Human Interest wants to help every startup worker get a 401k. And with new capital in hand it’s on its way to accomplishing that.
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The San Francisco-based financial services startup announced today that it has raised $15.4 million dollars in a Series B led by U.S. Venture Partners. Wing VC, Uncork Capital, and Slow Ventures also participated in the round. Human Interest was founded by Roger Lee and Paul Sawaya as part of the Y Combinator Summer 2015 batch.
The company sells software to help small businesses, like tech startups, build their own retirement plans.
Here’s why the option is important: If you work at a Seed-stage startup, it might be easier to get free snacks than a retirement plan, the latter of which can require financial advisors, bankers, and more.
“Even for tech forward companies in the Valley, it is hard,” said Jeff Schneble, the CEO of Human Interest.
The 70-person company works with 1,500 businesses who have 35,000 collective employees. Human Interest’s customers range from 30 to 300 employees and include Hint, a flavored water company, DuckDuckGo, a search company focused on privacy, and Lattice, a human resources software company.
Part of Human Interest’s pitch is that customers can avoid working with the incumbent investment institutions like Fidelity Investments and Vanguard. Let’s get into how it’s using its software to gain that trust it needs for companies to let it run their retirement accounts.
How It Works
Human Interest offers a set of software so that the new CBD startup next door can create a customized retirement plan for employees, seemingly from scratch, in just a few moments. Other startups also flex this promise, like ForUsAll and Ubiquity.
However, those aforementioned competitors use “legacy record keepers that make traditional 401k plans and put a skin on it,” Schneble claimed.
Human Interest offers a suite of services to help customers have better savings. One example is robo-advising, a method for intelligent money management through the help of smarter bits of software. It is a flagship product of companies like Betterment and Wealthfront.
Returning to the concept of trust: Human Interest’s low prices might be a deal maker.
The retirement savings industry, on average, charges 1.89% of the account balance per year for small 401(k) plans, the company claims. Human Interest’s fee is 0.50 percent.
The company also charges employers $4 dollars per employee, with a $120 base fee to sign on, about half the price, it claims, of its competitors.
“Because we don’t employ 100s of people we just have to run our software on the cloud, and we can pass on the savings to our customers,” he said. This helps employers take “just minutes” to start up a 401(k) plan.
At one point in our conversation, Schneble said that over half of the U.S. population isn’t saving for retirement. This is still up for debate. One idea that’s not, however, is that a future without social security checks is becoming increasingly probable. So “save more” is a golden rule that is not going anywhere, and this new capital for Human Interest could help make following the rule easier for everyone.
Illustration: Li-Anne Dias.