Invstr, a London-based company, revealed on Wednesday that it had closed on a $20 million Series A convertible offering. The $20 million it previously raised over two seed rounds from investors like Venture Capital, Finberg, European angel investor Jari Ovaskainen, and Rick Haythornthwaite, a former global chairman of Mastercard, gets added to this.
The London-based company Invstr has developed an educational platform throughout the years that includes elements like an investing academy. In order to help players gain a better understanding of the markets before jeopardising their own money in the real world, it has developed the Fantasy Finance game, which allows users to manage a fictitious $1 million portfolio. Invstr has made it its mission to make learning enjoyable through social gaming.
By providing education and learning materials up front, Invstr, according to CEO and founder Kerim Derhalli, is adopting a different strategy from rivals. In addition to allowing users to trade stocks without paying a commission, Invstr+ also enables customers to bank and invest online “without ever needing to move money from one place to another.”
Derhalli claimed that taking the business in this direction from the beginning was part of his business plan.
Self-directed investing, according to Derhalli, is the most significant trend in the United States right now. Younger generations aspire to be independent and self-sufficient because they were raised in an app-based environment. Many people have mistrust for the banking industry and don’t want to go the route of their parents in terms of banking and finance. We consider this to be a huge opportunity.
After witnessing directly how people’s lack of knowledge and confidence might deter them from beginning to invest, Derhalli claimed he felt motivated to start Invstr. Before launching Invstr “so that anyone, anywhere could learn how to invest,” he spent three decades in senior executive positions at Deutsche Bank, Lehman Brothers, Merrill Lynch, and JPMorgan.
Together with Apex Clearing, which formerly provided execution and settlement services to Robinhood, Invstr is launching its new investment services. Through a collaboration with Vast Bank, it is providing digital banking services. Regarding the security issue, Invstr claimed that Okta technology likewise safeguards its user data.
The business, which also has offices in New York and Istanbul, intends to use the additional funding to introduce brand-new analytics and brokerage tools as well as a portfolio builder.
A crucial step has been taken with Public’s new proposal for a trading platform that is free for investors but refuses to accept payments for order flow, the contentious practice where brokers like Robinhood send trade orders to market makers who then execute those transactions and pay a commission.
Payment for order flow accounted for more than 77% of Robinhood’s $1.8 billion in income last year, but Public condemned the revenue stream in February because, according to detractors, it can result in lower prices for investors. Instead, it has sought revenue-generating strategies including voluntary tipping for retail customers and interest on cash balances that are not invested. Webull, eToro, M1 Finance, and Stash are rivals of Robinhood that also sell order flow.
According to David Trainer, CEO of investment research firm New Constructs, a ban would force exchanges to discontinue free trading and place them at a “significant disadvantage” to rivals Fidelity and Charles Schwab. “If regulators were to outlaw payment for order flow, Robinhood’s revenue would be severely affected,” Trainer claims. Gary Gensler, the chair of the SEC, stated in August of last year that a total ban was “on the table,” although analysts believe stricter controls may be more likely.
One of the main complaints regarding investment applications is that they don’t educate users properly and purportedly leave them to fend for themselves, which is seen as irresponsible. Given the number of lawsuits Robinhood has faced, it is possible for customers to lose a significant amount of money as a result.
Vladimir Tenev and Baiju Bhatt.
13 million users
At an $8.3 billion valuation, Robinhood raised $280 million in venture capital and $200 million in Series G funding.