Lightyear, the European contender for the Robinhood trading platform, has raised $25 million in funding in an investment round backed by a British billionaire. Richard Branson.
Silicon Valley-based Lightspeed Venture Partners led the deal, the company told CNBC exclusively, in a rare vote of confidence for a start-up brokerage at a time when global stock markets are deep in the red.
Lightyear, founded last year in London by Estonian entrepreneurs Martin Sokk and Michel Aamer, offers commission-free trading in over 3,000 global stocks and multi-currency accounts. Sokk and Aamer previously worked for WiseBritish money transfer company.
“For too long, financial markets have been overly complex with high barriers to entry and confusing jargon,” Branson said in a statement broadcast to CNBC.
“Martin, Mihkel and the Lightyear team are lifting the curtain on the world of investing by making it more transparent and empowering people through education to choose the products that are right for them.”
The air and space travel mogul acquired an undisclosed stake in Lightyear through its Virgin Group conglomerate.
It is still a young start-up, having only launched in the UK in September. But Lightyear has ambitious expansion plans.
On Thursday, the firm will launch its app in 19 more European countries, including Germany and France, expanding its footprint into the eurozone. It is then planned to launch it in non-euro area countries such as Sweden and Norway.
The deal shows that there is still enough investor interest in the Europe-focused investment app, even as Robinhood faces a challenge. lull in trading volumes USA, according to Nicole Quinn, general partner of Lightspeed.
“Retail investment in the US more than doubled last year. Up to a fifth of all deals are with retail investors in the US,” she told CNBC. “We believe that Europe is moving in that direction.”
However, the cash injection comes at a difficult time for stock markets, which have tumbled on fears of a looming recession, with Robinhood’s stock down about 78% from its IPO price.
Martin Sokk, CEO of Lightyear, said he was not worried about the downturn in public markets.
“Market moves up, down or sideways don’t affect us too much because we’re building something that takes an awfully long time,” he said in an interview.
While Europe may lag behind the US when it comes to retail penetration, there are more and more e-commerce apps in the region looking for customers.
Lightyear is facing competition from both established brokers such as Hargreaves Lansdowne and AJ Bell, as well as fintech companies such as Revolut, Freetrade and eToro. Meanwhile, Robinhood has also announced its intention to enter the European market, albeit with a focus on crypto rather than equities.
The company had previously tried to launch operations in the region several years ago, but instead abandoned plans to focus on the domestic market. Since agreed to purchase British crypto exchange Ziglu.
In May Svetik tapped Vander Rutgerswho previously led Robinhood’s UK expansion efforts as Chief Operating Officer.
Lately, investors have been frustrated with fast-growing tech companies like Robinhood over fears that their money-losing business models may not be able to withstand a deteriorating economic climate characterized by rising inflation and tighter monetary policy.
Lightyear is not yet profitable. Right now, his main source of income is a fixed 0.35% of the currency conversion for foreign stock trading.
Sokk says the firm plans to eventually diversify its revenue stream with additional features, including a paid subscription that is scheduled to launch later this year.