Despite the current turbulence in global markets, the U.S. stock market remains highly appealing to international investors, primarily due to its vast size and liquidity. However, trading on U.S. exchanges presents significant challenges for investors from other regions. A startup based in San Mateo, known as Alpaca, has quietly stepped into this gap by providing an API to financial services firms, allowing them to offer trading services to their consumer bases.
As of now, Alpaca reports servicing over 5 million brokerage accounts and collaborating with more than 200 financial clients across 40 countries. To further this progress, Alpaca announced on Wednesday its successful raising of $52 million in a Series C funding round. The funding will facilitate its expansion into more international markets, including the Middle East, Europe, and Asia.
This round of investment includes participation from both new and returning investors such as Derayah Financial, 850 Management, National Investments Company Kuwait, Unbound, and Portage Ventures.
Alpaca, headquartered in San Mateo, recently inaugurated a new office in New York. The company plans to utilize the newly acquired funds to secure additional regulatory licenses in various regions, akin to those it already holds in the U.S., Japan, and the Bahamas, according to the co-founder and CEO, Yoshi Yokokawa, who spoke to TechCrunch.
Yokokawa emphasized the significance of the recent fundraising, describing it as essential for transitioning the company to a global infrastructure, beyond just being anchored in the U.S. Alpaca also aims to use the investment to develop new products, include non-U.S. offerings like European and Asian equities, and support around-the-clock trading of U.S. stocks during weekdays.
The Series C funding raises Alpaca’s total capital to $170 million. Founded by Yokokawa and Hitoshi Harada, the startup initially focused on selling software that financial services firms and fintech companies could integrate to enable trading for investment groups.
Yokokawa explained to TechCrunch that Alpaca’s initial goal in 2018 was to establish a globally functioning infrastructure that would allow individuals outside the U.S. to create platforms like Robinhood or Wealthfront that comply with local regulations. He highlighted the necessity of conducting the intricate work of ensuring regulatory compliance and reporting within the U.S.
Since its inception, Alpaca has broadened its services to include stocks, ETFs, options, fixed income, and high-yield products in USD for IRA accounts. Recently, Alpaca collaborated with Kraken to enable the crypto exchange’s users to trade U.S. stocks and ETFs in certain states.
The Series C funding round comes approximately 18 months after Alpaca secured a Series B extension in October 2023. Since then, the startup’s revenue and assets under custody have tripled, and its trading volume has quadrupled. Additionally, it has become a fully self-clearing broker-dealer with DTCC membership, enabling it to manage all trade clearing and settlement in-house, including risk management and compliance.
Yokokawa regards Interactive Brokers as a primary competitor in terms of international presence and technological capabilities. He notes the distinction between Alpaca and Interactive Brokers lies in the latter’s founding in 1978, which has resulted in technology based on legacy systems. He points out that new financial institutions seek to enhance their offerings with modern partners to meet customer demands for contemporary solutions, which gives Alpaca a competitive edge and facilitates its rapid market growth.
Alpaca currently has a workforce of approximately 200 employees, most of whom operate remotely from various global locations.
