Stash Raises $40M Amid Plans to Go Public

Investing app, Stash, has raised $40 million in new financing via a convertible note led by early backer T. Rowe Price. The New York-based startup positions itself for public market readiness, aiming to offer lower and middle-income consumers an affordable way to invest.

Convertible Notes: An Advantage for Stash

Convertible notes, also known as convertible debt, are short-term loans that can be converted into equity. CEO Liza Landsman believes this approach allows Stash to reach profitability without needing a valuation. Meanwhile, investors have the advantage of making interest off the loans or converting them into equity by purchasing stock warrants.

The company’s strategic move is seen as beneficial as it prepares to go public in the near future. To support this endeavor, Amy Butte, former CFO of the New York Stock Exchange, has been appointed as the company’s first independent audit chair.

Shifting Away from Venture Capital

Stash chose not to raise additional capital via venture routes due to current market conditions. The company is on its way to profitability by the end of 2024, according to Landsman. Stash has raised approximately $550 million in equity and debt since its inception in 2015.

Despite falling slightly short of the expected $125 million annual revenue in 2022, Stash has seen improved business margins. The company ended 2022 with just over 50% gross margin and is projected to end 2023 with a nearly 75% growth margin.

Stash: Key Player in a Competitive Space

Stash competes in the same market as Acorns and Robinhood, targeting lower and middle-income consumers with plans starting at $3 a month. Unlike its competitors, Stash does not consider itself a neobank. Instead, it provides banking as a service to facilitate investing.

The company offers features such as fractional shares of stocks and funds, enabling customers to build their own diversified portfolios and learn to invest confidently. It also provides a debit card that rewards users with a percentage of their purchases back in stock.

Amy Butte highlights Stash’s uniqueness in the competitive fintech landscape, stating that Stash, unlike many fintech companies, is positioned to generate a great amount of innovation and is preparing for actionality in public markets. Rebecca Kaden, managing partner at Union Square Ventures, also praised Stash for blending investing tools with advice and proprietary tech at scale.