Stock trading app Freetrade raises $69 million

Published March 23, 2021

U.K. challenger stockbroker Freetrade has raised a $69 million Series B round led by Left Lane Capital. The growth fund of L Catterton and existing investor Draper Esprit also participated. Freetrade operates a stock trading app and has managed to attract 600,000 users in the U.K. — they generated £1 billion in quarterly trade volume.

Freetrade has reached a post-money valuation of $366 million following today’s funding round. In December 2020, the company generated $1.4 million in revenue.

After signing up, Freetrade lets you buy and sell shares from the company’s mobile app. If you want to invest in companies with expensive shares, such as Alphabet (Google’s parent company), you can buy fractional shares. Instead of spending over $2,000 for a single share, you can buy one-tenth of a share for one-tenth of the price.

Freetrade lets you access U.S. and U.K. stocks as well as ETFs. Like Robinhood in the U.S., the company doesn’t charge any trading commission for basic orders — there’s a 0.45% foreign exchange fee on transactions in foreign currencies. Unlike Robinhood, the company doesn’t want to push you toward day trading.

In addition to free general investment accounts, Freetrade offers individual savings accounts (ISA). It’s a type of account specific to the U.K. that encourages long-term investments as tax on capital gains goes down over time. Freetrade charges £3 per month to open an ISA.

The company also offers pension savings accounts (SIPP). You get tax relief on contributions. If you live in the U.K., you’re probably familiar with SIPP. Those accounts cost £9.99 per month.

Finally, Freetrade has a premium plan for its most engaged users. You can pay £9.99 for Freetrade Plus. After that, you get 3% interest on cash up to £4,000, more stocks and more order types (limit and stop loss orders). You also get a free ISA and a discount on your SIPP.

As you can see, Freetrade is betting heavily on subscription revenue combined with a freemium approach. People who just want to buy a few shares probably stick with free accounts. But people who want to convert part of their savings into stocks and ETFs will likely end up subscribing to a tax-efficient account or a Freetrade Plus subscription.

With today’s funding round, the company plans to expand its product beyond its home country. You can expect some European expansion moves in the future.

For instance, Freetrade plans to launch in France with 5,000 stocks and ETFs from major European, U.K. and U.S. exchanges. Freetrade will support PEA, France’s equivalent of ISA, for €3 per month. And users will be able to subscribe to Freetrade Plus for €9.99 per month.

In other words, it’s going to be a very similar product in France and in the U.K. While there’s no dominant stock trading app in France, German startup Trade Republic recently launched its app on the French market. It’s going to be interesting to see how these two startups grow outside of their home countries.

Freetrade, the UK challenger stockbroker, completes $15M Series A

Published October 31, 2019

Freetrade, the U.K. challenger stockbroker that offers commission-free investing, has closed $15 million in Series A funding. The round includes a $7.5 million investment from Draper Esprit, the U.K. publicly listed venture capital firm, along with previously announced equity crowdfunding via Crowdcube.

The funding will be used by Freetrade for further growth and product development, including “doubling down” on engineering hires. The firm, which claims more than 50,000 customers, is also planning to expand to Europe next year.

In addition, Adam Dodds, CEO and founder of Freetrade, tells me there will be a marketing and content push to help reach more of the challenger stockbroker’s target millennial customers and help educate the market as a whole that investing in the stock market doesn’t have to be prohibitively expensive or complicated.

Amongst a number of new stock trading and investment apps in the U.K., London-based Freetrade was first out of the gate as a bona fide “challenger broker” after deciding early on to build its own brokerage. This included obtaining a full broker license from the FCA, rather than simply partnering with an established broker.

The Freetrade app lets you invest in stocks and ETFs. Trades are “fee-free” if you are happy for your buy or sell trades to execute at the close of business each day. If you want to execute immediately, the startup charges a low £1 per trade. The idea is to put the heat on the larger incumbents that can charge up to £12 per trade, which is off-putting to people wanting to only invest a small amount or regularly refresh a modestly sized portfolio.

Meanwhile, Dodds says that next on the product roadmap will be a new investment platform that will give users the option to purchase U.K. and European “fractional” shares, not just U.S. ones, which he claims will be a first.

With that said, competition has been steadily increasing since Freetrade set up shop. Silicon Valley’s Robinhood is gearing up for a U.K. launch, having recently received regulatory approval. Bux has also recently launched commission-free trading and now bills itself as a challenger broker just like Freetrade. Then, of course, there’s Revolut, the fast-growing challenger bank that tentatively launched fee-free stock investing in August.

Noteworthy, André Mohamed, previously CTO and a co-founder of Freetrade, joined Revolut as its new head of Wealth & Trading Product, adding a bit of extra spice to that rivalry. As I wrote at the time, the circumstances that saw Mohamed depart Freetrade remain unclear. According to my sources, his contract was terminated last year and the two parties settled, with Freetrade accepting no liability.

“Freetrade are on a mission to open up investment opportunities for everyone, as are we,” says Simon Cook, CEO of Draper Esprit, in a statement. “In this sense, their mission is totally aligned with our own, as a rare tech-focused VC listed on the stock exchange. The company have shown exceptional growth in the short time since they first launched the platform last year. We could not be more delighted to support Adam, Viktor, Ian and their wider team as they enable Europe’s 100 million millennials to benefit from the world’s economic growth.”