Captain401 raises $3.5M to help small businesses create employee retirement accounts

Captain401 announced today that it has raised $3.5 million for its employee retirement platform. The round was led by SoftTech VC and included participation from SV Angel, CrunchFund, Slow Ventures, Susa Ventures, Soma Capital, FundersClub, legendary NFL quarterback Joe Montana, and others. With this seed round investment, the company will refocus its efforts on its product, work on user acquisition, and scale the business.

A Y Combinator alumnus, Captain401 was founded last year with the aim of helping small businesses set up 401(k) accounts for their employees. It wants to simplify the process within companies, similar to what Gusto and Zenefits have done for payroll. Roger Lee, CEO of Captain401, told VentureBeat that at his last startup, he realized that offering a retirement package involved a lot of paperwork, data entry, and compliance headaches. These issues caused him to shift away from offering this savings program to his employees.

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This is a problem that many companies face — just 14 percent of small businesses offer a retirement savings plan, compared to 89 percent of large companies. It’s estimated that 78 million Americans don’t have a 401(k).

While companies could opt for the likes of T.Rowe Price, Mass Mutual, and other retirement plans, Captain401 believes its advantage is around automation, personalization, and ethics. Lee said that his service can not only quickly create employee accounts, but also sync deductions with their company’s payroll provider and process contributions each pay period. All of the insights and investing services are tailored toward individual employees, and Captain401 states that it does not accept any kickbacks from mutual fund companies, claiming that traditional 401(k) firms do receive compensation from the ones they recommend.

In the future, Lee’s team plans to expand the level of advice given to employees. “Now that individuals are increasingly responsible for their own financial futures (given the state of Social Security and the decline of pensions), there’s an enormous opportunity to educate people and make saving and investing feel approachable for the first time in a way that traditional financial services haven’t been able to do,” he said.

Captain401 considers its competitors to be MassMutual, John Hancock, ADP, and other finance and insurance companies.