Freetrade: Adam Dodds
Name: Adam Dodds
Company Name: Freetrade
Date Launched: January 2018
Tell us what your business does:
Freetrade is a next-generation investment app offering free stock trading for the first time in the UK. We’ve built an investment platform that allows our customers to trade stocks and ETFs with no commissions or fees, on a beautiful, intuitive app. Our main target demographic is millennials, but the app is really for anyone who wants to invest with less expense, hassle and friction.
Where did the idea for your business come from?
One of the most interesting lessons I’ve had as an entrepreneur is that if you want to start a new company, move country! Coming in as an outsider, it’s way easier to find gaps and opportunities in the market allowing you to do things better with a different perspective.
I came from Canada and had been investing since I was a teenager. When I arrived in the UK, I was truly shocked by the quality of investment platforms here, in terms of cost and usability. They were all built for middle-aged wealthy guys, without much expectation of good design and little concern about fees.
Eventually, if you don’t like what’s available, you start to wonder whether you should build it yourself – and this was my “light-bulb moment”.
How did you know there was a market for it?
It was incredibly important to us that there was a real product/market fit for our product and that it really solved a deep problem for a lot of people.
Wealth inequality is probably the biggest issue facing UK (and European) millennials and they desperately need an accessible way to build their wealth. A lot of these millennials are also about to be the beneficiaries of a huge wealth transfer from the previous generation and they need an easy way of investing this inherited wealth.
The rapid success of challenger banks also highlighted the appetite from today’s consumers for a new relationship with financial services after 2008. And again the competition is so far behind so we knew there was a solid market for it.
We crowdfunded our business through three funding campaigns and each time we overfunded by a considerable amount. This also provided validation of how much demand and excitement is out there among investors and potential/soon-to-be investors.
What were you doing before starting up?
Before launching Freetrade, I worked at KPMG in corporate finance, specialising in mergers and acquisitions. I've audited about everything on the spectrum, from big banks to boutique stockbrokers.
Have you always wanted to run your own business?
Honestly, no. I’ve always been fairly entrepreneurial, but working in financial services there are a lot of incentives to stick with the established firms (apart from the culture). It’s a big risk to give all that up.
Occasionally, I think if I’d remained in Canada I might have stayed at KPMG. But sometimes an opportunity is too compelling not to go for it.
How did you raise the money?
All of our funding has come from crowdfunding, with three rounds to date. We started (and finished) our latest round just a few days ago: we smashed our £500,000 target in 12 minutes and hit £1m in 28 minutes.
We then completed the round in under 29 hours, as the most overfunded equity offering ever on Crowdcube.
As a company with great product/market fit, crowdfunding was an obvious source of funding. It is in our DNA now, and has played a big role in our marketing.
Describe your business model and how you make money:
Our model is pretty innovative. We price more like a SaaS (software as a service) company than a broker – we offer our basic account for free and then charge a small fee for premium accounts and services (instantly executed trades, etc.).
Unlike a lot of other areas of finance, stockbroking has always been structurally profitable, so we’ve been able cut out a lot of costs, pass those savings on and still have a sustainable business model.
In contrast to a lot of other investment apps, we’re a real stockbroker so we own and operate as much of the stack as possible, rather than going through middlemen. This was harder to do and took more time to create, but it also means that we have a much more solid financial foundation.
What challenges have you faced and how have you overcome them?
Becoming that real stockbroker was probably the biggest challenge. Building a beautiful, user-friendly app is certainly a challenge too, but it’s one that’s in your own hands.
Becoming a fully regulated financial institution means dealing with all the intricate regulations, technology and institutions in the UK system. It’s a dizzying task.
In the end, we got there simply through sheer perseverance and the talent and expertise of an amazing team.
What was your first big breakthrough?
There have been a few but getting our FCA authorisation last year was a big one. That’s what made us a directly authorised stockbroker, on the same footing as all the huge incumbents, and that direct access gives us the ability to truly reshape the business model.
What advice would you give to budding entrepreneurs?
- Work hard, but make sure you’re working on something that’s a problem that needs a solution, rather than a solution looking for a problem – hard work isn’t worthwhile if you build something that doesn’t make a big difference.
- Be flexible to the unexpected – you will plan and you will be surprised.
- Build a culture you’d want to work in.
Where do you want to be in five years’ time?
Running the world’s best stockbroker with millions of millennials across continents using our platform to take charge of their financial lives. From a yacht. Kidding! I prefer Bermondsey.