Berlin-based investment API provider Upvest has raised $42m in a Series B equity funding round — which is one of Germany’s biggest fintech raises of the year, close behind Mondu last month.
What does Upvest do?
Upvest is part of the hyper-competitive club of banking-as-a-service (BaaS) fintechs that provide the core banking infrastructure for finance companies behind-the-scenes. Like many of the fintechs in this space, it’s built its own cloud-based core banking system. But unlike companies like Thought Machine and Mambu, it’s focused purely on investment products.
Fintechs and banks can use Upvest’s ready-to-go APIs to offer their end customers investment products including exchange-traded funds (ETFs), stocks and crypto assets, instead of having to build them in-house. For Upvest, this is a reliable revenue model – as once a fintech or bank chooses them, they tend to stick to the same core-banking platform for a while. And for the fintechs and banks, it’s generally cheaper to use an API like Upvest’s than go through the complex process of building the back end of an investment platform in-house.
And after a rigorous 24-month process, Upvest has also managed to secure licences from the German financial regulator BaFin for securities and crypto brokerage and custody — which means it’s allowed to provide these capital markets products in all the European countries that fintechs want to roll them out in.
Upvest’s CEO and founder Martin Kassing won’t name names but says it’s working with mid to large fintechs, which could mean companies with up to $10bn assets under management. And it’s also courting banks as customers…
Who’s investing in Upvest?
- US-based Bessemer Venture Partners led the round. It’s the VC’s third European startup investment in the last six months.
- ABN AMRO Ventures
- Notion Capital
- 10x Group
- N26 cofounder Maximilian Tayenthal (who also just invested in semi-competitor Pile, which is at a much earlier stage and just focuses on crypto investment APIs)
What’s the market like?
For fintechs and banks, the appeal of an API provider like Upvest is it saves time and money when you want to launch investment products. The money saving is the real pull in the current economic environment, as many fintechs try to reduce the amount they splurge on product launches.
“I would have said that in the last three years one of our main competitors would have been the big fintechs that are building things themselves,” Kassing tells Sifted.
“But that's changing now because the whole market is turning and they're outsourcing more. So the trend for us in the next two or three years is reducing costs for them with our offering and enabling them to create steady revenue.”
While some other BaaS providers have dipped their toes in investment APIs — and pure crypto player Pile just emerged on the scene — Upvest seems to be the only European player offering fintechs and banks the option to launch both securities and crypto through one API. In the US, there are players like Alpaca, but they don’t offer ETFs or European stocks.
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In the current economic climate, Kassing says ETFs are currently the company’s most in-demand API product, as people look to offer more stable savings plans to customers.
What’s next for Upvest?
Kassing says that Upvest’s focus is on European clients for now, despite having a US investor as its lead VC.
“Some of our fintechs are actually already in the US market,” says Kassing. “So the more clients we have onboard on our API, the more cost competitive we are. Then we’ll think about moving with some of these fintechs to the US.”
Upvest currently has 100 employees and plans to increase this to 150 people by the end of the year. It’s based in Berlin, but most of its team work hybrid or remote.
Moving customers out of negative interest is the big "next step" for many of Europe’s neobanks right now — and it seems like almost every day we’re hearing them say they want to launch a crypto trading platform to do so.
Upvest stands out as a one-stop-shop for both securities and crypto investment products — which ultimately saves fintechs and banks time and effort compared to working with multiple API providers. Time will tell whether customers shy away from investment products in the next 12 months or so — and whether Upvest’s client pipeline continues to grow.
Amy O’Brien is fintech reporter at Sifted. She tweets from @Amy_EOBrien and writes our fintech newsletter — you can sign up here.