Human Interest Raises $55M, Taps into Massive SMB 401(k) Opportunity

In our ongoing coverage of the intersection of technology and local and small businesses, we were interested in learning about Human Interest. We’ve probably all had friends who wanted to leave a large corporation for an opportunity at a small company. But they declined because the small company lacked a compelling retirement savings mechanism. 

Human Interest is trying to solve at least this one challenge. The San Francisco-based company announced last week it has raised a $55 million Series C round. This is on top of the $82 million the company, founded in 2015, had previously raised. 

Give the 401K the SaaS Treatment 

So what, exactly, does Human Interest do? It brings the processes that a large corporation utilizes to run an in-house 401(k) program to the small business world. Just as so many companies have taken software once reserved for enterprises and, using the cloud and the SaaS business model, made it accessible to SMBs. 

That is a pretty big idea. Small businesses drive something on the order of $4.5 trillion dollars of GDP and employ upwards of 50% of all private labor. That’s almost 60 million people. Squirreling away money for even a fraction of that market must have some compelling economics. And the cloud has now made it possible. 

CEO Jeff Schneble said this when the latest raise was made public. “[Human Interest] is now in the position of becoming a unicorn.” OK, Jeff.

This may more of an aspirational boast than a statement of fact. According to TechCrunch, the company is now driving more than $1 million in net new revenue per month with the goal of being over $2 million per month by the end of the year. The CEO’s said his company’s goal “…is to get to $100 million-plus ARR in the next three years so that we can go public in the next three to four years.” 

Human Interest Had Barely the Opportunity 

With just 3,000 businesses using the solution to offer retirement accounts to some 80,000 employees, there is a long runway in front of the Human Interest team. And Schneble acknowledges this.

“There’s so much runway just doing what we’re doing, and that’s taking market share from others.” Given the company’s core offering, it would seem that it can play the horizontal game and doesn’t need to verticalize its efforts. The company says it serves small businesses of all shapes and sizes. Dentists, dog walkers, non-profits, electricians, pizza makers, and so on. 

The company has increased its own workforce by 50% in the last year and intends to double it during 2021. Many of those will be in engineering as they’ve moved from a third-party platform to their own. And the company has increased its margins by doing so.

We’d expect Human Interest to pursue integrations with other small business tech platforms. After all, many of them don’t offer their customers an easy to use, simple 401(k) feature. 

Human Interest isn’t the only one chasing the 401(k) space for small businesses. Last year Guideline which has raised just about the same $140 million dollars. Much of their raise came in a Series D last July ($85 million).

That only an estimated 10% of SMBs offer 401(k) plans to their workforce puts an exclamation point on the market opportunity. We’re most eager to see how companies like Human Interest and Guideline build out their partner strategies. The small business space is too large and unyielding to sustain success without partnerships. Knowing how to pick the right ones becomes a key strategic advantage.

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