Popular stock-picking app Robinhood announced Monday that it is raising a Series F funding round that will see the company valued at $ 8.3 billion. The $ 280 million cash injection is being led by Sequoia Capital and comes at a time when Robinhood is experiencing a surge in new customers and business activity during the pandemic.
According to Co-CEO Vlad Tenev, Robinhood has added 3 million funded accounts since the beginning of the year, while its daily trading volume for March was three times its fourth-quarter average.
“The purpose of the capital increase is to allow us to be flexible and strategic, and continue to invest in the platform,” Tenev said in an interview with Fortune.
Tenev described the episodes as a “curve ball” resulting from unexpected volume, and said Robinhood has since improved its technological capabilities.
The $ 280 million Series F round comes after the company raised $ 323 million last July, which then valued the company at $ 7.6 billion. The new valuation figure of $ 8.3 billion represents the Series F investment.
Bloomberg and others reported rumors about the new round of funding in mid-April. According to anonymous sources cited at the time by the Financial Times, the terms of the new financing include provisions that would protect investor holdings if Robinhood goes public or sells at a price lower than the Series F valuation. The company declined. to comment on this matter.
Numerous financial publications predicted last year that Robinhood would launch an IPO in 2020. The company, founded in 2013, is especially popular with millennials for its mobile-first design and commission-free business policy, which has recently been imitated by brokerage houses. conventional bag.
But despite the rumors surrounding Robinhood, questions remain about how it will make money. A portion of its income comes from investing customers’ cash balances, but since Federal Reserve rates have fallen close to zero, the company may have a hard time making significant money on this front. Meanwhile, a report from last year said that more than half of Robinhood’s revenue comes from so-called “order flow,” a controversial practice in which brokerages receive rebates from market makers and other third parties who fulfill their orders.
Tenev declined to comment on whether Robinhood is profitable, but said the company enjoys diversified revenue streams and forecast “solid growth” for the next year. He noted that the company’s $ 5-a-month premium service known as Robinhood Gold is an additional source of income, as well as the money the company collects from stock loans and debit card fees from its companies. customers.
Tenev also noted that Robinhood’s imminent UK launch is off to a promising start, pointing to a waiting list of more than 150,000 customers who have signed up for the service. He also cited the recent launch of new products like fractional shares and a cash management account as evidence that the company has overcome recent mistakes.
The coronavirus-related economic turmoil also appears to have benefited Robinhood in the form of an increase in trade and, according to Tenev, an opportunity to expand hiring. He also noted that net deposits to Robinhood in March were 17 times their monthly average.
The latest round of funding also brought in contributions from previous and new investors, including NEA, Ribbit Capital, 9Yards Capital, and Unusual Ventures. This is the first round of Robinhood directed by Sequoia.
“We are excited to expand our relationship with Robinhood, which we believe is at the beginning of its opportunity,” said Andrew Reed, a partner at Sequoia in a statement.
