Aussie share trading startup Stake has secured a massive $40 million in funding from international backers, just months after the Wall Street GameStop saga led to a service disruption and customer outrage.
Founded in 2017 by Matt Leibowitz and Dan Silver, Stake is a platform allowing Aussie retail investors to trade in US stocks.
The $40 million raise is a significant step up from the $3.5 million it raised through founder investment and family and friends back in 2019. It also sees the Aussie startup bring on big-name, international investors.
The round is led by US investment giant Tiger Global along with partners from London’s DST Global.
This time, the co-founders weren’t out looking for capital, Leibowitz tells SmartCompany. They didn’t necessarily need it.
“But when we got to meet the investors and shared a strategic vision for how we see the market, it just made sense to do something.”
The capital injection follows a period of rapid growth for the business. The COVID-19 pandemic, along with low interest rates, has seen more people turning to alternative investment platforms to make their money work harder for them.
Stake and other platforms like it reaped the benefits.
Over the past year, Stake’s customer base has grown by more than 500%. It now has some 330,000 users in Australia, New Zealand, the UK and Brazil.
But things haven’t been entirely smooth sailing.
Life after GameStop
In January this year — when discussions with the investors were already well underway — Stake experienced a surge in trade volumes that saw users unable to trade throughout the US market opening, on what was one of the biggest trading days of all time.
The saga stemmed from a short seller taking aim at bricks-and-mortar retailer GameStop, in a bid to drive the share price of the beleaguered business down.
That led to an army of Redditors, millennials and high-net-worth individuals rallying around GameStop, buying up shares, inflating its share price and ultimately leaving the short sellers out of pocket.
At the time Stake called it “unprecedented trade activity”, which placed immense pressure on the platform, leading to outages.
Some users reported they were unable to log in during US trading hours. One claimed they were unable to sell their stock at peak price, meaning they missed out on some US$4,000 ($5,100).
For his part, Leibowitz says this wasn’t actually an outage as such. He maintains that customers could still access the markets and make trades.
“There were obviously systemic issues in the market,” he says.
“We had a lot more traffic than we’d expected [and] there are definitely areas we could improve.”
For the three months since, the team has been focusing on making those improvements, he adds, but the business has always been focused on meeting customer demand, and that never wavered.
Now the founders have their eyes firmly set on the future.
The funding boost will see Stake gearing up for global expansion. Although, with Aussies making up about 75% of its users, there will also be a focus on improving the product locally, and offering up new services.
Leibowitz hints that US shares are just the beginning. Some 75% of customers are also repeat investors, he adds.
“It’s about building more sophistication for them.”
For the other 25%, the goal is to make sure there’s a route for the to invest again and get more out of the market.
“Our DNA is embedded in access, and we’ve got exciting plans to give Aussies even more opportunities both in the short- and long-term,” he said.