Freetrade Secures $69 Million in Series B Funding

U.K.-based stockbroker Freetrade has successfully completed a $69 million Series B funding round. Leading the investment was Left Lane Capital, a prominent growth fund. Additional participation came from L Catterton’s growth fund and existing investor Draper Esprit.

Freetrade’s stock trading application has garnered a substantial user base, currently exceeding 600,000 individuals within the U.K. These users collectively generated an impressive £1 billion in quarterly trade volume.

Valuation and Revenue

Following this latest funding, Freetrade has achieved a post-money valuation of $366 million. The company reported revenue of $1.4 million in December 2020, demonstrating consistent financial growth.

Fractional Shares and Investment Options

Upon registration, Freetrade allows users to execute buy and sell orders directly through their mobile application. The platform facilitates investment in companies with high share prices through the availability of fractional shares.

Instead of requiring a large upfront investment, users can acquire portions of shares, such as one-tenth, for a corresponding fraction of the total cost. This makes investing more accessible.

Commission Structure and Investment Philosophy

Freetrade provides access to both U.S. and U.K. stocks, alongside a diverse range of Exchange Traded Funds (ETFs). Similar to Robinhood in the U.S., the company operates a commission-free model for standard trades.

A 0.45% foreign exchange fee applies to transactions involving foreign currencies. However, unlike some competitors, Freetrade does not actively promote frequent, short-term trading strategies.

Account Types and Associated Fees

Beyond standard investment accounts, Freetrade offers Individual Savings Accounts (ISAs), a U.K.-specific account designed to incentivize long-term investing through tax advantages. Opening an ISA with Freetrade incurs a monthly fee of £3.

Furthermore, the company provides Self-Invested Personal Pension (SIPP) accounts, offering tax relief on contributions. These accounts, popular in the U.K., are available for a monthly fee of £9.99.

Freetrade Plus Premium Plan

For its most active users, Freetrade offers a premium subscription service, Freetrade Plus, priced at £9.99 per month. This plan provides benefits such as 3% interest on cash holdings up to £4,000.

Subscribers also gain access to a wider selection of stocks, advanced order types like limit and stop-loss orders, a complimentary ISA, and a discounted SIPP rate.

Revenue Model and Freemium Approach

Freetrade’s business strategy centers on a freemium model, relying heavily on subscription revenue. Casual investors may utilize the free accounts, while those seeking more comprehensive investment solutions are encouraged to subscribe.

Tax-efficient accounts and the Freetrade Plus subscription are anticipated to attract users aiming to convert savings into stocks and ETFs.

European Expansion Plans

The recent funding will be strategically allocated towards expanding Freetrade’s product offerings beyond the U.K. market. Plans are underway for expansion into European territories.

Specifically, Freetrade intends to launch in France, offering access to 5,000 stocks and ETFs from major exchanges across Europe, the U.K., and the U.S.

French Market Strategy

In France, Freetrade will support the Plan d'Épargne en Actions (PEA), the French equivalent of an ISA, for a monthly fee of €3. The Freetrade Plus subscription will also be available in France for €9.99 per month.

The product offering in France is expected to closely mirror that of the U.K. However, Freetrade will face competition from German startup Trade Republic, which has recently entered the French market.

The competitive landscape and growth trajectories of these two startups outside their respective home countries will be closely watched.