Alpaca Raises $52M Series C to Expand API Brokerage Platform

The Appeal of the U.S. Stock Market and Alpaca's Global Expansion

Despite current global economic uncertainties, the U.S. stock market continues to be a highly desirable destination for investors internationally, primarily due to its substantial size and high levels of liquidity.

However, direct access to U.S. stock exchanges can present challenges for investors located in other countries. Alpaca, a startup headquartered in San Mateo, California, has successfully addressed this issue by providing an API solution.

Alpaca's Growth and Funding

This API enables financial services companies to offer trading capabilities to their customer base. Alpaca now reports serving over 5 million brokerage accounts and partnering with more than 200 financial clients across 40 nations.

To further accelerate its growth, Alpaca announced on Wednesday a $52 million Series C funding round. The funds will be used to expand operations into additional international markets, specifically targeting the Middle East, Europe, and Asia.

The investment round included participation from both new and existing investors, such as Derayah Financial, 850 Management, National Investments Company Kuwait, Unbound, and Portage Ventures.

Strategic Expansion and Regulatory Compliance

Alpaca recently established a new office in New York City. The newly acquired capital will be allocated towards securing further regulatory licenses in various regions.

This expansion mirrors the licenses Alpaca currently holds in the U.S., Japan, and the Bahamas, as explained by co-founder and CEO Yoshi Yokokawa in an interview with TechCrunch.

“This fundraising is crucial for us as it facilitates the development of a global infrastructure, shifting our focus from being solely a U.S.-centric company and platform,” Yokokawa stated.

Product Development and Trading Capabilities

The company intends to utilize the funding to enhance its product offerings. This includes the addition of non-U.S. equities, such as those from European and Asian markets.

Furthermore, Alpaca plans to support 24/5 trading of U.S. stocks, providing increased accessibility for investors. The Series C round brings the total funding raised by the company to $170 million.

Company Origins and Core Mission

Alpaca was founded by Yoshi Yokokawa, a former investment banker with experience in both the U.S. and Japan, and Hitoshi Harada (CPO). Initially, the company focused on providing software solutions.

These solutions allowed financial services firms and fintech companies to integrate trading functionality into their platforms. “Our initial goal in 2018 was to build a globally functional infrastructure that would empower individuals outside the U.S. to create platforms comparable to Robinhood or Wealthfront,” Yokokawa explained to TechCrunch.

“However, a critical component is ensuring adherence to U.S. regulations and compliance standards, as the U.S. remains the primary destination for capital and securities. This is the core service we provide.”

Expanding Product Suite and Partnerships

Alpaca’s product range has expanded to encompass stocks, ETFs, options, fixed income products, and high-yield offerings accessible through USD-denominated IRA accounts.

Recently, the company collaborated with Kraken, enabling users of the cryptocurrency exchange to trade U.S. stocks and ETFs in select states.

Recent Performance and Competitive Landscape

This Series C funding round follows a Series B extension secured in October 2023. Since then, Yokokawa reports that the startup’s revenue and assets under custody have tripled, while trading volume has quadrupled.

Alpaca has also achieved full self-clearing broker-dealer status with DTCC membership, allowing for in-house management of trade clearing, settlement, risk management, and compliance.

Yokokawa identifies Interactive Brokers as its primary competitor, acknowledging their established international presence and technological capabilities. However, he highlights a key differentiator.

“Interactive Brokers was established in 1978, resulting in technology built upon legacy systems. Modern financial institutions prefer partners offering contemporary solutions to meet evolving customer demands, and this is where we are gaining market share,” he noted.