finance

Europe's Answer to Robinhood Just Raised Fresh Funds at a $5.3 Billion Valuation

Trade Republic
  • German stock-trading app Trade Republic raised $900 million in a huge funding round that values the start-up at $5.3 billion.
  • Like Robinhood, Trade Republic's app lets users trade in stocks and exchange-traded funds without paying a commission.
  • The company has benefited from rising interest from retail investors in the stock market.

LONDON — German stock-trading app Trade Republic said Thursday it raised $900 million in a huge funding round that values the start-up at $5.3 billion.

The round, a Series C, was led by American venture capital firm Sequoia, with additional backing from new investors TCV and Thrive Capital. Existing shareholders include Accel, Founders Fund and Creandum increased their holdings.

Trade Republic is essentially Europe's answer to Robinhood. The app lets users trade in stocks and exchange-traded funds without paying a commission. Trade Republic makes money from a flat 1 euro  ($1.22) fee it charges per trade.

Earlier this year, Trade Republic added a cryptocurrency service, launching the feature just as the prices of bitcoin and other digital coins were rallying wildly. More recently, crypto markets have suffered a sharp downturn.

Like Robinhood, Trade Republic has benefited from rising interest from retail investors in the stock market. Earlier this year, usage of online trading platforms spiked amid volatile trading in GameStop and other stocks promoted on the Reddit board WallStreetBets.

However, unlike Robinhood, Trade Republic is a fully licensed bank. The firm secured its banking license from German regulators in late 2018. Co-founder Christian Hecker says the company went down this path as it gives people the confidence to trade with an upstart broker.

"If you want to be the home screen app for wealth, it feels like you should not put your money into somebody who is not a bank," Hecker told CNBC in an interview. "Being a regulated bank, there's a lot of trust. We're regulated in the same way as any other bank in Europe. On top of that, we're independent."

Trade Republic isn't too well known beyond its core markets of Germany, France and Austria. Founded in 2015, the company opted to grow its business stealthily in the early years, with Hecker and his other co-founders living together in Airbnb apartments as they built up the company.

Now, Trade Republic has grown to more than 1 million users, 400 employees and 6 billion euros in assets under management. The company now plans to roll out its service across all euro zone countries in the next 12 months.

Hecker said he's "very worried" about the threat of negative interest rates and rising inflation in Europe, adding more Europeans are flocking to financial markets as they struggle to make a decent return on their savings.

The latest cash injection makes Trade Republic one of the most valuable fintech start-ups in Europe. The continent's tech sector has grown dramatically over the past decade, and 2020 marked a record year in investments in European start-ups.

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