Alpaca Raises $10M Series A for API-Powered Trading

This morning, Alpaca, a company enabling businesses to integrate commission-free stock trading into their platforms, revealed a $10 million Series A funding round. Portag3 spearheaded this new investment, with participation from existing investors including Social Leverage, Spark Capital, Fathom Capital, and Abstract Ventures.

The company had previously secured $6 million in a pre-seed round and an additional $6 million in a seed round, as reported by TechCrunch last November.

Alpaca has recently been featured in our reporting on the startup and private investment landscape, offering insights into the growing trend of API-driven companies and their achievements.

Based on our calculations, this latest funding brings Alpaca’s total raised capital to approximately $22 million.

The company has demonstrated significant progress with its existing funds, notably increasing its transaction volume over the past year. Similar to the commission-free brokerage Robinhood, high transaction volume can lead to substantial profitability. Alpaca CEO Yoshi Yokokawa previously shared with us that the company earns revenue through order flow routing to designated market makers.

Consequently, as Alpaca’s trading activity increases, its revenue also expands. This is relevant as we have data on Alpaca’s trading volume from 2020, and a comparison to its 2019 performance. This information clarifies the reasons behind the company’s ability to attract further investment.

Below is a breakdown of the startup’s historical trading volume, measured in dollars, resulting from customer utilization of its API:

• January: $388.1 million
• February: $591.4 million
• March: $999.0 million
• April: $853.6 million
• June: $1.59 billion
• July: $1.58 billion
• August: $959.3 million
• September, 2020: ~$2 billion

According to the company, the $2 billion achieved in September represents a tenfold increase compared to the same period last year, suggesting a considerable surge in Alpaca’s revenue in recent quarters. Rapid revenue growth, and the potential for a ten-fold revenue increase, is highly attractive to investors. Therefore, the company’s Series A funding round is a logical outcome.

What’s next

Building on recent expansion, Alpaca intends to focus on attracting larger enterprise clients and further develop its API functionality. According to Yokokawa, this strategy supports the company’s ambition to make financial services universally accessible. Notably, the company is concentrating on developing foundational infrastructure technology rather than direct-to-consumer applications, as this approach is expected to maximize its overall impact. (By providing the underlying technology for numerous companies’ trading platforms, Alpaca believes it can reach a broader user base than by attempting to build a single, comprehensive service itself.)

To realize this ambitious objective, the company requires additional development talent. Like many growing businesses, Alpaca has adopted a fully remote work model and is utilizing its new funding to recruit globally. When asked if the company was primarily seeking sales personnel to support international expansion, the CEO indicated that the majority of new hires have been engineers, with some marketing roles also being filled.

Having scaled back to a team of approximately 10 during the initial phase of the COVID-19 pandemic, Alpaca now comprises 35 employees. These team members will be instrumental in driving growth through both geographic expansion and increased engagement with enterprise clients, facilitated by ongoing API development. The company’s efforts to enhance its broker-dealer capabilities are directly linked to its international growth strategy.

The market for APIs is currently very active. The fintech sector is experiencing significant growth. And within fintech, there has been a notable surge in savings and investment activity. Alpaca operates at the intersection of these three trends. It will be interesting to observe the company’s progress with this additional $10 million in funding.