Robinhood is a stock trading app rapidly growing in demand. After securing major new investment, the company could now become the world’s biggest cryptocurrency platform
It’s not exactly robbing from the rich and giving to the poor, but stock trading app Robinhood wants to bring the investment markets closer to the people.
And having raised $363m in a new investment round that now values the company at $5.6bn, it is clearly gaining a wider appeal – prompting the company to look towards expanding its cryptocurrency-specific services.
But what’s the story behind the fintech start-up named after Britain’s most famous outlaw, with a “mission of making the markets and the financial services system more accessible to the broader population”?
Knocked back 75 times
Robinhood first launched in the United States in December 2014 despite founders Vladimir Tenev and Baiju Bhatt previously being rejected by 75 investors when trying to secure funding.
After the setbacks, the business partners managed to raise $176m in venture capital funding and later received $3m in seed capital from investors including Google Ventures, Andreessen Horowitz, Index Ventures, It Ventures, Social Leverage and Elefund.
In 2018, it completed a Series D funding round of $363m and doubled its users to four million from the previous year, while turning it into the second most valuable fintech company in the US.
Did someone say commission-free?
The company, based in Palo Alto, California, started life as a tech-driven brokerage platform that cut out the overheads and enables users to stay on top of their stocks with real-time market data.
Not only does the mobile app offer a commission-free platform, but it also allows its users to buy and sell US-listed stocks and exchange funds with no investment minimums, maximums or withdrawal limits.
Speaking to Fortune magazine this week, Robinhood co-CEO Mr Bhatt said: “We plan on continuing to offer these services for free. There’s no real scenario where we would change that at all.
“I think we’re pretty relentlessly focused on our mission of making the markets and the financial services system more accessible to the broader population, and that’s a pretty good North star for us.”
Entering the cryptocurrency world
In February this year, the company launched a platform that enables users to trade cryptocurrencies – named Robinhood Crypto.
It currently offers market data on 16 cryptocurrencies, such as Bitcoin, Ethereum, Litecoin, Ripple and Bitcoin Gold.
For the time being, it’s not allowing users to withdraw cryptocurrencies to external wallets or deposit cryptocurrencies from external wallets to Robinhood Crypto accounts.
However, there are plans to introduce this feature soon.
Mr Bhatt said: “We expect by the end of the year to be either the largest or one of the largest crypto platforms out there.
“But we also really feel we’ll have the absolute best experience for investing in crypto as well – from having a large variety of coins available to a more favorable cost structure -mainly no commissions – to just quality of product.”
The platform was originally available in California, Massachusetts, Missouri, Montana and New Hampshire.
It later expanded to Mississippi, Colorado, Wisconsin and New Mexico, and will no doubt be adding more states to its list – with plans in place to do so once it receives the correct licences.
“We’re working through regulatory processes to bring Robinhood Crypto trading to more states,” the company confirmed over Twitter.
The only way is up
Not surprisingly, Coinbase and Circle are still the favourites to trade Bitcoin in the US with 20 million users, and making $1bn in annual revenue – Robinhood is not too far behind.
The platform has now surpassed E-Trade Financial, which currently has 3.7 million account users.
The Robinhood business model is based on taking a small share of a cent per dollar from each trade order as well as collecting interest on customer deposits.
It also launched a paid subscription service in September 2016 called Robinhood Gold, which is a margin account. For $6 a month, subscribers are given extended trading hours and further buying power.
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