Despite raising $4 million less than a year ago Currensee raised $2 million more to complete its C round. This brings the total funding in Currensee to a staggering $18.8 million and is not a very good sign. In a market where companies like Alpari and FXCM started with investment of $20,000 and ~$200,000 respectively a $20 million investment is unheard of. Although Currensee is not a broker and operates in a way that actually reduces spreads to its clients (Currensee’s social network serves as a sophisticated IB) it seems that its business model is just not working.
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One of the major issues Currensee is facing is attracting retail clients as it cannot compete with forex brokers on advertising prices. Even when it does manage to attract an investor then it is very limited in how it can make money out of them – clients would need to open a new account with a broker for Currensee to start making money (an existing account is not generating fees to Currensee) and even then, as Currensee demands that brokers reduce spreads to its clients, the proportional rebate it gets is very low. With that in mind Currensee changed its business model over time and now charges 2/20 from clients who follow its Trade Leaders.
Currensee also in my opinion is trying to kill two very different birds with one stone as it tries to appeal to both retail and institutional investors. The retail offering is very straightforward and even attractive but as mentioned above very difficult to market. The institutional offering with the 2/20 model is too very natural to institutional investors however those are still ages away from adopting spot fx as an asset class and pitching hedge funds is probably very difficult.
However it is not just Currensee that is struggling. Since 2009 quite a few forex social networks have emerged yet none of them has actually taken the lead or changed the market as they had hoped. In December 2010 I posted an article titled “Forex social network – not just a buzzword anymore” hoping that the proliferation of social trading technologies would change the forex market for the better. Unfortunately this is yet to happen.