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“I hate gift giving,” Peggy Mangot, founder of a startup called Spark Gift that launched on Friday, told me the other day.
I knew Mangot a little bit from her time as an executive on the Google Wallet team, so when she said this, I told her it sounded a lot meaner than the Peggy I know.
“It’s just that I’ve been a DIY investor and saver since I was very young. Saving and investing is important to me. That’s why gift-giving is especially hard,” she said. “Our culture is very much focused on commerce so every gift you see out there is commerce. Giving a savings instrument like an investment is not something that many people do.”
But people did at one time. I remember receiving gifts of savings bonds as a child but, over time, that kind of gift has largely gone out of style as interest rates have dropped and the process to buy them has remained cumbersome.
Enter Spark Gift. Mangot, the CEO, along with co-founders Tia Gao and Bob Haigler, have created a service that lets people give the gift of stocks or exchange-traded funds via email in denominations as low as $20. The goal is to make it easy to give the gift of an investment to young people.
The trio is part of the current class of Y Combinator, the high-profile startup incubator that provides mentorship and takes a 7 percent ownership stake in exchange for $120,000. Mangot left her position at Google earlier this year to enter Y Combinator. She was most recently Google Wallet’s head of partnership management, overseeing relationships with companies such as Uber, Airbnb and Domino’s, all of which had implemented Buy with Google buttons on their websites and apps. She previously worked with Gao at Google, when Gao was a product manager on the Google Wallet team. Gao and Haigler knew each other from the health-care startup, One Medical Group, where they both worked until recently.
Here’s how Spark Gift works. Gift givers sign up and select a dollar amount — from $20 to $1,000 — as well as a stock or ETF whose shares the money will go toward buying. Since gift givers choose a dollar amount instead of a share amount, the service allows the recipient to own fractional shares. The Vanguard Total Stock Market ETF as well as the stock of companies like Disney, Tesla and Google have been some of the most popular selections in early tests. Gift givers are charged $2.95 for gifts up to $100 and 4 percent for gifts above $100. They can pay with a credit or debit card and eventually through a direct link with their bank account, which may bring down their fees.
They then enter in a name and email address for the gift giver, as well as the name and email address of a parent if the recipient is under 18. When the recipient receives the Spark Gift gift certificate in the email, they are instructed on how to set up a brokerage account to execute the purchase of the stock or fund with the help of an investment advisement firm Spark Gift has also set up. Once this is done, which Mangot says should take no more than three minutes, the shares should appear in the recipient’s brokerage account within two to three business days. Gift recipients aren’t charged anything for brokerage accounts that have $5,000 or less under management. For more than that, the recipient is charged 0.5 percent.
“We’re not going to make money unless we can help you grow these accounts into something meaningful,” Mangot said. “If we’re able to do that, we think we provided some value.”
Mangot, who is a registered investment adviser, thinks Spark Gift has the opportunity to not only make it easy to bring back the idea of giving an investment as a gift, but also to teach the next generation how to plan for the future. Over time, Spark Gift aims to provide advice on things such as the importance of diversification or make investment recommendations based on a person’s age and financial situation. I asked Mangot in a follow-up message what she thinks of people who say investing in individual company’s stock is not the best investment strategy.
“Asset allocation using low-cost ETFs is the way to go,” she said, noting that Spark Gift offers a broad range of them.
Still, “some of our users like the idea of identifying with a brand — Apple, Google, Tesla, etc.,” she added. “At the end of the day, we still believe investing that gift is better than getting a gift card that forces you to spend your money.”
Along the way, the founders think they have a shot at building a very big business, in part by convincing people that it’s better to give the gift of a stock or fund than a gift card. Gift cards, after all, are estimated to be more than a $100 billion market in the U.S.
This article originally appeared on Recode.net.
