Robinhood: $320 Million Funding And $8.6 Billion Valuation

By Amit Chowdhry ● Jul 15, 2020
  • Commission-free trading company Robinhood revealed that it raised $320 million in funding from new and existing investors

Earlier this week, commission-free trading company Robinhood revealed that it raised $320 million in funding from new and existing investors. The new investors that joined the round include TSG Consumer Partners and IVP.

This investment comes through subsequent closings of a $280 million Series F funding round which had valued Robinhood at $8.3 billion in May. During that time, Robinhood co-CEO Vlad Tenev pointed out that the company was seeing a surge while new investors were joining the service to participate in the drop followed by a rally in stock prices. Between the beginning of the year and early May, Robinhood added 3 million funded accounts.

This investment puts the total for the round at $600 million at a post-money valuation of $8.6 billion — which was first reported by Fortune. With this funding round, the company is planning to invest in scaling the platform, build new products, and accelerate the build-out of operations — including hiring more top talent across all of its offices.

The popularity of Robinhood has largely driven pressure for other brokerages to pursue commission-free trading. E-Trade, TD Ameritrade, Fidelity, and Charles Schwab are all offering commission-free trading.

Last month, Robinhood issued a statement following the suicide of a 20-year-old trader named Alex Kearns. A screenshot on Kearns’ mobile device showed that his account balance on Robinhood was a negative $730,165 cash balance (displayed in red), according to Forbes. But that did not actually represent uncollateralized indebtedness as it was actually his temporary balance displayed until the stocks associated with the assigned options settled into his account. In a note that Kearns wrote before committing suicide, he wrote: “How was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?” 

“Our team at Robinhood has been focused on identifying how we can improve Robinhood’s customer experience, specifically around our option flows involving multi-leg exercise and assignment,” wrote Tenev and co-founder and co-CEO Baiju Prafulkumar Bhatt in a company blog post.

Some of the changes that are being made to the platform for addressing this issue in the future includes determining eligibility (additional criteria and education for customers seeking level 3 options authorization to help ensure customers understand more sophisticated options trading); educational resources (expanding of educational content related to options trading); and user interface (improvements to in-app messages and emails sent customers about multi-leg options spreads and details being added to the in-app history page to help users understand the mechanics of early options assignments).

“It is not lost upon us that our company and our service have become synonymous with retail investing in America, and that this has led to millions of new investors making their first investments through Robinhood,” added Tenev and Bhatt. “We recognize this profound responsibility, and we don’t take it lightly. Our aspiration is to innovate, lead, and go beyond the status quo.”