Amid the current market turbulence, the U.S. stock market continues to be an attractive destination for global investors due to its vast size and liquidity. However, trading on U.S. exchanges remains challenging for many international investors. A San Mateo-based startup, Alpaca, has taken advantage of this opportunity by providing an API to financial services firms, enabling them to offer trading services to their customers.
Presently, Alpaca supports over 5 million brokerage accounts and collaborates with more than 200 financial clients across 40 countries. To further this momentum, Alpaca announced on Wednesday that it has secured $52 million in a Series C funding round aimed at expanding its reach into new markets, including the Middle East, Europe, and Asia.
The funding round attracted both new and existing investors, such as Derayah Financial, 850 Management, National Investments Company Kuwait, Unbound, and Portage Ventures.
Recently, Alpaca inaugurated a new office in New York, and the fresh capital will be utilized to acquire additional regulatory licenses in various regions, akin to those it holds in the U.S., Japan, and the Bahamas, according to co-founder and CEO Yoshi Yokokawa.
Yokokawa emphasized that this fundraising effort is crucial as it serves as a catalyst for Alpaca to transform from a U.S.-centric company to a global infrastructure provider.
The new funds will also be allocated towards developing new products, introducing non-U.S. products like European and Asian equities, and supporting 24/5 trading of U.S. stocks.
With this latest round, Alpaca’s total funding has reached $170 million.
Founded by Yokokawa, a former investment banker in the U.S. and Japan, and Hitoshi Harada (CPO), Alpaca initially focused on providing software that financial services firms and fintechs could use to facilitate trading for investment groups.
Back in 2018, the company aimed to establish a globally functional infrastructure that would allow individuals outside the U.S. to create platforms similar to Robinhood or Wealthfront while adhering to local regulations. This involved rigorous work to ensure compliance and regulatory reporting, especially since money and securities often flow to the U.S. for access to its financial products.
Alpaca has since diversified its offerings to include stocks, ETFs, options, fixed income, and high-yield products in USD for IRA accounts. The company also partnered with Kraken to enable the crypto exchange’s users to trade U.S. stocks and ETFs in select states.
The Series C funding follows approximately 18 months after Alpaca’s Series B extension in October 2023. During this period, the startup has seen its revenue and assets under custody triple, while its trading volume has quadrupled. Additionally, Alpaca has become a fully self-clearing broker-dealer with DTCC membership, allowing it to manage all trade clearing and settlement processes internally, including risk management and compliance.
Yokokawa identifies Interactive Brokers as Alpaca’s closest competitor in terms of international reach and technological capabilities. However, he believes Alpaca’s modern technology gives them an edge, especially as new banks seek innovative solutions for their customers.
Alpaca employs around 200 people, with most of its workforce operating remotely from various locations around the world.
(Source: TechCrunch)
