Why We Invested in Icon
Many of our founders were inspired to start their companies after experiencing a broken system and thinking, “There has to be a better way.” Laurie Rowley also had that lightbulb moment. After years of analyzing the retirement system, she saw firsthand that 401(k)s weren’t working as a mass-market solution, so she founded Icon to change that.
In the United States, only about one-third of small businesses offer retirement savings plans to their employees – a massive gap that will have economic consequences in the years ahead.
One reason for the void is that 401(k) plans aren’t a viable option for small businesses. Most SMBs pay 10x the fees compared to large corporations, so it should come as no surprise that 60% end up terminating their plan. As a result, six out of ten Americans do not have access to a 401(k) plan through their employer, resulting in an estimated $5 trillion in lost asset capture.
To understand why 401(k) plans became the standard – and remain the default retirement solution for most companies today –we need to take a look back. Fifty years ago, most employees worked at one company for their entire career, so a flexible retirement plan wasn’t even a consideration. 401(k) plans were never designed to be portable, and today’s mobile workforce is revealing the flaws in this structure: American workers have $1.65 trillion locked up in abandoned or lost 401(k) plans, $92 billion is cashed out of 401(k)s each year, and $800 billion in savings is rolled over annually from employees who change jobs. The career landscape looks dramatically different from the previous generation, so business owners and their employees need a solution that aligns with modern needs.
That’s where Icon comes in. Laurie and her team are democratizing retirement savings by helping companies offer affordable, flexible plans to their employees. Icon’s portable retirement plan (PRP) works like a 401(k) but without the high cost, regulatory complexity, and fiduciary burden. The platform is easy for employers to use, as it handles all plan creation, enrollment, account set up, funds flow, record keeping, investing, compliance, and account consolidation. Employees can then create their own account to start investing pre-tax savings in a personalized portfolio, with a maximum annual contribution of $7,000.
We found it especially appealing that Icon isn’t limited to small business owners and doesn’t mandate the fiduciary requirements of a traditional 401(k). This means it is an excellent option for W2 and 1099 workers. With the continued rise of the gig economy and freelance work, there is increasing demand for retirement plans that aren’t tied to an employer. By decoupling the plan from employer sponsorship, Icon is opening the door for all types of workers to set up their own portable retirement plan – one that doesn’t mandate a rollover due to change in employment.
Icon’s early results have been remarkable. For starters, the company is dismantling the narrative that only high-income earners save for retirement. Half of Icon’s participants make less than $50K per year, but they are saving an average of $280 per month in their PRPs. By partnering with payroll providers and HR management platforms like Paylocity and Heartland, Icon is identifying and enrolling new customers that would otherwise not be able to offer retirement plans to their employees. The result is a win-win for SMBs and employees alike.
We invested in Icon’s most recent Seed round because we believe there is a sizable market opportunity for an alternative to the traditional 401(k) plan. Icon’s strong product-market fit and Laurie’s visionary leadership strengthened our conviction to lead their funding round. We believe that Icon has the potential to set a new standard for retirement savings accounts – one that is more directly aligned with the needs of today’s workforce. We’re looking forward to supporting Laurie and the team in the months and years ahead as they help even more people save for retirement.
