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The stock trading startup Robinhood announced a $200 million Series G round yesterday, continuing its march through the fundraising alphabet. Robinhood’s updated 2020 funding report:
- May: $280 million raised
- July: $320 million raised
- Yesterday: $200 million raised
Know your brokerage: Robinhood
rose to prominence by offering users a hassle-free signup process,
sleek design, and zero-fee trading. Its latest round of funding values
it at $11.2 billion, up almost $3 billion from May and nearly 9x its
2017 valuation.
What’s behind the growth?
Robinhood is
adding users faster than people who live alone in NYC add house plants.
The company said it surpassed 13 million users in May, 3 million of
which had jumped aboard since the start of 2020. And it’s making money
off trades at a faster rate than its competitors, too.
- In June, Robinhood traders carried out
4.3 million “daily average revenue trades,” a key metric used by
brokerages. That topped TD Ameritrade and Interactive Brokers and
exceeded the combined total of E-Trade and Charles Schwab.
Keep a firm grip on those horses of yours
Robinhood’s key selling point is that it makes trading accessible to a wider range of people. But after a Robinhood user died by suicide
in June when he saw a negative $730,000 balance in his account, critics
pointed out that Robinhood may encourage reckless financial decisions
by overly gamifying options trading.
Looking ahead...Robinhood’s
latest fundraising round has investors wondering when it will finally
go public. But eye-popping user growth ≠ profitability. Robinhood
probably still operates at a loss
as it pumps money back into the company and explores revenue streams
beyond its core brokerage business. Two potential options: retirement
planning and peer-to-peer money transfers. “We believe that if you’re
going to have a single app on your phone, we want Robinhood to be the
money app,” Robinhood’s COO told Barron's.
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