High Potential Startup #29: Nosso
Investment accounts for children combined with gifting from family and friends
At the time of publication: Seed | Total funding raised: ~2.7mn USD
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"If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon. Time is the most powerful force in investing" - Morgan Housel in Psychology of Money
The most important but highly underappreciated factor in investing for wealth creation is time. More people will be better off if they lock up their investments for a long period of time. Like Charlie Munger said, the first rule of compounding is to never interrupt it unnecessarily. Skill may be useful but time is the secret.
Starting to save for retirement as early as possible may leave you with a decent fortune if you don't interrupt it.
Similarly, starting to save/invest for a child right after she is born and locking it up for a very long time is extremely beneficial to the child and the parents.
The UK has a very good offering for this called JISA or Junior Investment Savings Accounts introduced in 2011. This is how it works
Parents can start an 'investment savings account for their child'
The investment income from these accounts are non-taxable (up to annual pay-in of 9000 British pounds)
But the caveat is you can't withdraw money till the child turns 18 years old (lock up period) unless some exceptions
Once the child turns 18, the JISA gets automatically converted into an adult investment savings account
Nosso is an investment app built for parents to save and invest for their children. It offers JISA and other general investment savings accounts. New parents can open an account easily and start investing right away and can choose investment themes based on the risk they are comfortable with.
What makes Nosso unique is that it combines gifting and investing. Imagine all the gifts your child gets are funneled into her investment savings account.
Parents get a 'sharable' link that they can share with their friends and family members. Grandparents for example can gift money via the link that goes to a 'goal' (say a home or a university fund). They can leave cute photos and messages for the child on every contribution.
This is a great approach that focuses and funnels money into one fund that will compound for a decent amount of time. A compounding gift in hindsight will be much more meaningful to the givers too!
Nosso charges 0.5% of funds annually and an additional 0.2% to 0.3% that goes to the fund providers. The banking and fund partners are Wealth, BlackRock and NatWest.
Because of the inherent nature of JISA, the churn is going to be very low (because of the long lock-up period).
The two big challenges for Nosso will likely be:
Educating parents about need for JISA and
Getting them to try Nosso at a low CAC
Here I think a PayPal-style referral scheme might work because of the long lock up period. For example, $10 for the referred parent and $10 for the parent who refers (the money is locked up and hence there is very low incentive for fraud). Nosso seems to be trying this out already.
A Nosso account as an employee benefit for new parents can also be tested. For example, an employer can contribute some cash every year as a benefit and it can result in some meaningful accrual at the end of the lock up period.
Features like auto savings, rounding up change etc. can be used to minimize friction to save and maximize savings. Motivation features like 'streaks' can also be useful to parents. (For example an auto debit of 3 pounds a day can help save 1000 pounds a year)
Seamless (low intrusion) commerce revenue opportunities can also be explored in the future. For example, retail and brand partners may want to push coupons to new parents to increase trial of their products. (Nosso can earn affiliate fees on these.)
Insurance distribution is an additional opportunity once there is enough scale.
The founders are Youssef Darwich and Sigurjon Isaksson. Youssef earlier was head of operations at Tide, another fintech startup. Nosso is a great initiative and has won some finance category awards. Its core premise that gifting can be made meaningful towards financial goals for a child is game changing for new families. We need less gifting of toys and apparel and more of something like Nosso. If Nosso is able to figure out low-cost viral distribution, it is going to do very well. Nosso is a high potential startup to watch out for.