Robinhood, the commission-free stock trading platform valued at $7.6 billion, again showed itself to be bright spot in the fintech industry as its accounts soared to 10 million.
The seven-year-old Silicon Valley firm is tapping into millennial’s demand for free, easy-to-use mobile services. While much smaller than established behemoths like Fidelity Investments and Charles Schwab, investors are boosting Robinhood’s valuation, seeing it as a play on rising demand from a next generation of users.
“Our mission is to empower this new generation to take greater ownership in their financial future,” Robinhood said on its website.
More than six out of 10 Americans would buy a financial product from a tech company, according to a report by consulting giant Bain. With investors ages 18 to 34, that number rose to three out of every four surveyed.
Robinhood’s platform includes free stock and ETF trading with no account minimums. It raked in $373 million series D funding in October led by Hong Kong-based venture capital firm DST Global, bringing its total raised to $912 million, according to PitchBook. The Series D round gave the company an $8.7 billion valuation.
“Our mission is to empower this new generation to take greater ownership in their financial future.”
Fidelity has the largest client base with 22 million retail accounts and 7 million advisor clients. Charles Schwab, once it completes its acquisition of TD Ameritrade. will have 24 million accounts.
Robinhood’s success in raising funds is one of the few bright spots for fintech investments this year. Venture capitalists spent $28.5 billion in 2019, a 45% decrease from last year, according to PitchBook data. While 10 companies raised $500 million or more funding last year, only three companies scored such mega-deals this year, including Indian payment company PayTM, Atlanta, GA-based microfinance firm Mission Lane and student loan refinancing startup SoFi.
- Robinhood’s long-term strategy is to do an initial public offering, co-founder and CEO Baiju Bhatt told CNBC. “It’s something we think is very much in the future. Being a public company closely aligns with our mission,” Bhatt said at last year’s TechCrunch Disrupt conference.
- Robinhood has been expanding services. In November, the platform’s free trading service was made available in the U.K. It launched Robinhood Crypto last year, offering zero-commission crypto-trading services covering eight coins including Bitcoin, Ethereum, and Litecoin.
- Robinhood is also planning to provide “a competitive interest rate” for customers’ uninvested money in their brokerage account, according to the company blog. The company makes money by lending out clients’ cash, charging for extra services and collecting fees from market makers for stock orders.