Berlin Trade Republic grabs $ 900 million, led by Sequoia, at $ 5 billion valuation to propel its neo-broker app across Europe
Consumers are turning to investing to supplement – or in some cases offset – the poorer returns on things like traditional savings accounts with low interest rates or pensions, and today one of the largest “neo-brokers” in Europe is helping to open up this opportunity announces a huge wave of financing to fuel its growth.
Trade Republic, which allows people to buy and sell stocks, exchange-traded funds (ETFs), derivatives, and (more recently) cryptocurrency through a mobile app that doesn’t charge commissions (but which has a fee structure for various services), has raised $ 900 million in a Series C funding round that values the Berlin-based start-up at $ 5 billion.
Funding has a very good bank of investors behind it. It is led by Sequoia, with new backers TCV and Thrive Capital, as well as former backers Accel, Founders Fund, Creandum and Project A also participating. A year ago, Accel and Founders Fund co-led Trade Republic Series B.
This investment propels the Berlin start-up among the largest private fintech companies in the region, and while Trade Republic is currently only active in Germany, Austria and France, Christian Hecker (who co-founded the company with Marco Cancellieri and Thomas Pischke) said the start-up will use the funds to expand to many other countries (which will include not only sorting out licenses to do so, but also implementing larger regional operations. , hence the big round of financing).
“It is our ambition to be present throughout the euro area over the next four months,” he said in an interview with TechCrunch. It could start with the region’s largest markets, which would mean Spain and Italy, followed by Benelux, Ireland and Finland. Hecker’s point of view is that what Trade Republic provides is a resource that everyone should be able to access. “It really pains me to see that these demographic or macroeconomic factors [that are impacting users in Germany, France and Austria] basically burn all the countries of continental Europe. So I think it’s really, really important that we launch in all of these nations. The UK is also on the target list, he noted, but Brexit has definitely thrown a proverbial wrench into the works to sort this one out.
Shifting consumer habits and economic trends are indeed working in favor of apps like Trade Republic that give people a chance to invest, an area of financial services that has traditionally been reserved for wealthier individuals with large sums of money. ‘money and access. to brokers to help them manage this.
For the most ordinary European citizens, interest rates have been at an all-time low, making traditional savings a less compelling way to grow money; and given the rate of inflation, there are fears that state pensions – Social Security, as it is called in the United States – will not be enough for average consumers to live into their later years without a supplement, so that private pension plans are not widely used to supplement this already.
Enter the “neo-brokers” who are taking advantage of the ubiquity of smartphones and mobile applications and the growing acceptance of providing financial services such as payments or banking using them, to build a new approach to investment, much more accessible to a larger pool of consumers by dividing the shares by investing in increments or by allowing investment in funds made up of many shares; or even giving users a way to invest in alternative fields like cryptocurrency.
Or, as Hecker sums it up, “We have negative interest rates, inflation, and a huge pension gap. All three factors require that you do something for yourself. “
This resulted in a massive shift in stock trading which led to the emergence of a number of new players including Robinhood in the United States (who has tried but has yet to make a move in Europe) ; eToro, which announced in March its IPO through a SPAC valuing it at $ 10 billion; Bux, who raised $ 80 million last month; and the neo-bank Revolut, which also provides stock trading services. It is also leading to the growth of completely new approaches to the concept, such as Rally creating a new market for investing in collectibles, and more recently NFTs to turn “everything” into an investable asset. Rally also raised $ 30 million led by Accel this week.
All of these trends, and the wider increase in services to allow you to trade over the phone, has led to a huge boost for Trade Republic. Last year, when announcing its Series B, Trade Republic said it had more than a billion euros under management. Today, this figure has risen to 6 billion euros, coming from 1 million customers in the three markets where the startup is active: Germany, Austria and France.
Doing the math on this, customers are investing an average of € 6,000 per account in Trade Republic, albeit in practice – and as a sign of “democratization” which the company touts as part of its mass market appeal. – some put significantly less, and some much more, than this amount.
Hecker said some users allocate as much as 20-30% of their salary or savings on a monthly basis, and the idea is not so much about quick returns from quick transactions, but more about people looking for payoffs. long-term.
“We have never been a trading platform,” Hecker said, referring to the fact that many people use their Trade Republic accounts as a savings plan. And for that reason, he wouldn’t really be drawn to what kind of returns people might expect from investments except to say that they match how the general market generates earnings and will depend on what you invest in.
“I think what’s very interesting about being a savings plan is that it’s not just tied to short-term returns,” he said, noting that ‘A recent customer survey found that 70% of Trade Republic customers “are not looking for short-term gains, or investing for the sole purpose of benefiting from the average buying effect.” Users, a- he said, “believe in trends, like sustainability, or the ability of the US tech industry to really grow over the next 10 to 30 years.
Funding and valuation, and the story the company likes to tell about its potential to help the average consumer have a better bottom line with the money they have, certainly seems to set the startup up to start getting started. position as a more permanent business. part of the financial fabric, although, as we have unfortunately seen, this can be a slippery idea not only in the world of financial services, but also in the world of startups.
This is one of the reasons why having the company with a banking license helps: it means customers have deposit insurance up to € 100,000 per account (similar to how the FDIC supports banks in the United States).
Sequoia has been a strong investor in fintechs, supporting companies like Klarna and Nubank, and this comes as the company expands its reach in the region after opening its first European office, in London.
“The democratization of financial markets will be one of the most important consumer trends of the next decade,” said Doug Leone, partner of Sequoia, in a statement. “Trade Republic is at the forefront of this trend and has attracted an untapped generation of European savers who demand greater affordability. We’re excited to partner with Christian, Thomas, Marco and their team to deliver a product and experience that customers love. “