M1 Finance raises $33M Series B as it reaches $1.45B AUM

Today M1 Finance, a Chicago-based fintech startup focused on consumer finance, announced that it has closed a $33 million Series B. Left Lane Capital led the round, with participation from Clocktower Technology Ventures and Jump Capital. The firm has raised around $54.5 million to date.

M1 Finance caught TechCrunch’s attention earlier in the year when it crossed the $1 billion assets-under-management (AUM) mark. When TechCrunch learned of its impending Series B, we wanted to know how fast the company was adding to its AUM total, and how its efficiency was faring in the current savings-and-investing fintech boom. So, we found out.

Growth

According to M1 Finance founder and CEO Brian Barnes, after reaching the $1 billion AUM mark in February, his company has “continued to see record new account signups and net inflows,” helping it grow its total assets managed by “about 50% in the less than four months since.” Asked about its precise AUM today, the company told TechCrunch that as of the time of press, it had reached $1.45 billion in assets under management.

The company’s AUM total is not only a good metric to track regarding how successful the firm is in terms of attracting customers and customer trust (monies deposited are a vote of user confidence), it’s also a fun proxy for M1 Finance’s revenue. The firm previously told TechCrunch before that it targets generating around 1% of AUM in revenue.

So, as M1 stacks AUM, it theoretically grows it revenues. Asked whether M1 was sustaining its revenue goal as its assets managed grew, Barnes told TechCrunch that personal banking tool M1 Spend “is seeing strong demand from our users,” adding that “because it is still very new, we are, as expected, below the 1% target.”

But while M1 is currently tracking under its 1% goal, Barnes added that his company expects “to hit the 1% target over the next year or so as we increase use adoption across our entire product suite.”

Doing the math, 1% of $1.45 billion AUM is a run rate of $14.5 million. M1 is growing assets while boosting its take rate, likely making its short-term financial results attractive to investors.

On that note, the company’s financial performance is improving in other ways. Asked by TechCrunch what has happened to M1’s blended customer acquisition costs (CAC) since it reached the $1 billion AUM mark, Barnes said that the company’s “blended CAC continues to fall every month because our organic and word of mouth traffic continues to grow substantially.”

It’s far easier to pay back customer acquisition costs when they are going down. And, as CAC payback periods (the length of time it takes to repay CAC with gross-margin adjusted revenues) matter to investors, this is a bullish result for M1.

What’s next

M1’s new $33 million round is more money than the aggregate amount of capital that the company had raised before its Series B. Given that the firm has at its disposal more capital than ever, TechCrunch was curious what it intends to do with the capital.

According to Barnes, M1 will double-down on its product focus, “just with more money to do so bigger, better and faster.” The CEO highlighted that the new money would also give M1 “more flexibility to make longer-term investments as people will need finance products for the rest of time.”

Next up we’ll look for news that the company has reached the $2 billion AUM mark, and then we’ll set our stopwatches for $3 billion. How much more quickly the company can add its third billion in AUM compared to its second will provide a good proxy for its future growth prospects.

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