Stock trading app Robinhood is valued at $7.6 billion, but it only operates in the U.S. Freshly funded fintech startup Alpaca does the dirty work so developers worldwide can launch their own competitors to that investing unicorn. Like the Stripe of stocks, Alpaca’s API handles the banking, security and regulatory complexity, allowing other startups to quickly build brokerage apps on top for free. It has already crossed $1 billion in transactions within a year of launch.
The potential to power the backend of a new generation of fintech apps has attracted a $6 million Series A round for Alpaca led by Spark Capital. Instead of charging developers, Alpaca earns its money through payment for order flow, interest on cash deposits and margin lending, much like Robinhood.
“I want to make sure that people even outside the U.S. have access” to a way of building wealth that’s historically only “available to rich people” Alpaca co-founder and CEO Yoshi Yokokawa tells me.
Alpaca co-founder and CEO Yoshi Yokokawa
Hailing from Japan, Yokokawa followed his friends into the investment banking industry, where he worked at Lehman Brothers until its collapse. After his grandmother got sick, he moved into day-trading for three years and realized “all the broker dealer business tools were pretty bad.” But when he heard of Robinhood in 2013 and saw it actually catering to users’ needs, he thought, “I need to be involved in this new transformation” of fintech.
Yokokawa ended up first building a business selling deep learning AI to banks and trading firms in the foreign exchange market. Watching clients struggle to quickly integrate new technology revealed the lack of available developer tools. By 2017, he was pivoting the business and applying for FINRA approval. Alpaca launched in late 2018, letting developers paste in code to let their users buy and sell securities.
Now international developers and small hedge funds are building atop the Alpaca API so they don’t have to reinvent the underlying infrastructure themselves right away. Alpaca works with clearing broker NTC, and then marks up margin trading while earning interest and payment for order flow. It also offers products like AlpacaForecast, with short-term predictions of stock prices, AlpacaRadar for detecting price swings and its MarketStore financial database server.
AlpacaForecast
The $6 million from Spark Capital, Social Leverage, Portag3, Fathom Capital and Zillionize adds to $5.8 million in previous funding from investors, including Y Combinator. The startup plans to spend the cash on hiring to handle partnerships with bigger businesses, supporting its developer community and ensuring compliance.
One major question is whether fintech businesses that start to grow atop Alpaca and drive its revenues will try to declare independence and later invest in their own technology stack. There’s the additional risk of a security breach that might scare away clients.
Alpaca’s top competitor, Interactive Brokers, offers trading APIs, but other services as well that distract it from fostering a robust developer community, Yokokawa tells me. Alpaca focuses on providing great documentation, open-source contribution and SDKs in different languages that make it more developer-friendly. It will also have to watch out for other fintech services startups like DriveWealth and well-funded Galileo.
There’s a big opportunity to capitalize on the race to integrate stock trading into other finance apps to drive stickiness because it’s a consistent, voluntary behavior rather than a chore or something only done a few times a year. Lender SoFi and point-of-sale system Square both recently became broker dealers as well, and Yokokawa predicts more and more apps will push into the space.
Why would we need so many stock trading apps? “Every single person is involved with money, so the market is huge. Instead of one-player takes all, there will be different players that can all do well,” Yokokawa tells me. “Like banks and investment banks co-exist, it will never be that Bank of America takes 80% of the pie. I think differentiation will be on customer acquisition, and operations management efficiency.”
The co-founder’s biggest concern is keeping up with all the new opportunities in financial services, from cash management and cryptocurrency that Robinhood already deals in, to security token offerings and fractional investing. Yokokawa says, “I need to make sure I’m on top of everything and that we’re executing with the right timing so we don’t lose.”
The CEO hopes that Alpaca will one day power broader access to the U.S. stock market back in Japan, noting that if a modern nation still lags behind in fintech, the rest of the world surely fares even worse. “I want to connect this asset class to as many people as possible on the earth.”
FAQs
Alpaca nabs $6M for stocks API so anyone can build a Robinhood. Stock trading app Robinhood is valued at $7.6 billion, but it only operates in the U.S. Freshly funded fintech startup Alpaca does the dirty work so developers worldwide can launch their own competitors to that investing unicorn.
Does Robinhood allow API? ›
Robinhood Crypto customers in the United States can use our new trading API to set up advanced and automated trading strategies that allow them to stay ahead of market trends, react to significant market movements, or simply trade crypto–all without needing to open the app.
How do alpaca markets make money? ›
Although we do not charge commissions, Alpaca may generate revenue in some of the same ways as traditional online brokerages. These include: Interest on cash deposits. Payment for order flow (“PFOF”) - Alpaca receives remuneration for routing your orders to market makers and exchanges.
Can Robinhood sell your stock without permission? ›
By definition, Robinhood can't perform any transactions on cash accounts without the consent of its customers. However, Robinhood can sell stocks in a margin account when its clients don't meet requirements. Many investors using Robinhood's platform argued that their shares were illegally liquidated.
Who is alpaca trading? ›
Alpaca is a developer-first API brokerage platform that supports hundreds of businesses globally. Alpaca offers stock and crypto trading, real-time market data, and end-to-end brokerage infrastructure through modern APIs.
Do I actually own stock on Robinhood? ›
Robinhood aligns with industry standards for fractional orders. This doesn't change anything about how your shares are held or your ownership of them. Orders are executed for your account just as they were before.
What is the API limit for Robinhood? ›
Trading From API
Robinhood needs you to have more than 25k to make day trading. Otherwise, you can only make four-day trades in 5 days.
Is alpaca a legit broker? ›
Alpaca Trading is a legit brokerage. It is overseen by top-tier US regulators and comes with strong investor protection, but its lack of a banking license or a public listing means less transparency.
Is alpaca completely free? ›
At Alpaca Securities LLC, our mission is to provide general brokerage services for free. However, there are some services used by our customers that cannot be provided for free because there is a direct cost associated with those services, that is, the service is not shared among all of our clients.
Is alpaca trustable? ›
Alpaca Trading, founded in 2015, is a legit and safe US-based online brokerage, compliant with the SEC, and a SIPC member.
If the equity in your account falls below the minimum maintenance requirements (varies according to the security), you'll have to deposit additional cash or acceptable collateral. If you fail to meet your minimums, your broker may be forced to sell some or all of your securities, with or without your prior approval.
Does Robinhood sell your oldest shares? ›
The default method for your Robinhood account is first-in, first-out (FIFO), which is selling the shares you bought first. The shares themselves aren't specifically tracked, but the cost associated with those shares is expensed first. Check out Cost basis for more details.
Can I leave Robinhood and keep my stocks? ›
Whole, settled security shares in your RHF account are eligible to be transferred through the Automated Customer Account Transfer Service (ACATS) to outside brokerages. You can transfer all your eligible securities in a full ACATS transfer, or only some in a partial ACATS transfer.
Is Alpaca a good investment? ›
Alpacas have a reputation as “the world's finest livestock investment“. Alpacas are suitable for small holdings. You can generate multiple income streams from alpacas which add to their investment attractiveness.
Is Alpaca Finance safe? ›
Alpaca Finance is the largest lending protocol allowing leveraged yield farming on BNB Chain and Fantom. It helps lenders earn safe and stable yields, and offers borrowers undercollateralized loans for leveraged yield farming positions, vastly multiplying their farming principals and resulting profits.
Does Alpaca have trading fees? ›
While Alpaca stock trading remains commission-free, crypto trading includes a small fee per trade dependent on your executed volume and order type.
Does Robinhood have a Python API? ›
Robin-Stocks API Library
This library provides a pure python interface to interact with the Robinhood API, Gemini API, and TD Ameritrade API. The code is simple to use, easy to understand, and easy to modify.
Can you use AI with Robinhood? ›
Robinhood said that the addition of Pluto's AI technology will give its customers enhanced data analytics capabilities, personalized investment strategies, and real-time insights and portfolio optimization.
Can you automate Robinhood? ›
With recurring investments, you can automatically invest in stocks and ETFs with Robinhood Financial and trade in crypto with Robinhood Crypto, all on your own schedule. You can use this to help make investing a habit and build your portfolio long term.
Does Robinhood use websockets? ›
To do this, Robinhood installs a WebSocket-based stock management server. The server is configured to constantly monitor various exchanges and send instant updates to connected clients.
