Investing in DriveWealth, a Pioneer and Leader in Embedded Investing

Individual retail investors represent a growing share of investment activity, accounting for 25% of stock market activity in 2020—compared with 10% in 2019—and 30% of overall market activity in Q1 2021. During this period, retail investors in the U.S. generated about as much equity trading volume as mutual funds and hedge funds combined.

This surge is driven in part by the COVID-19 pandemic, as many people have been largely homebound over the last year and a half with time to devote to their finances. Additionally, a new survey has revealed that nearly half of those receiving stimulus checks invested some of their most recent payment in the stock market. Even prior to the pandemic, however, a myriad of new fintech apps were “democratizing” the market by lowering the cost of financial services and making them more readily accessible. Many of these startups promote financial inclusion and education, offering no-commission trades and new technologies that enable people to take control of their finances.

For all the new activity, however, there is still significant unmet need in key areas of the stock market. While companies such as Robinhood, Schwab, and Fidelity have enabled retail trading with their in-house brokerage capabilities, smaller institutions have been unable to build these capabilities. Additionally, the democratization of the market has failed to reach lower-wealth individuals who are unable to purchase even single shares of the highest-priced stocks.

We believe that DriveWealth's brokerage solution is changing that paradigm. Founded in 2012 and based in Jersey City, NJ, DriveWealth is a pioneer in “fractional-share investing,” a practice that enables investors to buy a portion of a share of a company’s stock. DriveWealth’s solution also enables retail investors to “penny-cost average” themselves into a diversified portfolio―that is, to automatically invest a set sum in penny stocks (or fractional shares thereof) at regular intervals, rather than trying to time the market in order to buy low.

As a B2B2C “embedded investing” solution, DriveWealth’s partners include fintechs, traditional financial institutions, and retail brands, among others. The company provides its patent-pending Fracker technology within a comprehensive infrastructure, enabling its partners to embed investment capabilities into their own consumer applications. In accordance with DriveWealth’s belief that “buying Starbucks stock should be as easy as buying a latte,” the company streamlines the end-user experience and enables frictionless account opening so users can start investing immediately.

DriveWealth’s end-to-end technology solution uses application programming interfaces (APIs) to make it easy for its partners to implement innovative experiences and connect with their customers with the markets in new ways. However, the company provides its partners with more than just a technology layer: a dedicated team of experts also supports the integration process through product design, development, launch, and post-launch support.

DriveWealth’s leaders have deep experience in the investment management space. Founder and CEO Bob Cortright, a past E&Y Entrepreneur of the Year, previously co-founded FX Solutions LLC—an online foreign exchange brokerage company that was named to the Inc. 500 list of fastest-growing private companies for three consecutive years—and Financial Labs LLC, a high-frequency principal trading business that was purchased by Bank of America in 2006. President Julie Coin was previously Chief Operating Officer at both Galaxy Digital, a broker-dealer that seeks to bridge the crypto and institutional worlds, and E*Trade Retail Services, a subsidiary of Morgan Stanley that offers an electronic trading platform to trade financial assets.

DriveWealth currently works with more than 100 global partners, including Square’s CashApp, Moneylion, Revolut, Stake, and Digit (a Citi Ventures portfolio company). It also partners with top digital wallets and neobanks that serve millions of users in multiple countries, including South Korean neobank Toss, Mexican neobanks GBM and Flink, Uganda-based payments company Chipper Cash, and Chile’s mobile-first investing platform Racional App. During the third quarter of 2020, DriveWealth experienced a 34% increase in the number of trades placed on the platform year-over-year.

In December 2020, DriveWealth acquired Cuttone & Co., one of the largest independent brokerage firms on the New York Stock Exchange (NYSE) trading floor. Through Cuttone―now called DriveWealth Institutional―partners can access information, insights and order types that are only available to floor brokers.

Citi Ventures recently participated in DriveWealth's Series D round, and we are looking forward to supporting the company’s continued progress in the embedded finance sector.

For more information, contact Luis Valdich at luis.valdich@citi.com or Thompson Barro at thompson.barro@citi.com.