Human Interest Raises $40M Series C To Close Retirement Savings Gap for SMBs

People who work for large corporations often have the option of contributing to a 401(k) retirement plan. And in many cases, those companies will match an employee’s contribution.

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But when it comes to small and medium-sized businesses (SMBs), it’s not always as easy to offer 401(k)s as a benefit. And owners of those businesses often struggle with being able to save for retirement themselves. A startup out to change that has just raised a new round of funding to help it advance on its goal.

Human Interest, a retirement plan provider for SMBs, announced today it has closed a $40 million Series C round just months after raising a $15.4 million Series B.

Oberndorf Enterprises LLC, a family-owned office led by William Oberndorf, led the latest round, which brings Human Interest’s total debt and (mostly) equity raised to just over $75 million since its April 2015 inception. Combined, the last two rounds total more than three times the capital Human Interest raised during its first four years of operation, the company said.

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 currently provides retirement savings plans to over 2,200 companies and more than 100,000 employees.

After building out its sales and marketing functions in the second quarter of last year, Human Interest said it has seen its rate of customer acquisition and revenue grow by four times.

Jeff Schneble, CEO of Human Interest, said the company is on track to grow its revenue by a little over three times year over year in 2020.

“We will have tens of millions of dollars in ARR by the end of the year,” he added. “We also expect to reach cash flow breakeven in 2021.”

The company just crossed the 150 employee mark, which is up from around 40 a year ago.

Interestingly, Schneble just joined Human Interest as CEO a little over a year ago. He was  formerly an operating executive at Silver Lake Partners, and then left Silver Lake to build a new venture fund called Wing Venture Capital. He was originally an investor and board member at Human Interest, after leading the company’s series A in 2017.

“I was so blown away by the size of the opportunity to fix America’s retirement system that I left my own venture fund last year to join the company full time,” he told Crunchbase News.

Schneble would not disclose Human Interest’s valuation other than to say it’s “in the hundreds of millions now.”

“It is also about a four times step-up from our series B, which we raised only seven months ago,” he said. “We believe this financing will get us to more than $40 million in ARR and profitability, although it’s possible we will decide to raise additional capital to invest further in product or growth. This financing was significantly oversubscribed and moved very quickly, so we know we’ll have access to additional capital if we want or need it.”

Closing the retirement savings gap

Most of Human Interest’s customers have fewer than 500 employees.

Schneble said Human Interest was founded to address that historically, most smaller companies have not offered retirement benefits. In fact, he added, an estimated 85 percent of companies with fewer than 100 employees do not offer a retirement benefit.

“This is because setting up legacy retirement plans required months of work, and involved working with lawyers, advisers and others to design and implement a plan,” Schneble told Crunchbase News. “These plans were also expensive and time-consuming to administer once set up.”

What Human Interest has created gives companies a way to get a retirement plan via its website in as little as 15 minutes. It also provides built-in investment advising, which Schneble said drives “very high” participation and savings rates. The company said it sees a 93 percent participation rate when employers use its recommended settings. Its average savings rate is 10 percent of gross income.

Because Human Interest uses software to set up and run retirement plans (rather than people), it claims to cost typically 50-70 percent lower than traditional retirement plans for employers and their employees, Schneble told Crunchbase News.

“We think we can meaningfully close the retirement savings gap in America by getting this benefit to as many of the 6 million smaller companies that don’t have it today as possible,” he said.

Human Interest works with benefits brokers, CPAs, financial advisers and payroll providers like Zenefits. As such, it’s been able to nearly triple its average number of new customers per month, 85 percent of whom are investing in a 401(k) for the first time. Late last year, it added 403(b) plans to extend access to retirement savings for the employees of nonprofit organizations across the country.

The company plans to use new funding to extend its reach and double down on product development. It also plans to develop more regional and national partnerships and continue to hire primarily in product and engineering but also in sales and marketing to a lesser extent.

Investor perspective

Oberndorf of Oberndorf Enterprises, said his firm was initially attracted to the investment due to the company’s mission around solving the retirement gap in the United States, which is projected to be $137 trillion by 2050, according to the World Economic Forum.

“We strongly support and encourage our own employees to save for retirement, and we believe that every American worker should have the opportunity to retire with dignity,” he wrote via email. “What was so surprising to us was just how much friction there was in accessing retirement services for a huge number of Americans, which is why Human Interest is such a critical company solving a huge problem.”

To Oberndorf, the company is differentiated in many ways. Besides its “world class team,” it has created an affordable and easy to use platform with a “unique distribution model” that allows the company “to target a segment of the market that is very large and overlooked by incumbent players.”

Illustration: Li-Anne Dias