Scalable capital, a Munich startup that aims to make investing in financial markets accessible to a wider range of consumers, is putting more fuel in its tank to reach deeper into Europe. The company has raised 60 million euros in equity ($65 million at today’s prices). It will use the funds to grow its operations in the six countries — Germany, Austria, Italy, France, Spain and the Netherlands — where it already operates and to expand into more. Balderton is leading the round, with participation from HV Capital from its new growth fund and other unnamed existing backers.
Contrary to the startup’s name, this round comes at a firm valuation of $1.4 billion. That was the same valuation Scalable Capital had last time it raised money — $180 million in 2021, a round led by Tencent, with BlackRock, HV and Tengelmann participating. That’s despite the startup now being “four or five times bigger” than it was two years ago, according to co-CEO Erik Podzuweit, who co-founded the company with Florian Prucker.
Today, Scalable Capital, which began as a digital wealth management platform, is now described as a full-service brokerage. It has 1.2 million savings plans on the platform, which it tells me are running for more than 600,000 customers and close to €17bn under management, with products covering ETFs, shares, funds, bonds, cryptocurrencies and derivatives and loans. It gives users access to investments in 8,000 stocks, 2,500 ETFs and 3,500 funds among other products. ETFs are the most popular today.
This speaks volumes for the continued pressure on startups amid a very tight funding market right now in the region. (More on this in Atomico’s latest annual barometric report.)
“Yes, we are four or five times bigger than the last round,” Podzuweit said in an interview. “So, like for like, it’s obviously a very attractive deal for the investor. But in the current market environment, I think it’s really cool that we’ve been able to achieve that.” He confirmed that the company still has “the majority of the money from the last funding round” in the bank, but this extra injection means it may be a bit more aggressive in its approach. “We can do a little more marketing, we can hire the top people, but we also have a much bigger equity cushion,” he said. The company has now raised more than $345 million, he said.
Indeed, the fundraising may come at a difficult time for startup funding, but one possible reason that Scalable took the money now is that, for new brokers, the landscape is becoming more competitive and crowded.
Late last month, Robinhood – the tech company best known for democratizing investing in the US – finally took its first step into international (and European) territories, opening an office in the UK (and just today launching the EU cryptocurrency trading on the back of it). Other players outside the UK market with clear European ambitions include; Free trade and light year.
And just yesterday, Scalable Capital’s biggest rival among startups, Trade Republic, secured full banking license from the European Central Bank. The latter, backed by Sequoia among others and last valued at $5.3 billion in June 2022 (via PitchBook), said it will use the new license to launch more savings and investment products — a move that will put the gauntlet up to Scalable to figure out whether and how to scale up.
For now, Scalable Capital is standing firm and not seeking the same license, Podzuweit said.
“It’s leaner, obviously,” he said, likening it to how some e-commerce companies might invest in building their own logistics and some work with third parties (Scalable’s banking partners, instead of licensing, include ING ). “Maybe I wouldn’t rule [getting a license] out forever. But right now we’re focused on building products and launching new markets and doing it faster our way.”
The other big forces at play in the market include the impending presence of artificial intelligence and how it will be used both to manage investment platforms and the investments themselves. and the general state of the economy: Markets were generally lethargic, with inflation and adverse interest rates having a chilling effect on consumers’ propensity to take risks and invest money that could be used more immediately elsewhere.
Scalable’s position, as with others like it, is that it leaves the door open for smaller and more incremental buy-ins from its customers. Additionally, Podzuweit points out that the startup’s average user age is 35, a person perhaps with more disposable income than some of the younger consumers that other newbies have courted.
Focusing on the upside at a time when the market seems to have cooled is also very much in line with the ethos of investing, where people often leave their money at lower points if they think it will represent a lot in the longer term. Of course, only time will tell if this steadfast belief in growth in the long run will work out as hoped.
Balderton general partner Rana Yared joins the board with this round. “Scalable’s one-stop, digital-first wealth creation and creation platform brings a range of world-class financial products to individuals across Europe and is unmatched in the market,” it said in a statement. “We have been impressed by the vision and execution of Erik, Florian and the team to date and are delighted to support them in this next chapter.” Hopefully we’ll hear from Yared directly later today and update more down the line.
Updated to correct the amount raised in 2021 to $180 million, not $140 million. and determine the number of customers and the total collected, since the numbers were given by the company after publication.
