For all the turmoil these days, the U.S. stock market remains extremely attractive to investors around the world, simply because of its sheer size and liquidity. But it’s still quite difficult for investors in other parts of the globe to trade stocks on U.S. exchanges. A San Mateo-based startup called Alpaca has quietly capitalized on that opportunity by offering an API to financial services firms that lets them sell trading services to their consumer user bases.
Today, Alpaca claims it serves more than 5 million brokerage accounts, and has more than 200 financial clients in 40 countries. To build on that traction, Alpaca said on Wednesday it has raised $52 million in a Series C funding round to expand into more foreign markets, including the Middle East, Europe, and Asia.
Investors in the round include new and returning backers like Derayah Financial, 850 Management, National Investments Company Kuwait, Unbound, and Portage Ventures.
The San Mateo-based startup just opened a new office in New York, and it plans to use the fresh cash to obtain more regulatory licenses in different regions, similar to those it already has in the U.S., Japan, and the Bahamas, its co-founder and CEO Yoshi Yokokawa told TechCrunch.
“The [recent] fundraising for us is very important because this is really a catalyst to go global infrastructure, instead of the U.S.-only anchored company and platform,” Yokokawa said.
Alpaca will also use the proceeds to develop new products, add non-U.S. products like European and Asian equities, and support 24/5 trading of U.S. stocks.
The Series C brings the company’s total funding raised to $170 million.
Founded by Yokokawa, a former investment banker in the U.S. and Japan, and Hitoshi Harada (CPO), Alpaca started off selling software that financial services firms and fintechs could use to plug into and power trading for investing groups.
“We first needed to create a globally functioning infrastructure [in 2018] that would enable people outside the U.S. to create platforms similar to Robinhood or Wealthfront that comply with their local regulations and contexts,” Yokokawa told TechCrunch. “But someone has to do the tough, tedious work of ensuring that regulation and compliance are right and reported in the U.S. because, [ultimately], money and securities, as you know, flow to the U.S. if you want to have access to U.S. products. That’s what we do.”
The company has since expanded its offerings to include stocks, ETFs, options, fixed income, and high-yield products in USD to IRA accounts. Alpaca recently also teamed up with Kraken to let the crypto exchange’s users trade U.S. stocks and ETFs in some states.
The Series C comes roughly 18 months after Alpaca secured a Series B extension in October 2023. Since then, Yokokawa said, the startup’s revenue and assets under custody have tripled, and its trading volume has quadrupled. It also has become a fully self-clearing broker-dealer with DTCC membership, the CEO said, allowing it to handle all trade clearing and settlement processes in-house, including risk management and compliance.
Yokokawa sees Interactive Brokers as his closest competitor in terms of its international presence and technology capabilities. However, he feels the main difference is that Interactive Brokers was founded in 1978, leading to technology that was developed based on its legacy systems.
“When new banks want to improve their products for their customers, they prefer to work with modern partners because their customers want modern solutions. So that is how we are currently winning the market share over them. We are growing faster, but I do see them as our competition in that sense,” he said.
Alpaca currently employs approximately 200 people, the majority of whom work remotely from various locations worldwide.
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