, naturally, do some hiring –– another 200 employees by year’s end, primarily in its product, engineering and revenue teams.

The 401(k) for SMB space is heating up as of late. In June, competitor Guideline also raised $200 million in a round led by General Atlantic.

Additional details around the IPO and revenue were added post-publication.

Investors don’t expect the US startup funding market to slow down

Human Interest tacks on $10M more to its Series C

Published May 20, 2020

The COVID-19 pandemic is making life worse for many startups, but not all. Those benefiting are often taking advantage of the market updraft to add more capital to their accounts. Robinhood, for example, saw usage of its consumer fintech product rise rapidly. Then the company raised a Series F worth $280 million at a new, higher valuation.

Another startup has done something similar. Human Interest, a finservices 401(k) provider for SMBs, added $10 million to its Series C today. The company’s Series C round is now worth a total of $50 million. Glynn Capital led the Series C extension.

The reason for the new capital is simple. According to Jeff Schneble, the company’s CEO, Human Interest has seen “some of the strongest sales months in the company’s history, and are seeing 2-3X year-over-year growth in customer acquisition even in the midst of the COVID-19 crisis.”

When usage and revenue scale ahead of expectations, options open up. TechCrunch had a few questions about the additional capital. Let’s explore.

$10 million more

TechCrunch first wanted to know if the San Francisco-based Human Interest’s new $10 million — which brings its total known capital raised to around $80 million — is earmarked for offense (greater investment into GTM functions, for example), or defense (runway extension, and so forth).

According to the CEO, the round is “more about playing offense,” with the executive adding that offense has been “something we’ve had the luxury of thinking about since the beginning of the crisis, given our large raise in February.” Human Interest intends to double its engineering team, and is “aggressively ramping up [its] GTM team (more reps, more partners, growing our marketing team and budget).”

TechCrunch was also curious about its customer profile — is Human Interest seeing growth from a different set of customers in the COVID-19 era? According to Schneble, not really: “We have not seen a significant shift in customer size, geography or vertical,” he said.

Human Interest, however, is seeing more companies coming to it looking to change 401(k) providers. Schneble told TechCrunch that “historically” 85% of his company’s customers are looking to offer “a retirement benefit for the first time.” However, “in the last couple of months” Human Interest has seen “a surge of customers with existing retirement plans that want to move to a lower-cost benefit.”

As Human Interest uses “technology, rather than people” to run its 401(k) service, the startup can offer a service that is “typically 30-50% lower-cost than a legacy 401(k) plan,” according to Schneble.

Is this new demand changing the company’s economics? TechCrunch wanted to know if market interest in 401(k) plans — consumers are flocking to savings and investing apps, likely driving more companies to add retirement savings plans for their employees — was lowering Human Interest’s customer acquisition costs (CAC).

According to the CEO, Human Interest focuses on gross-margin payback, or the time period it takes for gross-margin adjusted revenue to repay CAC. “I can’t stress how important profitability is in this space,” Schneble told TechCrunch, adding that “many of [his] competitors have negative contribution margins, which is obviously not a recipe for building a successful public company.”

The company’s gross-margin payback pace is improving, with the company telling TechCrunch that it has “come down by ~70% in the past 12 months, and is now approaching zero for many of our customers (meaning the margin contribution from their initial payment when they launch their plan covers our CAC).”

Human Interest’s gross margins help with that, with Human Interest telling TechCrunch that it has “typical software margins” on its product. That means 70%+ gross margins.

Back to the $10 million add-on, TechCrunch confirmed that the new capital was raised at the same pre-money valuation as the rest of its Series C. The CEO added the following color:

We had interest from several of the later-stage growth funds we talked to in our Series C process, but decided to move forward with Glynn Capital. They are long-term investors that plan to hold their investment in us long after we’re public (similar to one of our other large investors, Oberndorf Enterprises). While we probably could have demanded a higher price for the extension, given the acceleration we’ve seen in the last few months, we decided to optimize on partner quality instead.

Now with more capital aboard, expectations are even higher for Human Interest. Let’s see how fast it can grow.

Captain401, now Human Interest, raises $11M to build a 401(k) for small businesses

Published February 7, 2018

Pushing through a funding round is never an easy process — and for Captain401 co-founder Roger Lee, it was even more tricky this time around. That’s because Lee and his team raised $11 million right around the birth of his first baby. That gave Lee an even deeper appreciation and understanding for the need of robust employee benefits, which was part of the original goal of… Read More