Nextmarkets, a neobroker founded by two brothers from Cologne, has raised $30m to expand its trading platform to more countries around Europe.
The Series B round was led by previous investors Alan Howard and Christian Angermayer, while Peter Thiel was also an early investor. Nextmarkets is currently active in eight European countries and will use the funding to expand to others.
Just like US trading app Robinhood, Nextmarkets allows non-professional traders to make commission free trades. And again, like Robinhood, the company’s seen an uptick in trades across the last year — up from 300k in 2019 to 1.2m in 2020.
But, after the Gamestop saga and accusations that Robinhood failed to protect vulnerable traders from significant losses, what makes Nextmarkets different?
The simple answer, cofounder Manuel Heyden says: Nextmarkets wants to educate the investor and actually help them make more money.
“Robinhood is offering a completely commission free product — which is great,” he says. “But, then there’s a part missing. We’re a neobroker like Robinhood, but we’re also about curated learning for retail investors.”
Heyden’s background is in behavioural finance, a field that led him to realise quite how many people were investing without a proper understanding of how the stock market works.
“There’s a lot of irrational behaviour because people aren’t trained. You don’t play sports or start playing an instrument without a coach and it’s the same for the stock market.” Nextmarkets offers investors access to ‘trading coaches’ who guide them on basic principles of investing. The company also gives out 300 real time trading recommendations a month across seven asset classes.
There are basic principles that retail investors aren’t always following, Heyden says. “If your position is profitable, you need to let it run, and when you’re in a loss phase you need to close, but a typical retail investor is doing the opposite.”
At present, a third of Nextmarkets’ customers are trading based on recommendations within the app, whilst a third are going off their own strategy and a third are using a mixture of the two.
Although Nextmarkets believes the retail investor needs advice, the company says it is completely committed to the idea of commission-free trading, pioneered by Robinhood.
“Forty to fifty years ago, we all paid €50 per transaction, then at the beginning of the 2000s it was a flat rate of €5 and today there’s the megatrend initiated by Robinhood that’s come to Europe.”
Heyden compares the shift to what happened in the music industry. “Companies used to make money from selling music itself,” he says. “Now they make it through selling merchandise or concert tickets.”
Nextmarkets allows completely free trading, but makes money whenever a customer uses one of its portfolio management tools, trades with leverage or invests in a curated basket of assets.
Throughout the Gamestop saga in February, Nextmarkets continued to allow its users to trade Gamestop stock — in contrast to Robinhood, who enforced a buying limit, and fellow German neobank Trade Republic, which experienced technical issues.
“Our platform remained completely stable throughout the crisis, people were always able to trade Gamestop, there were no interruptions,” says Heyden.
“This is important to us, that there’s no intervention from humans into the system because if there is, it’s no longer a free market.”