Alpaca – Commission-Free API for Stock Trading and Brokerage Raises $50M in Series B

It’s been an year since we announced Series A of our portfolio startup, Alpaca and now we are pleased to share about Series B that helped Alpaca raise $50M funding. The funding round was led by Tribe Capital in participation with Spark Capital, Social Leverage, Portage Ventures, Horizons Ventures, Positive Sum and Eldridge. After this Series B, the total funding amount of Alpaca has reached almost $72M.

Alpaca started with offering stock trading API for traders to better execute their trading strategies but later it also offered brokerage API for fintech companies allowing them to also offer stock trading to their consumers. This brokerage API has greatly helped Alpaca to expand its market reach.

With this Series B funding announcement, Alpaca has also shared about its upcoming crypto trading product using which customers will also be able to trade cryptocurrencies using Alpaca’s API.

By now offering its trading services to fintechs with consumer end users — the B2B2C model, if you will — Alpaca has expanded its market remit. Per the startup, the number of brokerage accounts it supports has risen some 1,500% this year to more than 100,000. The startup’s CEO, Yoshi Yokokawa, told TechCrunch that it expects to secure 100 partners for its equities trading tech by the end of 2021. That figure was zero at the end of 2020, before its embedded finance product was released.

Notably, Alpaca intends to make its service an anti-cost center by sharing PFOF revenues with partners that embed its fintech APIs. Yokokawa declined to share the PFOF split with customers, but our guess is that something around 15% to 25% makes sense, providing incentives to potential partners to choose Alpaca over rival tech while keeping enough top line on the Alpaca side of the ledger to continue building a venture-scale business.

The startup has big plans: It is moving into the cryptocurrency market, it announced this morning, and partnering with Plaid to make money transfer easier for investors. Recent results from Robinhood, a consumer trading platform popular in the United States, helped underscore just how lucrative crypto trading can be for platforms.

Why raise $50 million? TechCrunch was curious why the company would put so much capital onto its books in a single shot instead of raising a more modest round of, say, $25 million, still a healthy figure for a Series B and one closer in size to its preceding Series A.

Yokokawa said Alpaca has a lot of stuff to build. And to build it all is going to take a lot of folks. Alpaca had just 10 employees when COVID-19 hit, which means that the company has a lot of hiring in front of it. And the sorts of developers it needs, we suppose, aren’t going to come cheap.

Please read full story at TechCrunch.