European neobroker Scalable Capital raises $180M+ at a $1.4B valuation

[NelsonG]

Neobrokers — startups that are disrupting the investment industry by providing a platform for a wider range of consumers to partake in the stock market by offering them more incremental investment options and modern and easy mobile-based interfaces to manage their money — continue to see a huge amount of interest, and today comes the latest development in that story.

Scalable Capital, a Munich/Berlin startup that provides tools to monitor and manage portfolios for those investing in shares, manage trades and exchange traded funds for a flat fee of €2.99 per month, has raised over $180 million (around €150 million) to expand its business. The company confirmed to us that the all-equity investment, a Series E being led by China’s Tencent, has been done at a $1.4 billion post-money valuation.

This is a huge jump — a lot of scaling, as it were — for Scalable Capital. It was only in July 2020, less than a year ago, that the startup raised a Series D of $58 million at a $460 million valuation.

Previous investors are also in this round although Scalable is not disclosing which of these are participating. Other backers have included BlackRock, HV Holtzbrinck Ventures and Tengelmann Ventures. The company, founded in 2014 but commercially launched in 2016, has now raised more than $320 million in equity funding.

Part of the reason for the rapid fundraising is to strike while the iron is hot, and to give the startup some more fuel to grow at a time when other neobrokers are also seeing a lot of activity.

Scalable Capital itself now has 250,000 customers across Austria, Germany and the UK, more than three times the 80,000 it had back in July. At the same time, assets under management have ballooned to $5 billion (versus $2 billion in that last round).

In another interesting turn, Scalable has built out a business as a partner to many established banks, acting as a “digital advisory” (but not a neobroker), with the list of high-street names including ING, the British Barclays Bank, Siemens Private Finance, the digital subsidiary of the Santander Group Openbank, Oskar GmbH, and Targobank.

But while Scalable will be using some of the funding to continue expanding on the continent, it also seems that its UK retail business is no longer accepting new customers and winding down direct-to-consumer operations.

“Scalable Capital has operated across multiple platforms in the past,” a spokesperson said. “We have taken the decision to consolidate our services onto one central platform to provide a consistent and scalable experience across markets and offerings. Following significant analysis and serious consideration, the German platform has been selected for further international expansion of our B2C brokerage and wealth businesses. As a result of this decision, we will be closing all client accounts in the UK.” She pointed out that Scalable remains present in the UK market however via its Barclays partnership.

Altogether, Scalable says that some 1,500 Exchange Traded Funds (ETFs) are available on the platform, which are the most popular investment vehicle, with more than half of the assets on the platform invested in them. It also provides access to invest across some 4,000 different shares and 2,000 funds. All of these are set to grow, along with potentially launching new products, too.

“We see huge demand to invest money in the capital markets instead of leaving it in bank accounts. This comes against a backdrop of record-low interest rates, growing inflation and a widening pension gap”, says Florian Prucker, co-CEO and co-founder of Scalable Capital, in a statement. “Our clients can access fully managed globally diversified ETF portfolios and – in the same app – self directed trading in shares, ETFs, crypto currencies and funds. We also provide a market-leading offering of ETF, stocks and crypto monthly savings plans. We are planning to launch derivatives trading next. We will continue on our mission to make everyone an investor”.

In the meantime, the company is also bulking up at a time when others in the same space are doubling down, too. Last month, Trade Republic — another neobroker from Germany — announced a $900 million investment at a $5 billion valuation led by Sequoia. Other big European players that have also recently raised big expansion rounds include Amsterdam’s Bux ($80 million in April) and Vienna-based Bitpanda ($170 million in March).

Interestingly, Tencent also led that last round for Bux, a part of its bigger investment efforts both in fintech and in the region. Other big bets in Fintech have included Viva Wallet in Greece; Nubank in Brazil, which yesterday also announced a big round; N26; and Futu, a Nasdaq-listed Chinese neo-broker. It also has built out an extensive gaming empire with a string of major acquisitions, including Supercell.

“Tencent complements our existing long-term partners who already represent an international investor base. Our recent funding is a major step forward on our way to becoming the leading retail investment platform in Europe. The strong acceleration of our growth further validates our mission to empower investors”, says Erik Podzuweit, co-CEO and co-founder of Scalable Capital, in a statement. “Anyone thinking of investing money should think of Scalable Capital. Whether you want to invest yourself via our broker or want our wealth management solutions to do it for you.”

The fintech interest is particularly notable also given that Tencent is also the parent of China’s messaging behemoth WeChat, which has also made huge inroads among consumers around a range of financial services.

“Demand for accessible solutions of personal investing is increasing in European markets, particularly among millennials. Scalable Capital excels in offering its customers a convenient and cost-efficient investing experience. We are delighted to be an investor and participate in Scalable Capital’s growth”, says Danying Ma, Managing Director of Tencent Investment, in a statement.

Updated with a statement on Scalable Capital’s presence in the UK market, to clarify that the previous investors are not named as investors in this round and that bank partnerships are not neobroker partnerships.

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