Social Stock Trading Platform Raises $65M Series C

Just under a year following its $15 million Series B funding, Public, the social investing platform offering commission-free stock trading, has secured $65 million in a Series C round.

Public isn't alone in achieving multiple funding rounds this year. Companies like Welcome, Skyflow, and several others have also successfully completed successive investments. This Series C for Public aligns with the broader pattern of investors increasing their commitment to startups demonstrating strong promise.

Following a temporary slowdown at the beginning of the pandemic, venture capital firms and other investors significantly increased the speed at which they provided funding to emerging companies in later stages. Public’s Series C is a clear example of this shift, accounting for slightly more than 72% of all the capital the company has raised so far.

This funding round also illustrates a growing trend in venture capital: existing investors taking the lead in subsequent funding rounds for companies already in their portfolio. Accel spearheaded this new investment, having also led Public’s Series A and Series B rounds.

However, prevailing trends aren’t the sole driver of investment decisions. To gain deeper insight into what attracts investors to this fintech company, TechCrunch spoke with Public’s co-founders, Jannick Malling and Leif Abraham.

Growth

The Public platform experienced rapid expansion in 2020, increasing its user base tenfold since the beginning of the year.

As stated by Abraham, the company’s development has been steady rather than erratic, growing at approximately 30% on a monthly basis. The co-founder also highlighted that the majority of Public’s users discover the service through organic channels, suggesting that the startup’s marketing expenses have been moderate and its growth hasn’t been artificially inflated.

This increase in users clarifies why Public was successful in securing additional funding. However, what was the motivation behind seeking more capital?

The company’s founders explained to TechCrunch that they already possessed sufficient funds from their previous funding round, but viewed the new investment as an opportunity to further strengthen their existing business approach.

Although other services similar to Public also provide commission-free trading, Public’s strategy centers around a social component (TechCrunch previously reported on a feature of Public’s social platform). The founders believe that Public’s value increases as its user base expands.

Therefore, the startup plans to utilize the newly acquired funds to continue investing in product development, sustaining its positive momentum.

This cyclical process functions as follows: Public provides a platform where investors can freely discuss and execute trades. These investors then recommend Public to their network, attracting new users who join the discussions. The conversations are enhanced by these new participants – as Public deals with securities, all users are required to register with verified identities, minimizing disruptive behavior – and the cycle continues.

This approach has proven effective thus far. Nevertheless, the extent to which Public, Robinhood, M1, Wealthfront, and other similar platforms can continue to attract new investors remains to be seen.

Revenue?

Observant readers may have noticed that our discussion of Public’s expansion in the preceding sections centered on its user base. But what about its financial performance?

Similar to other platforms providing commission-free stock trading, Public generates income through a practice known as payment for order flow. This involves directing trades to various market makers. Robinhood, for instance, earns substantial revenue from this method.

Prior to speaking with Public, I reviewed the regulatory filings of its trading partner, Apex, to understand its payment for order flow earnings from recent reports. The resulting figures were relatively small for Apex’s combined customer base. Consequently, Public’s revenue figures, representing a segment of these overall amounts, are even less significant.

We were naturally interested in whether the company had altered its business strategy, potentially leading to revenue increases that weren’t apparent in publicly available information. The company’s leadership team informed TechCrunch that its core model remains unchanged, and that the organization prioritizes user acquisition over immediate revenue goals.

This approach is understandable. Public communicated to TechCrunch that a majority of its users are long-term investors. The less frequently a user trades securities, the lower the potential income from trading-related sources like payment for order flow. Therefore, trading alone is unlikely to become a major revenue stream for the company.

The company’s plans for generating revenue remain unclear. This suggests that the recent funding will support not only the development of its product, particularly its social features, but also, presumably, its future efforts to create income.

Examining the broader fintech landscape reveals several potential avenues for Public to further monetize its user base.

It’s important to note that Public’s revenue has increased. I inquired whether trading volume typically rises in line with user growth. The founders confirmed a correlation, indicating that the company’s expanding user base has collectively executed a greater number of trades over time.

It will be interesting to observe Public’s future developments and gain insight into its strategies for achieving substantial revenue growth from its users.