Robinhood Announces $280 Million Funding Round
It looks as though Robinhood is right on target once again. Last week, the stock trading app announced that it had closed a $280 million funding round. The Series F was led by Sequoia Capital, who had previously invested in the company. Other participants marked a mix of returning and new investors, including NEA, Ribbit Capital, 9Yards Capital, and Unusual Ventures. Also notable is that the funding round valued Robinhood at $8.3 billion. That’s up from the $7.6 billion valuation the company raised its $323 million Series E at last summer.
The massive round comes at a pivotal time for Robinhood as the FinTech has seen a number of ups and downs over the past year. On the bright side, the company has not only continued to roll out new features stateside — including their Cash Management account, fractional shares trading, and dividend reinvestment (DRIP) — but also announced plans to expand to the United Kingdom. Moreover, along with other trading platforms, Robinhood has continued to see growth in new users. Unfortunately the app has also suffered some setbacks, such as an embarrassing crash that left its customers unable to make trades during key times on two consecutive days. On top of that, the commission-free trading model that Robinhood helped to popularize has now been adopted by numerous discount brokerage firms, leading to increased competition.
In a blog post about the funding, Robinhood offered details about their surge in new users. First the company says that three million funded accounts have been created so far this year. What’s more, half of these new users reported being first-time investors. For what it’s worth, at the time of their service interruptions in March, the FinTech attributed the technical errors to the increased traffic it was seeing from new sign-ups among other things.
Commenting on his firm’s investment in Robinhood, Sequoia partner Andrew Reed said, “Robinhood has made the financial markets accessible to the masses, and in turn, revolutionized the decades-old brokerage industry.” Reed continued, “We’re excited to further our relationship with Robinhood, which we believe is at the beginning of its opportunity.”
Despite fears that the added competition from more traditional brokerages would negatively impact their growth, it seems that Robinhood has remained successful in not only bringing new users to their platform but also assisting first-time traders in making their initial investments. With more cash now lining their coffers, the trick for the FinTech will now be to keep ahead of the curve when it comes to introducing new features — something that’s proving to be an issue as Charles Schwab has already announced its own fractional shares trading platform is on the way. Of course it’s also safe to assume that a portion of these funds will also go into ensuring that Robinhood’s app won’t see anymore unexpected outages. Lastly, it’s also worth considering whether this might be the last private funding round seen from Robinhood as the company has long discussed the possibility of going public. Could that be in the cards for the next year? Perhaps with those negative notes behind them, it just might be.