Acorns acquires kid-focused fintech GoHenry in a bid to expand in Europe

The American micro-investment platform Acorns acquired GoHenry, a digital banking startup focusing on teaching kids about the importance of money, for an undisclosed amount of money.

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There has been an agreement between Acorns and GoHenry that will see GoHenry become a wholly owned subsidiary of Acorns, with employees and shareholders of GoHenry rolling their equity over to Acorns as part of the deal. This was confirmed exclusively to Trade Algo.

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GoHenry, a company founded in 2012, offers a spending card for children aged six to 18 that is linked to a money management app that is accessible online. It allows parents to monitor their children's transactions in real-time and to set spending limits or savings goals for their children.

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The timing of this deal is one of the most noteworthy aspects of it. There is currently a tough environment for the fintech sector characterized by high inflation and a rise in interest rates at the moment. This has impacted the sentiment in the market, with many publicly-listed companies' share prices falling as a result. As a result of this, private fintech companies have seen their valuations fall sharply in recent times, which, in turn, has had a knock-on effect on privately held fintech firms as well.

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Noah Kerner, Acorns CEO, and co-founder insisted, however, that market conditions had no effect on the timing of the acquisition since negotiations between the two companies began as early as 2021 and discussions have continued ever since.

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Taking care of the financial well-being of families has been part of Acorns' mission for a long time, according to the CEO, and will be launched in 2020 with the launch of an investment account for children called Acorns Early.

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Kerner said that Acorns looked at more than 100 deals before deciding to invest in GoHenry, adding that the $55 million infusion that GoHenry received last year and the purchase of rival PixPay by the company made the deal even more attractive.

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“With GoHenry we blazed a trail for kids and teens, and with Acorns we blazed a trail for investing and saving, as well as bringing mental wellness to the life of every American, and the up-and-coming generation,” Louise Hill, co-founder, and chief operating officer of GoHenry, told Trade Algo.

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“Although, we both had ambitions to go beyond that in terms of customer demographics, in order to start serving people throughout their lifecycle so that they can be served through every stage of their lives."

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GoHenry charges parents a monthly subscription rather than offering a free service and making money off interchange fees so that the service can offer features like setting up paid chores or parental controls, which it claims pays for the service.

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The Acorns investment platform, on the other hand, focuses on investments, allowing customers to invest spare change from card payments into index funds.

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There is a monthly subscription fee that Acorns charges as well. Having acquired GoHenry, the company says it now has a combined 6 million subscribers as a result of its acquisition of the company.

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The acquisition of GoHenry by Acorns despite this gap shows that the company is taking a major risk by expanding into Europe, a market that is less advanced when it comes to retail investing. In its purchase of GoHenry, it will now have the opportunity to access Europe, a market that is less advanced when it comes to retail investing compared to the United States.

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As of now, GoHenry has operations in the United Kingdom, France, Spain, and the United States. The GoHenry app will now be known as GoHenry by Acorns in the U.S. Meanwhile, GoHenry will continue to go by its original name in the UK, while it goes by its original name in France and Spain, where it is known as PixPay.

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Neither Kerner nor Hill was willing to comment on the price of the transaction, however, Kerner said that he believed the deal would benefit GoHenry and its shareholders as well as the company as a whole.

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After scrapping plans to go public via a merger with a special purpose acquisition company or SPAC as a result of volatile market conditions, Acorns was valued at $1.9 billion in a $300 million funding round last year.

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After the GoHenry deal closed, it is unclear what the latest valuation of the company is.

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There were a number of investors who invested in GoHenry prior to its acquisition by Acorns, among them Edison Partners, Gaia Capital Partners, Citi Ventures, and Muse Capital, for a total of $121.2 million. 

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It has had to face stiff competition from rival firms that have their own child-focused offerings, including Revolut, which launched its own account for kids in 2020, as well as established banks like NatWest which have their own child-focused offerings.

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The company has also struggled to book a profit since its launch, and has posted a loss of £30.9 million ($38 million) on revenue of £30.6 million in 2021, according to a filing with Companies House. Even though Acorns is losing money, Kerner said it is striving to become a profitable company by the end of the year.