5 minute read by Thomas Martchek
Rocket Companies, a real estate mortgage services business, announced a $1.275B cash agreement to purchase Truebill, a personal finance app that helps consumers manage subscriptions. A true win-win-win, this acquisition appears to have an upside for Rocket Companies, other personal finance management services, and consumers alike.
Previously to Truebill, there have been numerous acquisitions in personal finance management, such as Personal Capital (acquired by Empower Retirement for $825M in 2020), Credit Karma (acquired by Intuit for $8.1B in 2020), Mint (acquired by Intuit $170M in 2009), and smaller purchases like Harvest or Pinch (acquired by Acorns and Chime for undisclosed amounts respectively). Data from Crunchbase. In each of these exits, the acquirers consistently discussed the value of the deal in terms of engaging and driving customer growth.
How Rocket Companies Will Benefit
In the case of Truebill, Rocket's narrative was similar. Rocket will leverage Truebill to engage users earlier in their growth funnel and add a new recurring revenue stream. In an interview on CNBC, Rocket Company's CEO, Jay Farner, added, "...maybe today they don't get a mortgage, but we provide these other services that Truebill has and all of the sudden, 6 months later, or a year later, we are able to help that client with a car, with a mortgage."
With Truebill's 2.5 million users and rapid growth (2x over 2020), Rocket could quickly benefit beyond the direct 8% increase to revenue (Rocket Press Release). Strategically, the two businesses are complementary, and Rocket can extend loans or mortgages to targeted users in Truebill's growing user base. The data connection further enables Rocket to identify consumers that have a high likelihood of adopting core loan products. We'll need to see how successful they are engaging these new users with loans or other services in the coming quarters.
Personal Finance Management Market
In addition to Rocket's benefit from the deal, Truebill's acquisition demonstrates the breadth of the potential acquirer list for other personal finance services. While many personal finance services are acquired to complement the purchasing business, Rocket is the biggest loan provider to look to expand its fintech footprint with personal finance features. It appears that lending, investing, banking, bill pay, and payment services are all acquiring companies in the space.
The deal terms themselves further benefits personal finance services. While the enterprise valuation (EV) multiple on revenue for Truebill's $100M ARR (~13x EV-Rev) is below average in fintech (according to Finerva), the multiple on active users of $510 per user is near that of Dave or Acorns for subscribed users. In addition to neo-banking and investment services, Dave and Acorns also provide personal financial services to their users. Dave and Acorns investor prospectuses for coming IPOs can be found here (Dave and Acorns).
While there are many other factors that are often more important to the valuation of businesses like Chime or PayPal; like defensibility, revenue growth, or profitability; financial management businesses are often acquired for their user engagement and user acquisition capabilities. Therefore, it appears Truebill's EV-User precedent could raise the valuation bar for personal finance services. Previously, valuations in the space were built from exits without successful monetization, like Clarity Money's ~$100 in EV-User (CNBC and Reuters).
Benefits for Consumers
Rocket's acquisition of Truebill will directly enable the expansion of lending capabilities for consumers using personal finance to plan for a major life event, like buying a house or car. The ability to leverage data between Truebill and Rocket could drastically simplify the loan origination process, raising the standard for consumer experience. Further, the ability to leverage a fuller picture of a consumer’s financial position could enable Rocket and Truebill to offer more tailored products for consumers.
In addition, Truebill's recent, meteoric growth and acquisition can guide other financial services to provide unique products with an operating model that consumers love. Consumer growth reflects a market need for services such as budgeting, short-term loans, and canceling unused subscriptions. Further, consumers are showing their acceptance of subscription and cancellation fees for these services. The subscription model isn’t uncommon for software companies, but Truebill’s growth proves just how successful it can be and what consumers think is fair in the personal finance space.
Further, Truebill’s acquisition may help founders in nearby service adjacencies to raise additional funding and inspire new services for consumers. The operating model and potential service focus on personal finance can indeed result in a billion-dollar business. Founders look for opportunities to solve consumer challenges in big markets that can scale. Meanwhile, investors need to assess the service’s potential to scale and ultimately provide a sizable return invested capital before making an investment, so large acquisitions, like Truebill’s, are a helpful signal.
Overall, It's a Win-Win-Win
As consumers need to manage a meteoric rise in the number of subscriptions, Truebill’s $1.3B cash acquisition should give the acquiring Rocket Companies a strong edge in the personal finance and loan markets. Further, the acquisition provides precedent of a successful operating model in the personal finance space and can help guide other personal finance services. Finally, consumers will benefit from Rocket’s simplified onboarding and tailoring of loan products using Truebill’s data connectivity or an inspired group of new personal finance services certain to build on Truebill’s success.
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