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Apex Fintech expects to beat the financial figures it projected in its proposed SPAC merger two years ago, despite the retail trading slump, CEO Bill Capuzzi tells Lucinda.

Why he matters: Apex's stock-trading technology underpins eToro, Sofi, Betterment and others, giving it more than $120 billion in assets under custody.

Context: For comparison's sake, Robinhood's annual revenue hit a peak in 2021 and has slowed as interest rates have risen.

Apex says it expects 2023 will be its best year ever, thanks to a growing international business and a newer segment selling to advisory businesses.

This conversation comes roughly two years after the company canceled a deal that would've taken the company public and valued it at $4.7 billion.

This interview has been edited for brevity and clarity.

Apex in its SPAC filing estimated that it would hit $418 million in operating revenue in 2023, with adjusted EBITDA of $178 million. Where is the company now?

We'll meet or outperform. We're expecting to have our best year ever as a company.

It sort of defies some logic, but I'll explain why. While the U.S. business is waning, what is still growing for Apex is the advisory business. 

Our international business also continues to win firms outside the U.S. that want to offer access to the states. We're also in Software as a Service;  we acquired Silver, and we've been building out product there.

The last part that's really the wind in our sails for 2023: The Fed keeps raising rates.

So stock trading has slowed down — but there are other opportunities.

There are places (from interest income) in cash, in stock loan. We're also in proxy. Let's say you own a bunch of stocks in your TD Ameritrade account. The company might do a corporate action and do a stock split or issue a dividend. We get paid to process that dividend. And there's just been more proxy activity in 2023, because markets are starting to settle in.

Where is your head at now in terms of a potential IPO?

We killed the 2021 SPAC deal because we were way outperforming what we said we were going to do. At the same time, Apex Crypto was part of the company (later selling to Bakkt), which caused lots of challenges with the SEC. And that was not how we want to go public.

We had an out in the fall, and we took it. The goal at that point was to pivot directly into an IPO — and we actually filed an S-1. But then the market fell out, so we just paused.

The firm's ready for it, and there's active conversations right now with a bunch of bankers. But there's no urgency, because let's say we raise $500 million. What would we do with it? We're profitable. I don't need operating cash. So then we get into the M&A conversation.

I don't want to raise a bunch of money before we need it, because that just creates a bunch of unreasonable expectations for a company.

What are the bankers telling you on potential valuation?

They're not actually giving us a range on valuation. They've given us multiples, which you can translate. We were going to come out as part of the SPAC at $4.7 billion pre-money. That's pretty frothy.

I think the valuation is less than what it was back then, despite the fact that their numbers are much better — we're profitable. But I think we're getting back to a normal, multiple range, and today it puts us in range with the SaaS-type companies.

What are your thoughts on where Twitter is going with its stock trading plans?

We're powering that; they use eToro, which uses Apex. It's really yet to get going. I think for a couple of reasons: One, I think on the macro level retail investors are waning. Number two: If you've seen it on Twitter, it's not intuitive yet.

A lot of the question is, how do you reduce clicks outside of Twitter and make it compliant? Investing is hard, because it's not just about building amazing technology and creating great ergonomics. It's about complying with this myriad of rules and regulations that span different regulatory bodies and different asset classes. So that's the partnership with eToro and Apex.

1 big thing: Apex revenues

Photo illustration of Bill Capuzzi with geometric shapes and the Wall St. bull.

Photo illustration: Shoshana Gordon/Axios. Photo: Courtesy of Apex Fintech

Allocate, a company enabling clients of wealth advisers and family offices to invest in venture funds, raised $10 million in new funding, the company tells Axios' Kia Kokalitcheva.

Why it's the BFD: The current fundraising market is an opportunity for venture firms to diversify their limited partner base, and for eager smaller investors to get access to top funds.

How it works: In an average year, the company assesses between 500 and 700 fund managers and selects between 20 and 50 across established large firms and smaller newer ones, according to co-founder and CEO Samir Kaji.

Though Kaji declined to name any firms, SEC filings indicate they include Andreessen Horowitz, Lightspeed Venture Partners, Khosla Ventures, Craft Ventures and Altimeter, Uncork. It also provides co-investment opportunities alongside some fund managers.

Allocate charges an investment fee and next year will begin charging subscription fees as it expands its portfolio management software's capabilities. So far, customers have invested almost $500 million.

Of note: Though wealth advisers and private banks have gravitated more toward blue chip funds, family offices tend to be more interested in smaller firms, Kaji says.

What they're saying: "iCapital and CAIS allowed these [registered investment adviser] firms to offer these types of opportunities to clients ... the one area that hasn't been as democratized is top-tier venture capital," says Kaji, who worked at First Republic Bank and Silicon Valley Bank for two decades.

Though institutional investors are split on investing in venture, Kaji says Allocate's customers are enthusiastic about the asset class and eager to gain more access.

Between the lines: An obvious question is why Allocate's customers wouldn't simply invest in funds of funds to access venture firms.

Kaji argues that Allocate lets clients invest into funds that are more tailored to their preferences, avoids the double charging of carry, and avoids the higher minimum investments that some funds of funds require.

Details: Allocate's new funding came from Gopher Asset US (affiliate with Noah Holdings International), Intera Investments, M13 Ventures and family offices.

Prior to this round, the company had raised $23.5 million in total, per PitchBook.

2. The BFD: VCs bet on investing in VCs 

Illustration of hands placing coins into an arrangement creating a one hundred dollar bill

🌏 Crypto firms are looking outside the U.S. for growth (WSJ)

After a clampdown on crypto firms by U.S. regulators this year, Ryze Labs, Ripple Labs and Zodia Markets are focusing outside the U.S. for growth.

🏠 Revolut is branching into mortgages (AltFi)

The fintech is looking to hire across several new roles to drive the development of mortgage products in Europe but has not said when it plans to launch new products.

🏦 Grayscale files for new ether futures ETF (WSJ)

As it waits for clarity around converting its bitcoin trust into a spot bitcoin ETF, Grayscale has filed paperwork with the SEC for a new exchange-traded fund tracking ether futures.

🪙 PayPal brings stablecoin to Venmo (Decrypt)

The company said yesterday in a statement that selected Venmo users can buy PayPal USD (PYUSD) today, with the option becoming available to all users "in the coming weeks."

3. Credit score

Illustration of a credit card headed towards a goal post to score a touchdown.

Want more fintech deals? Check out the Axios Pro Deals Tracker beta.

• Curve, a London-based app for bundling multiple debit and credit cards into one card, raised £58m in an extension of its Series C funding round. Britannia, IDC Ventures, Cercano Management, Cohen Circle, Outward VC and other existing shareholders participated. https://axios.link/3RruhZR

• Bolttech, a Singaporean insurtech, raised $50m in new Series B funding from LeapFrog Investments. www.bolttech.io

• Mesh, a startup focused on digital asset transfers and account aggregation, raised $22m in Series A funding. Money Forward led and was joined by Galaxy, Samsung Next and insiders Streamlined Ventures, SNR.VC, Hike VC, Heitner Group, Arash Ferdowsi, Valon Capital, Matt Ocko, Florida Funders, Altair Capital, Network VC and Gokul Rajaram. https://axios.link/3rrATwI

• CoinScan, a crypto analytics platform for traders, raised $6.3m from iAngels, Tectona and individuals like Shalom MecKenzie. www.coinscan.com

• DataBlend, a Vermont-based finance-focused integration Platform as a Service provider, raised seed funding led by FreshTracks Capital and The Dudley Fund. https://axios.link/3LTUa19

• Payflow, a Spanish salary advance startup, raised €20m in debt funding. BBVA Spark led. https://axios.link/48h6LF7

4. Deals!

• Stephan Apel was named CEO at Outlier Ventures. https://axios.link/3PP3Lsp

• Jon Daplyn has been named chief information officer of Clear Street, and Hari Godbole joined as managing director and VP of engineering. https://axios.link/48m0B6x

• Leon Marshall, who recently joined Galaxy Digital  (TSX: GLXY) as global head of sales, has been appointed CEO of Galaxy Europe. www.galaxy.com

• Nick Babinsky, a former BillTrust exec, has joined Solutions By Text as chief product officer. solutionsbytext.com

• Thomas Zeeb was named a board member at Obligate. He was previously global head of exchanges, head of securities and exchanges, and CEO of Six Securities Services. https://axios.link/3RyubQf

• Alex Mishurov was appointed to the board of directors at Cardlytics (NASDAQ: CDLX).  https://axios.link/3rdWI2Z

5. It's personnel

🚨 Situational awareness: Reid Hoffman will be part of the Axios BFD event in New York on Oct. 12, joining our discussion of AI investments. Request your invitation.

😭 @Ryan enjoyed Celine Song's "Past Lives."

Thanks to George Moriarty and Rob Reinalda for today's edits.

And thanks to you for reading. Please tell your fintech friends about this newsletter. They can sign up here.

September 21, 2023

1 big thing: Apex revenues