Chicago’s M1 Finance continues its hyper-growth streak with a new funding round—its largest yet.
The startup raised $75 million in a Series D round led by Coatue, a tech-focused investment firm that’s cut checks to other companies like Hopin and Rivian. Left Lane Capital and Clocktower Technology Ventures also participated in the round.
The funding news comes off a year in which M1 Finance saw significant growth. The company, founded in 2015 by CEO Brian Barnes, has raised more than $170 million to date, $153 million of which was just raised in the last nine months.
The startup raised $45 million in October and $33 million in June. M1 Finance now manages over $3.5 billion in client assets, just five months after reaching $2 billion.
M1 has created a no-fee investing app that offers users an automated brokerage, portfolio lines of credit and digital banking. The company is not yet profitable, but with its recent funding rounds, it now has plenty of cash, according to Barnes.
He said M1 Finance raised this latest round because there were so many investors interested in buying ownership in the company.
“It wasn’t a need of capital. It was really much more investor demand,” Barnes said. “We haven’t even come close to touching the Series B money.”
The average size of an M1 Finance portfolio is $25,000 after the first year of use and about $40,000 after two years, Barnes said. The largest portfolio managed on M1 Finance right now is about $18 million.
“Every single person has to manage their money and they are typically using a incumbent bank,” Barnes said. “And the tools just aren’t that good. We have ambitions to be a category-defining, leading financial institution.”
M1 monetizes its offerings through interest rates on money borrowed from users, as well as a debit card product that charges users fees.
Last month during the Reddit and Robinhood drama that resulted in massive price swings of GameStop stock, M1 Finance saw a record number of new signups. The startup saw as many as 18,000 new users in a single day and its app store ranking climbed as high as No. 10 in the finance category and No. 84 overall.
“In a short amount of time, we had a boost in customer signups,” Barnes said. “But in the long-term, it doesn’t affect M1’s ability to try to be that next-generation Schwab.”
The new funding will be used to improve its tech tools and services, and nearly double its headcount. Currently, the startup employs 145 people. Barnes said he expects to employ about 300 people by the end of 2021.
M1 Finance will be hiring to fill product and engineering, customer support, operations, analytics and finance roles.
“We’re growing insanely fast,” Barnes said. “The likelihood that M1 is going to be a big, sustainable, durable financial institution in the future just gets more and more likely as time goes on.”
