Alpaca's $1.15 Billion Valuation Signals Democratization of Stock Trading Infrastructure

The infrastructure behind commission-free stock trading is becoming a billion-dollar business in its own right. Alpaca, the company that provides the backend plumbing for brokerages and fintech apps, just closed a $150 million Series D funding round that values it at $1.15 billion. The round was led by Drive Capital, with participation from existing investors.

This funding milestone reflects a broader shift in how financial services get built. Rather than building their own brokerage systems from scratch, companies are increasingly turning to API providers like Alpaca to embed trading capabilities directly into their products. The approach mirrors what Stripe did for payments and what Plaid did for bank connectivity.

What Alpaca Actually Does

Alpaca operates as a "brokerage-as-a-service" platform. The company provides APIs that handle the complex regulatory, compliance, and operational requirements of running a brokerage. This includes:

• Account opening and KYC verification
• Order routing and execution across multiple exchanges
• Real-time market data feeds
• Portfolio management and reporting
• Regulatory compliance (SEC, FINRA, SIPC insurance)

For a fintech startup or established company wanting to offer trading, building this infrastructure would take years and require navigating a maze of financial regulations. Alpaca abstracts that complexity away.

The company's clients include trading apps, neobanks, and even traditional financial institutions looking to modernize their offerings. The business model is typically transaction-based, earning a small piece of each trade while clients handle the customer-facing interface and marketing.

The "Robinhood Effect" and Market Timing

Alpaca's rise tracks closely with the retail trading boom that accelerated during the pandemic. When Robinhood popularized commission-free trading and fractional shares, it created consumer expectations that trading should be as seamless as ordering an Uber.

But Robinhood also demonstrated the risks of vertically integrated models. The company faced regulatory scrutiny, platform reliability issues during volatility, and the immense cost of building and maintaining trading infrastructure.

This created an opening for infrastructure players. Why should every neobank or fintech app rebuild what Robinhood already built? Especially when Alpaca can provide it as a service.

The market has validated this approach. According to the company, Alpaca now powers trading for millions of accounts across its client base. The Series D funding will be used to expand internationally, develop new products like crypto and options trading, and potentially pursue strategic acquisitions.

Counter-Perspectives and Risks

Not everyone is convinced this model is sustainable long-term:

Margin Compression: The commission-free trading model has squeezed brokerage margins across the industry. If Alpaca's clients are competing on price, that pressure eventually flows upstream to the infrastructure providers. The company will need to demonstrate it can maintain healthy margins as volume grows.

Regulatory Headwinds: The SEC has been scrutinizing payment for order flow (PFOF) and other practices that enable commission-free trading. Any regulatory changes that impact the economics of retail trading could affect Alpaca's business model.

Concentration Risk: If a major client like a large neobank decides to build their own infrastructure (as some have), Alpaca could face significant revenue impact. The company needs to maintain sticky relationships and continuously demonstrate value beyond just the API.

Competition from Big Tech: Major platforms like Apple and Google have shown interest in financial services. While they currently partner with established players, nothing prevents them from building or acquiring their own infrastructure eventually.

The Bigger Picture: Financial Services as Platforms

Alpaca's success reflects a pattern we're seeing across financial technology: the unbundling of traditional financial services into modular components that can be mixed and matched.

Just as companies now plug into Stripe for payments, Twilio for communications, and Auth0 for authentication, they're increasingly plugging into specialized providers for banking, lending, and now trading. This lowers the barrier to entry for innovation but also creates new dependencies.

The $1.15 billion valuation suggests investors believe this infrastructure layer will capture significant value as financial services continue to digitize. The question is whether this represents a durable competitive advantage or a temporary arbitrage opportunity before consolidation or vertical integration reshapes the landscape again.

For now, Alpaca's funding round signals that the plumbing of modern trading infrastructure has become a substantial business opportunity—one that could determine which companies get to offer trading to their customers and which don't.