Now valued at $ 5.6 billion, the free stock trading application and the Robinhood cryptocurrency exchange is beginning preparations to go public. Only a year and a half ago, it was still largely off the radar. But then it raised a Series C of $ 110 million with a valuation of $ 1.3 billion in April 2017 and then, a year later, it obtained a Series D of $ 363 million, both led by the Russian-backed firm DST Global. Combined with the growth of its premium subscription to operate in margin called Robinhood Gold, the startup now has the firepower and revenues to make a viable debut on Wall Street.
Today during the talk of Robinhood president, Baiju Bhatt at TechCrunch Interrupt SF, revealed that his company is on the road to an initial public offering and has begun the search for a CFO. It also undergoes constant audits of the SEC, FINRA and its security team to make sure everything is kosher and closed.
The CFO could help the five-year Silicon Valley startup become the cheapest alternative for young people. E * Traditional traders and stockbrokers. They would also have to convince potential investors that, although the prices of cryptocurrencies are in recession, allowing people to exchange them for cheaper than competitors like Coinbase is a powerful user acquisition funnel.
Robinhood now has 5 million customers tracking, buying and selling stocks, options, ETFs, receipts from international companies and crypts such as Bitcoin and Ethereum. That's twice as many customers as its current competitor E * Trade despite having 4,000 employees compared to Robinhood's # 250.
The startup has raised a total of $ 539 million to date from prestigious investors like Andreessen Horowitz, Kleiner Perkins, Sequoia and Google & # 39; s Capital G, allowing you to launch products quickly before your rivals can react. This rapid increase in valuation can go to the heads of some founders, or crush them under pressure, but Bhatt cited the "friendship" with his co-CEO Vlad Tenev as what keeps him healthy.
The startup has three main monetization flows. First, it generates interest on the users of money that they keep in their Robinhood account. Second, it sells order flow to stock exchanges that want more liquidity for their operators. And it sells Robinhood Gold subscriptions, ranging from $ 10 per month for $ 2,000 in additional purchasing power to $ 200 per month for $ 50,000 in margin operations, with an annual percentage rate of 5 percent charged for borrowing . Gold increased its number of subscribers by 17 percent per month earlier this year, showing the potential to offer free exchanges and then charge for additional services.
But Robinhood also encounters renewed competition, as both startups and the wise holders above. The European banking application Revolut is building a stock market operation without commissions, and the startup Y Combinator, Titan, has just launched its application that allows it to buy a managed portfolio of leading shares. The financial giant JP Morgan now offers its customers 100 free transactions in the hope of not being undermined by Robinhood.
Regarding cryptography, Coinbase continues to grow in popularity despite its rates of 1.4 percent to 4 percent in exchanges. It is rapidly expanding its product offering and the two new fintech companies are destined to continue crashing. Robinhood may also be suffering from the cryptographic crisis, which probably discourages the conventional public from getting rid of cash chips after seeing that people lose fortunes when the prices of Bitcoin and Ethereum fell this year.
There is also the persistent risk of a breach of security that could tank the Robinhood brand. Meanwhile, the startup uses software-based systems, both human and third-party, to moderate its cryptographic chat rooms to ensure that pumping and dump schemes do not fire. Bhatt says he is proud to make the cryptocurrency more accessible, although he did not say he felt responsible for the price drop, which could mean that many users of Robinhood Crypto have lost money.
Fundamentally, Robinhood is using software to make the common but costly behavior of stock trading much cheaper and more accessible to a wider audience. Traditional banks and brokers have large costs for offices and branches, commercial executives and television commercials. Robinhood has managed to replace much of that with an efficient engineering team and a viral application that grows on its own. Once you find your CFO, that could give you an efficiency and growth rate that has made Wall Street see green.