"Traditionally you would end up with a portfolio with a risk label like medium risk, but it has no real meaning. Instead of giving you an arbitrary number, we give a percentage, so a 15 percent portfolio, that represents what you could lose in really bad year," Adam French, chief executive of Scalable Capital, told CNBC by phone.
"We are able to target that because we dynamically adjust the risk of assets."
Scalable Capital launched in Germany at the start of the year and is looking to further grow across Europe. It has an internal team that narrows down the investment opportunities, and then essentially inputs those into the algorithm. Scalable chooses the "most liquid and cheapest" assets, which are filtered using an algorithm to find the best ones.
So far, the start-up has 1,000 invested clients and is hoping to sign up a lot more now that it has launched in the U.K.
Scalable is coming up against stiff competition, however. Betterment is a larger rival which offers a similar service and secured $100 million funding earlier this year, in one round alone. So far, Scalable has raised around $12.2 million in total. Betterment also reached $5 billion of assets under management earlier this year.
Robo-advisors are on the rise however with much room to grow. Currently, these trading platforms have around $50 billion of assets under management, compared to the $71.4 trillion for the entire fund management industry globally.
And these management firms believe they can help investors through volatile periods of trading. French told CNBC that the company's portfolios were up between 10-12 percent from the June 23 Brexit vote in the U.K. until Friday July 29. The S&P 500 in comparison is around 2.7 percent higher.
"We still had a conservative risk allocation going into Brexit which helped us to outperform someone who has a high equity allocation and a portfolio with a lot of home bias. Both of those helped us do a good job on that day versus what we are benchmarking," French said.