Free stock trading app, Robinhood raised $363 million in Series D funding round that has brought the company to a $5.6 billion valuation.
The investment was announced on Thursday and it makes Robinhood the second most valuable finetech startup in the U.S after online payment company, Stripe.
The round was led by DST Global while Sequoia Capital, Iconiq Capital, Kliener Perkins and Capital G (investment arm of Alphabet) also participated.
The three-year-old Robinhood started off as a simple stock trading application. Since then, the company grew rapidly, overtaking incumbents in one of the oldest Wall Street industries. In just last year, the number of company’s brokerage accounts doubled to 4 million, while its valuation has quadrupled as compared to its last fundraising round.
Investors are really excited as Robinhood has started making a move towards the crypto industry. Last November, the company announced its new products that included a web version of the original Robinhood app, commission-free options trading and most prominently, free Bitcoin and Ethereum trading. And Robinhood managed to do all of this with a task force of less than 200 employees.
“I think the real ‘X Factor’ that made investors even more excited about being a part of Robinhood was seeing our ability to, with a very, very limited workforce, to ship three brand new products in these last six months, while maintaining and growing one of the largest brokerages in the US,” Robinhood’s co-founder and co-CEO, Baiju Bhatt said.
“It’s the only place right now where you can trade crypto, stocks, and options all in one place,” said co-CEO Vlad Tenev.
Robinhood Crypto was launched in February and is currently expanded to ten U.S states. The company is working on the product’s expansion to more states and expects the product to be available country-wide by later 2018.
Coinbase, is currently the most popular and one of the biggest cryptocurrency trading platform in the U.S, handling more than 20 million customer accounts. But, according to Bhatt, it won’t remain the most popular for longer as he forecasts that Robinhood would soon take the lead or become a close rival to Coinbase.
“We expect by the end of the year to be either the largest or one of the largest crypto platforms are there,” said Baiju Bhatt. “But we also really feel we’ll have the absolute best experience for investing in crypto as well – from having a large variety of coins available to a more favourable cost structure – mainly no commissions – to just quality of product.”
Currently, Robinhood offers the trading of Bitcoin and Ethereum only and offers its customers market data tracking for more than 16 virtual currencies including Ripple and Zcash. The company also plans to include more cryptocoins (unspecified) to its platform in near future. Meanwhile Coinbase offers four cryptocurrencies for trading that are Bitcoin, Ethereum, Bitcoin Cash and Litecoin.
Despite of the recent news regarding major Wall Street firm, Goldman Sachs and the parent company of New York Stock Exchange, making their way into the crypto space, Bhatt still feels confident that his company can “unquestionably” achieve its goal to take the position as the leader.
“Robinhood’s product credence has been very impressive,” said Andrew Reed, a partner in Sequoia Capital, one of Robinhood’s new investors. “We invested because we think that Robinhood has the potential to bring its low-cost and user-first approach to revolutionize large portions of financial services.”
Speaking about upcoming crypto regulations, Bhatt is “totally fine” about it as according to him, his company already went through these processes for its original stock-trading product. For example, Robinhood is already a licensed broker-dealer under the U.S Securities and Exchange Commission, which Coinbase is not and is trying hard to become one.
Unlike its competitors, Robinhood has a rather different business model. It does not charge commission for cryptocurrency trading but only for subscription of the Robinhood Gold (premium version). It also collects interest on deposits.
For now, Robinhood plans to continue the non-commission strategy and indicates it will stand firm on the plan.
“We plan on continuing to offer these services for free. There’s no real scenario where we would change that at all,” Bhatt says. “I think we’re pretty relentlessly focused on our mission of making the markets and financial services system more accessible to the broader population, and that’s a pretty good North Star for us.”