Tech

Richard Branson is taking a stake in Lightyear, Europe’s answer to Robinhood

Lightyear application.

A light year

Lightyear, a European challenger to trading platform Robinhood, has raised $25 million in an investment round backed by British billionaire Richard Branson.

Silicon Valley-based Lightspeed Venture Partners led the deal, the company told CNBC exclusively, a rare vote of confidence for a startup brokerage at a time when global stock markets are in the red.

Founded in London last year by Estonian entrepreneurs Martin Sok and Mihkel Aamer, Lightyear offers commission-free trading in more than 3,000 global stocks and multi-currency accounts. Sok and Aamer previously worked at Wise, a UK-listed money transfer firm.

“For too long, financial markets have been overly complex with high barriers to entry and confusing jargon,” Branson said in a statement released by CNBC.

“Martin, Michkel and the Lightyear team are opening up the world of investing by making it more transparent, while empowering people through education to choose the products that are right for them.”

The aerospace tycoon acquired an undisclosed stake in Lightyear through his conglomerate Virgin Group.

European expansion

It’s still a young startup that only launched in the UK in September. But Lightyear has ambitious expansion plans.

On Thursday, the firm will launch its program in 19 more European countries, including Germany and France, expanding its scope in the euro zone. The next plan is to launch in non-euro countries, such as Sweden and Norway.

According to Nicole Quinn, a general partner at Lightspeed, the deal shows that investors still have a strong appetite for the European-focused investment app, even as Robinhood faces a lull in US trading volumes.

“Retail investment in the US more than doubled last year. Up to a fifth of all transactions are made by retail investors in the US,” she told CNBC. “We think Europe is moving in that direction.”

Still, the cash infusion comes at a difficult time for stock markets, which have tumbled in response to fears of a looming recession — Robinhood’s value is down about 78% since its IPO.

Martin Sock, CEO of Lightyear, said he was not concerned about the fall in public markets.

“Markets going up, down or sideways don’t really affect us because we’re building something that takes a very long time,” he said in an interview.

Fierce competition

​​​​​​While Europe may lag behind the US when it comes to retail penetration, the region is becoming increasingly crowded with various online shopping programs looking for customers.

Lightyear faces competition from established brokers such as Hargreaves Lansdown and AJ Bell, as well as financial technology firms such as Revolut, Freetrade and eToro. Meanwhile, Robinhood has also announced its intention to enter the European market, albeit with a focus on crypto rather than equities.

The company previously tried to launch in the region a few years ago, but abandoned the plans and focused on the domestic market. It has since agreed to acquire UK-based crypto exchange Ziglu.

In May, Lighter appointed Vander Rutgers, who previously led Robinhood’s UK expansion, as chief operating officer.

Investors have recently bristled at high-growth technology companies such as Robinhood over concerns that their loss-making business models may not withstand a worsening economic climate marked by rising inflation and tighter monetary policy.

Lightyear is not yet profitable. His main source of income now is a flat 0.35% on foreign exchange conversions for foreign stock trading.

Sock says the firm plans to eventually diversify its revenue stream with additional features, including a paid subscription due to launch later this year.

Richard Branson is taking a stake in Lightyear, Europe’s answer to Robinhood

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