Robinhood Markets Inc. is set to be valued at about $5.6 billion
in a new funding round, according to people familiar with the matter, a
fourfold increase in just one year that reflects the stock-trading app’s
soaring popularity among millennials.
The Silicon Valley startup is in the
final stages of securing around $350 million from a group of investors led by
Russian firm DST Global, according to the people familiar with the fundraising.
DST led Robinhood’s last funding round a year ago, which valued the company at $1.3 billion.
A Robinhood spokeswoman declined to
The exploding valuation puts Robinhood among the top 15
highest-valued private technology companies in the U.S.,
representing an ambitious bet by investors that the firm can capture a sizable
piece of the financial-trading market.
Robinhood’s three-year-old app has amassed more than four million users—roughly
doubling from the prior year—by offering free stock trades that undercut even
discount brokers that charge small fees.
The question is whether Robinhood can
convince enough of its users to pay for premium services, such as “Gold”
subscriptions that start at $6 a month for the ability to trade after hours and
borrow capital. Robinhood also makes money on interest held in client cash
accounts as well as by selling client trades to market makers.
As of last year, the median age of
Robinhood’s users was around 30, meaning they are less likely to have ample
cash in spare accounts to spend compared with older clients at big brokerages.
The company is banking that the younger investors’ assets will grow over time,
and that it will be able to sell them additional services. Robinhood has sought
to keep costs low by shunning marketing and reducing overhead.
Investors also see opportunity in
Robinhood’s recent introduction of trading in cryptocurrencies like bitcoin,
according to a person familiar with the investment. Those trades are also
At about $5.6 billion, Robinhood is already valued at a third of E*Trade Financial Corp. ,
which has a market capitalization of $15 billion. For investors in this latest
round to earn a solid return on their investment they will be betting that
Robinhood can approach that valuation.
Robinhood was founded in 2012 by two 20-something
Stanford University math graduates, Vladimir Tenev and Baiju Bhatt. Now in
their 30s, the founders have said they were inspired by the Occupy Wall Street
movement in 2011 to make financial services accessible to everyone regardless of income.
here for the original article from The Wall Street Journal.