Author: azeeadmin

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week we did something fun and different and good: a live show! A good number of people came, and asked questions, and altogether, it was a blast.

Danny, Natasha, and Alex had a lovely time with the regular work, while Grace and Chris and Kevin made the whole operation function. We’ll likely post a bonus episode of the Q&A on Saturday if people are interested in Equity After Hours.

That aside, what did we talk about in a longer-than-usual episode? Here’s the rundown:

• Buzzfeed is going public! Alex wrote about the news here, but the gist is that the media company is merging with a SPAC, buying Complex, and raising some capital at the same time. We have thoughts about it.
• Maybe neobanks will break even? We dug into some fintech news through the perspective of some recent news from the neobank market.
• MAJORITY raised MONEY for migrants to the United States, while MFast, a Vietnamese financial services app, got some funding of its own amid the neobank boom.
• Alex interviewed a leading venture capitalist. So, we talked about that.
• What’s going on with the early-stage venture capital market? That’s something we tried to parse. The gist is that the rapidly-evolving world of investing in startups is in the midst of a few trends that are worth understanding. Even if they are slightly contradictory.
• A16z tripled down on crypto with a new $2.2 billion fund, giving it a total of $18.8 billion in assets under management.
• Edtech leaders rallied around a memo of their own this past week.
• And then to close, we raced through some of our recent reporting on a new fund that will invest in American military institute graduates, Figma’s huge new round of capital, and WaitWhat?

It’s always fun to play around with our show, and thank you to everyone who came out and supported us in our first-ever, but probably not last-ever, virtual live show. We are back to regular, however, starting Monday.

Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday morning at 7:00 a.m. PST, so subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts.

Amazon’s cloud services giant Amazon Web Services (AWS) is getting into the encrypted messaging business. The company has just announced that it’s buying secure communications service Wickr — a messaging app that has geared itself towards providing services to government and military groups and enterprises. It claims to be the only “collaboration service” that meets security criteria set out by the NSA.

AWS will continue operating Wickr as is, and offer its services to AWS customers, “effective immediately,” notes a blog post from Stephen Schmidt, the VP and CISO for AWS, announcing the news.

Financial terms were not disclosed in the short announcement. Wickr had raised just under $60 million in funding according to PitchBook data (it also notes a valuation of under $30 million but that seems to be a very old estimate).

Amazon’s purchase of a messaging product geared at providing secure services to government bodies is coming at a time when the company continues to be embroiled in a dispute around the JEDI contract, a $10 billion deal to provide services to the U.S. that Microsoft was granted during the Trump administration. It’s unclear if this is part of Amazon’s effort to build out more infrastructure and services to flesh out its own offerings, or simply a sign that it will continue to court that merket, with or without JEDI in its pocket.

The move also suggests that Amazon could be planning to make a bigger push into the messaging space — some might say a long-awaited move from the company.

The AWS division currently offers communications service Chime, which enables organizations to meet, chat, and place business calls. But it’s a little-known product that’s failed to have the impact of rival services Slack or Microsoft Teams.

Amazon was reportedly working on a messaging product as far back as 2017, although that appeared to be geared more to consumers. The company also owns a number of social media patents.

Fast forward to 2021, and there are a million other considerations around messaging that wouldn’t have been key factors in 2017, such as encryption and other privacy-saving features. And messaging in general has grown increasingly sophisticated. There are our areas in particular where Amazon might be playing here: (1) to offer Wickr as a business service, continuing how it is used today; (2) building “messaging-as-a-service” for other companies to use in their apps a la other AWS services; (3) build a consumer messaging app on top of the Wickr infrastructure; (4) more services connected to Echo, expanding more features around a bigger social commerce/interactive play. Or, all of the above.

Commenting on the surprise acquisition, Stephen Schmidt, AWS CISO, said: “The need for this type of secure communications is accelerating. With the move to hybrid work environments, due in part to the Covid-19 pandemic, enterprises and government agencies have a growing desire to protect their communications across many remote locations. Wickr’s secure communications solutions help enterprises and government organizations adapt to this change in their workforces and is a welcome addition to the growing set of collaboration and productivity services that AWS offers customers and partners.”

In a notice on its website, Wickr said: “From our founding ten years ago, we have grown to serve organizations across a wide range of industries, all over the world. Together with AWS, we look forward to taking our solutions to the next level for our customers and partners.”

Wickr, which was founded in 2011 and is based in San Fransisco, California, describes itself as the “most secure” video conferencing and collaboration platform. Unlike other collaboration tools, which encrypt messages as they travel from a user’s device to a company’s servers but store those communications in an unencrypted state, Wickr uses end-to-end encryption which means that only people on either end of a conversation can decrypt and read messages.

It also offers users an ephemeral messaging feature, which allows users to set self-destruction timers for as short as a few seconds.

The company has recently made a big push into the enterprise as a result of the mass shift to online communications. In February this year Wickr launched ‘Global Federation’, a feature that enables enterprise and government entities to securely communicate using end-to-end encryption with mission-critical partners outside of their network. 

API Holdings, which operates the giant healthcare startup PharmEasy, said on Friday it has reached an agreement to acquire 66.1% stake in Thyrocare, which runs a diagnostic lab chain, for about $613 million in what is the first ever acquisition of a listed firm by an unicorn startup.

The transaction is subject to regulatory and other applicable customary approvals. Docon Technologies Pvt Ltd, a 100% subsidiary of API, will be the acquirer and shall make an open offer for an additional 26% stake, the firm said in a statement.

“We are delighted to be partnering Thyrocare. We will provide world class customer experience in diagnostics, rivalling our pharmacy experience by leveraging technology, and building on top of the massive scale & truly pan-India presence of Thyrocare. It is our aim to deliver all outpatient healthcare products & services to every Indian within 24 hours,” Siddharth Shah, CEO of API Holdings, said in a statement.

This is a developing story. More to follow…

Startups are the embodiment of frenetic action. The rush to grow, outrun, and disrupt runs in the lifeblood of today’s entrepreneurs, driving their fervor and enabling them to capture markets from giants of industries too big to maneuver in a quickly changing landscape.

That has been truer for the mobility landscape than most other industries. Companies like electric scooter providers Lime and Bird have raised tons of capital to change how the urban population gets around, but that growth has come at the cost of a bottom line still in the red.

So it’s striking to see electric scooter company Veo take a different approach to the business. Rather than raising venture capital and scaling quickly, the company does business the old-fashioned way: Proving the model works in one market before moving to the next. This slower, more methodical approach has worked in Veo’s favor — it might be the only company in its industry that has been consistently profitable.

Veo’s approach reflects its co-founder and CEO Candice Xie’s belief that transportation is not an industry that allows companies to scale rapidly and turn a big profit within a year, and especially not if it’s going to make sense for a city. Electric scooters aren’t just a business to Xie — they’re a utility, a tool that can be best implemented through patient collaboration between public and private partners. The CEO has taken this ethos and executed Veo’s business model with the expectation that it will make the company the most impactful in the industry.

A former financial planner for automation solutions company, Schneider Electric, in Chicago, Xie launched Vue in 2017, partly inspired by the bike-share boom in Asia. She was decidedly against the poor quality bikes many operators were deploying at the time, and was also frustrated by the lack of affordable, safe and convenient transportation in Chicago. After some market research, Xie and her co-founder, Yanke (Edwin) Tan, a bike engineer, discovered the gap in last-mile transportation in the United States.

The following interview, part of an ongoing series with founders who are building transportation companies, has been edited for length and clarity. 

In your Medium post titled “Sorry, Boys. The First Profitable Micromobility Company Was Veo, Not Lime,” you fired some shots at Lime and the tech bro-ey micromobility industry at large. That was pretty bold. 

Thank you! I think because of the VC money and also the hype in the industry, a lot of people just forget how easy and simple the business should be. That’s why I put out the post. It was just time to say something in the industry and help people to understand.

What made you write it?

That was actually the time when Lime announced they were the first ones to achieve profitability, and that’s through EBITDA, and a lot of people were clapping for them. I was compelled to write because many people who follow the industry asked me, “Hey, it seems their approach is working? Should we follow suit? Why are you taking a different approach?”

I felt like that statement from Lime was quite misleading for a lot of people, and I don’t think that was a responsible statement, either. So that made me feel like I should use my insight and just explain things a bit more openly with our information.

Like other financial sectors in Latin America, the retail investing space is getting a facelift by local tech startups that are cashing in on the untapped potential for democratizing asset management in the region. One of those startups is Chilean-based Fintual, which today announced a $15 million round led by Kaszek Ventures, the largest fund in Latin America.

Fintual is an automated passive investment platform that allows the average person in Chile or Mexico to invest in mutual funds containing ETFs (Exchange Traded Funds), investment vehicles that aren’t as well known, or as readily accessible in Latin America.

“The idea that got to me was that we were allowing people to invest in the long term, we enable them to invest in instruments they didn’t have access to before,” said Pedro Pineda, co-founder and CEO of Fintual.

Before starting Fintual in 2018 with his three co-founders, Pineda was an astronomer and an entrepreneur, who built and sold a Groupon copycat company in Chile called “Queremos Descuentos” (We Want Discounts) for just over $1 million when he was 28. 

After the exit, he admits he was a bit lost in life. 

“One day I decided that I wanted to do only the things that I wanted to do and with the people I wanted to do it with,” he said.

He traveled for a couple of years, and learned to code, among other things, until Omar Larré, Fintual’s current CIO, presented him with the idea for the business. 

Larré had been a portfolio manager at Banco Itau, Brazil’s biggest bank by total assets, and he saw the gap in the market: investing was not set up for the average person. The annual fees were too high, the minimum amount required to invest was too high, and there was a penalty when you removed your money. Additionally, the transaction takes a certain amount of financial know-how that most people don’t possess.

For Pineda, disrupting the financial sector also seemed like a lot of fun, he thought.

“I liked the idea of challenging the financial banks, and you can’t do that without technology. We have this super tool that my parents didn’t have, and you can disrupt an entire industry,” Pineda told TechCrunch.

While traditional mutual funds in Chile and Mexico charge up to 6.45% and 5% annually, Fintual charges 1% annually of assets managed. Additionally, Fintual doesn’t require a minimum investment nor a minimum amount of time invested, and users can take their money out any time with no penalties. 

“It’s different than the U.S.; we invest way less than you do; by a factor of 10 maybe,” Pineda said, comparing the investment rate in Chile.

In 2018, the company was accepted into Y Combinator and became the first Chilean startup to go through the prestigious accelerator. It has been growing exponentially ever since and today it serves 57,000 clients in Chile and Mexico.

Below is a table that shows their growth including money managed and percent growth each year since launch.

	Assets Under Management (USD)*	Annual Growth
May 2018	1.2 M
May 2019	12.9 M	1075%
May 2020	87.6 M	679%
May 2021	480.7 m	548%

    *Each figure corresponds to the end of each month.

The current raise will be used to grow the company’s operations in Mexico, expand to other countries — namely Colombia and Peru — and grow its tech team. 

In addition to Kaszek, other investors to date include YC, ALLVP, and angel investors such as Plaid’s CTO, Jean-Denis Greze, and Cornershop’s founder Oskar Hjertonsson. To date, the company has raised about $15.2 million.

Fintual’s impressive growth speaks for itself, but Kaszek’s co-founder and managing partner, Nicolas Szekasy, said the fund has been following Fintual since its early days, and he was impressed with the niche market the team identified and even more impressed with the user experience the company had developed which has, in turn, fueled its growth.

The U.S. Federal Aviation Administration (FAA) has given Virgin Galactic the green light to begin transporting commercial passengers to space aboard its VSS spacecraft. This is an expansion of the company’s existing license, which had granted it permission to fly professional test pilots and astronauts to space using its spaceplane. The updated license comes on the heels of Virgin Galactic’s successful test flight on May 22.

This means that the way is cleared for Virgin Galactic to being operating as the first official ‘spaceline’ — which is like an airline, but for space. The company aims to provide regular service for space tourists and researchers to suborbital space, with an experience that includes unparalleled views of Earth and a few minutes of weightless during the roughly 2 hour trip.

The FAA’s approval is a big step, but it’s not the final one before Virgin Galactic begins its actual regular service flights for paying customers: The company still needs to complete three remaining test flights before that happens. These will be the first flights of the Virgin spacecraft and its carrier plane while carrying a full crew, and at the goal is still to fly the first of those sometime “this summer,” according to CEO Michael Colglazier.

A report from earlier this month claims that Virgin Galactic backer Sir Richard Branson could fly on the next test flight, and that it might occur as early as the coming July 4 weekend, which would mean he makes it to space faster than his billionaire rocket riding rival Jeff Bezos, who is set to make a trip on his own Blue Origin New Shepard spaceship on July 20. Virgin Galactic hasn’t said officially when its next test flight would occur, however.

Cryptocurrency company Circle has announced that it plans to launch a new API for companies using Circle accounts to manage crypto assets — and in particular USDC stablecoins. The new API will let companies access decentralized finance (DeFi) protocols starting with Compound lending pools.

Circle is better known as one of the founding members of the Centre consortium with Coinbase. Along with other crypto partners, they have issued USD Coin (USDC), a popular stablecoin.

As the name suggests, stablecoins are cryptocurrencies with a fixed price. One USDC is always worth one USD. Auditing firms regularly check that issuers always keep as many USD in bank accounts as USDC in circulation.

The idea behind USDC is that you can manipulate money more easily. According to USDC backers, moving money from one person to another should be as easy as sending bitcoin from one wallet to another. Circle has its own solution with Circle accounts. Account holders can programmatically send, receive and hold USDC using standard API calls.

In particular, Circle has built ramps to bridge the gap between fiat currencies and cryptocurrencies. With Payments, you can accept card payments, bank transfers and USDC transactions. Everything arrives in your Circle account as USDC. Similarly with Payouts, you can send bank transfers from your Circle account.

Now, Circle also wants to help you access more features with your USDC currently in your Circle account. With the upcoming DeFi API, you’ll be able to access DeFi protocols without having to manually send USDC tokens to another wallet. Circle will start with the Compound protocol.

Compound manages crypto-based lending markets. Some users provide crypto assets and contribute to liquidity pools. Others borrow crypto assets — they first need to provide another type of crypto as collateral.

Users who lend money on Compound are rewarded with interest rates. For instance, when you supply USDC using the Compound protocol, you get 1.74% in annual percentage yield (APY). As USDC is a popular collateral for the Compound protocol, it makes sense that Circle is embracing the protocol with its business accounts. It’s an interesting addition to Circle’s treasury infrastructure.

The UK’s competition watchdog, the CMA, has opened another investigation into Big Tech — this one targeted at Amazon and Google over how they handle (or, well, don’t) fake reviews.

The Competition and Markets Authority has taken an interest in online reviews for several years, as far back as 2015.

It also went after eBay and Facebook back in 2019 to try to squeeze the trade in fake reviews it found thriving on their marketplaces. After continuing to pressure those platforms the watchdog was given pledges they’d do more. Albeit, in the case of Facebook, it took until April 2021 for it to take down 16,000 groups that had been trading fake reviews — and the CMA expressed disappointment that it had taken Facebook over a year to take meaningful action.

Now the CMA has Amazon and Google in its sites, both of which control platforms hosting user reviews — saying it will be gathering evidence to determine whether they may have broken UK law by taking insufficient action to protect shoppers from fake reviews.

Businesses that mislead consumers or don’t take action to prevent consumers being misled may be in breach of UK laws intended to protect consumers from unfair trading.

The CMA says its investigation into Amazon and Google follows an initial probe, which it started in May 2020, which was focused on assessing several platforms’ internal systems and processes for identifying and dealing with fake reviews.

That work raised specific concerns about whether the two tech giants have been doing enough to:

• Detect fake and misleading reviews or suspicious patterns of behaviour. For example, where the same users have reviewed the same range of products or businesses at similar times to each other and there is no connection between those products or businesses – or where the review suggests that the reviewer has received a payment or other incentive to write a positive review.
• Investigate and, where necessary, remove promptly fake and misleading reviews from their platforms.
• Impose adequate sanctions on reviewers or businesses to deter them and others from posting fake or misleading reviews on their platforms – including those who have published these types of reviews many times.

The regulator also said it’s concerned that Amazon’s systems have been “failing adequately to prevent and deter some sellers from manipulating product listings” — such as, for example, by co-opting positive reviews from other products.

And, well, who hasn’t been browsing product reviews on Amazon, only to be drawn up short by a reviewer earnestly referring to product attributes that clearly bear no relation to the sale item in question?

While the user reviews that pop up on, for example, Google Maps after a search for a local business can also display unusual patterns of 5-starring (or 1-starring) behaviour.

Commenting on its investigation into concerns that Amazon and Google are not doing enough to combat the problem of fake reviews the CMA’s CEO Andrea Coscelli had this to say, in a statement:

“Our worry is that millions of online shoppers could be misled by reading fake reviews and then spending their money based on those recommendations. Equally, it’s simply not fair if some businesses can fake 5-star reviews to give their products or services the most prominence, while law-abiding businesses lose out.

“We are investigating concerns that Amazon and Google have not been doing enough to prevent or remove fake reviews to protect customers and honest businesses. It’s important that these tech platforms take responsibility and we stand ready to take action if we find that they are not doing enough.”

Amazon and Google were contacted for comment.

A Google Spokesperson sent us this statement:

“Our strict policies clearly state reviews must be based on real experiences, and when we find policy violations, we take action — from removing abusive content to disabling user accounts. We look forward to continuing our work with the CMA to share more on how our industry-leading technology and review teams work to help users find relevant and useful information on Google.”

An Amazon spokesperson also said:

“To help earn the trust of customers, we devote significant resources to preventing fake or incentivized reviews from appearing in our store. We work hard to ensure that reviews accurately reflect the experience that customers have had with a product.  We will continue to assist the CMA with its enquiries and we note its confirmation that no findings have been made against our business. We are relentless in protecting our store and will take action to stop fake reviews regardless of the size or location of those who attempt this abuse.”

In a blog post earlier this month, Amazon — likely aware of the CMA’s attention on the issue — discussed the problem of bogus online reviews, claiming it “relentlessly innovates to allow only genuine product reviews in our store”; and offering up some illustrative stats (such as that, in 2020 alone, it stopped more than 200M “suspected fake reviews” before they were seen by any customers, mostly via the use of “proactive detection”).

However the blog post was also heavily on the defensive — with the ecommerce giant seeking to spread the blame for the fake reviews problem — saying, for example, that there’s an “increasing trend of bad actors attempting to solicit fake reviews outside Amazon, particularly via social media services”. 

It sought to frame fake reviews as an industry-wide problem, needing a coordinated, industry-wide solution — while reserving its heaviest fire for (unnamed) “social media companies” (cough Facebook cough) — and suggesting, for example, that they are the weak link in the chain:

“We need social media companies whose services are being used to facilitate fake reviews to proactively invest in fraud and fake review controls, partner with us to stop these bad actors, and help consumers shop with confidence. It will take constant innovation and partnership across industries and law enforcement to fully protect consumers and our honest selling partners.”

Amazon’s blog post also called for coordinated assistance from consumer protection regulators “around the world” to support its existing efforts to litigate against “bad actors”, aka “those who have purchased reviews and the service providers who provided them”.

The company also told us it has won “dozens” of injunctions against providers of fake reviews across Europe — adding that it won’t shy away from taking legal action. (It noted, for example, a lawsuit it filed on June 9 with the London Commercial Court against the owners of the websites, AMZ Tigers and TesterJob — seeking a prohibitory injunction and damages.)

In light of the CMA’s investigation being opened now, Amazon’s blog post calling for regulatory assistance to support litigation against purveyors of fake reviews looks like a pre-emptive plea to the CMA to swivel its gaze back onto Facebook’s marketplace — and check back in on how the trade in fake reviews is looking over there.

We reached out to the CMA to ask whether its investigation into Amazon and Google will dig into the role that review trading groups hosted elsewhere, such as on social media platforms, may play in exacerbating the issue and will update this port with any response.

The CMA has been increasingly active in regulating Big Tech as it dials up attention on digital markets to prepare for planned UK reforms to competition law that look set to usher in an ex ante regime for dealing with competition-denting platform power.

The watchdog has a number of other open investigations into Big Tech — including into Google’s planned deprecation of tracking cookies. It also recently initiated a market study into Apple and Google’s dominance of the mobile ecosystem.

Given the watchdog’s focus on major platforms — as well as its long standing interest in fake reviews — it’s interesting to speculate whether iOS maker Apple may not face some UK scrutiny on this issue.

Concerns have also been raised over fake ratings and reviews on its App Store.

Earlier this year, for example, iOS app developer, Kosta Eleftheriou, filed suit against Apple — alleging it enticed developers to build apps by claiming the App Store is a safe and trustworthy place but that it doesn’t protect legitimate developers against scammers profiting from their hard work.

The CMA already has an open investigation into Apple’s App Store. So it will be paying close attention to aspects of the store, saying back in March that it would be investigating whether Apple imposes unfair or anti-competitive terms on developers — which then ultimately result in users having less choice or paying higher prices for apps and add-ons.

For now, though, the watchdog’s attention toward the fake reviews issue has been publicly focused elsewhere.

Indian online learning platform Unacademy is in advanced talks to acquire Rheo TV, a less than two-year-old startup founded by two former Unacademy employees, according to three sources familiar with the matter.

The current deal values Rheo TV, a startup that has built a platform to help professional game streamers live stream their gameplays and monetize those feeds, at over $10 million, one of the sources said. The deal proposes Rheo TV’s team of fewer than a dozen people to join Unacademy.

The younger startup counts Lightspeed India Partners, Sequoia Capital India’s Surge, as well as the founding team of Unacademy — Gaurav Munjal, Hemesh Singh, and Roman Saini — among its existing investors.

Munjal and Sequoia Capital India declined to comment. A founder of Rheo TV didn’t immediately respond.

As tens of millions of college students come online and play games, the startup is betting that many of them, provided platforms are able to help them make a living, will consider streaming their gameplays as a viable career option.

Streamers on Rheo TV, which offers several features similar to those of Twitch, are currently rewarded based on their gameplays, followerbase, and past performance in different tournaments.

If the deal materializes, it would be the latest acquisition by Unacademy, the Bangalore-based startup that has amassed over 5 million monthly active users in over 10,000 cities in India.

In the past two years, the Facebook, Tiger Global, and SoftBank-backed startup has acquired WiFi Study, PrepLadder, Coursavy, and led a strategic investment in Mastree.

The startup, which also operates creator platform Graphy, this week unveiled a fund worth over $13 million to help applicants kickstart their online school.

India’s online education market is estimated to grow to $19.7 billion by 2030, up from $1 billion last year, analysts at Bernstein wrote in a recent report.

Stock in many American companies, like Amazon, Alphabet or Tesla, can host hundreds or thousands of dollars per share. Fractional trading, or buying part of a single share through a brokerage, makes them more accessible—at least to people within the United States. Investors in other countries, however, often have to pay high fees through interactive brokers. Gotrade makes fractional trading of U.S. stocks available to people in 150 countries, and charges a minimum of just one dollar.

The Singapore-based startup announced it has raised $7 million in seed funding led by LocalGlobe, with participation from Social Leverage, Y Combinator, Picus Capital and Raptor Group. The round also included angel investors like Matt Robinson, co-founder of GoCardless; Carlos Gonzalez-Cadenas, former chief product officer of Skyscanner; Frank Strauss, former head of Deutsche Bank’s global digital business; and Joel Yarbrough, Asia-Pacific head at Rapyd.

GoTrade was founded in 2019 by David Grant, Norman Wanto and Rohit Mulani. Its app launched three months ago and is currently invite-only. Gotrade claims sign-ups have grown 20% week-on-week, and it now has more than 100,000 users spread across the world. About 65% of Gotrade’s users have traded stocks before, while the rest are first-time investors.

Mulani, the company’s chief executive officer, told TechCrunch that the idea for Gotrade was planted when he became interested in American stocks, but discovered many barriers to trading.

“When I was 18, I actually looked to get access in Singapore, and banks were charging $30 per trade. Effectively, the market taught me that I could not get into the market. Fast forward ten years, I decided to look into it again, and the banks were still charging $25 a trade,” he said. “On top of that, their user interfaces were something I didn’t want to look at. So we decided to build a brokerage platform where anyone can get access.”

“Fractional trading actually came a bit later,” he added. “That was the real MVP for us because fractional really makes investing accessible to anyone globally since all you need is one dollar.”

Robinhood, SoFi and Stash all feature fractional trading, but Mulani said those apps are primarily used by U.S. residents. On the other hand, Gotrade is not available to U.S. residents because of financial regulations, so its main competitors are interactive brokers, Saxo Bank and eToro.

Gotrade does not charge commission, custody, inactivity or dividend fees. Instead, it monetizes by collecting a small fee on the currency exchange from deposits, and interest generated from uninvested cash in brokerage accounts. The app is free to use, but plans to add a premium paid subscription program and virtual debit card that users can link to their accounts.

Many of Gotrade’s users are people who have invested in their local stock markets, but weren’t able to trade U.S. stocks before. They vary widely in age, but 25 to 34-year-olds are the app’s biggest segment, and the average account size is about $500.

Gotrade acts as an introducing broker to Alpaca Securities LLC, a U.S. stock brokerage that is regulated by the Financial Industry Regulatory Authority (FINRA) and serves as an intermediary. Alpaca Securities splits its stock inventory into fractions, and Gotrade users can decide how many fractions they want to buy. The app also allows them to set a budget, and automatically calculates the amount of fractional shares they can afford through notional value trading.

User accounts are protected up to $500,000 by the Securities Investor Protection Corporation (SIPC), and money goes through counterparties regulated in Singapore, like Rapyd, and the United States, including Alpaca and First Republic Bank. To protect users, Gotrade works only with fully-funded cash accounts without any margin facility. Mulani explained that a margin account effectively means people are borrowing money to invest, while a fully-funded account means that a user can only invest the money they have already deposited in their account. FINRA and Securities Exchange Commission regulations also mean accounts under $25,000 can only day trade, or buy and sell a security on the same day, up to three times every five trading days.

Like many investment apps aimed at first-time or relatively new traders, Gotrade includes educational content, like pop-ups with definitions for investment terms, and news articles about publicly-traded companies. Its new funding will be used for hiring and product development, with a strong focus on adding more in-app content.

In a statement, LocalGlobe partner Remus Brett said, “Over the past 100 years, U.S. stocks have delivered average annual returns of 10%. With compounding, an investment of $1,000 back then would be worth $13 million today. These returns have fueled wealth creation in the U.S. and other developed markets but most of the world has missed out. We believe Gotrade has the potential to help the world’s 99% gain access the same benefits that the 1% have. We are incredibly excited to be joining Rohit, David and Norman on this journey.”