Robinhood is Catching up to Coinbase


via medium

The Millennial crypto app of choice has come a long way!

5 years ago, the stock-trading app Robinhood was rejected by 75 investors — now it’s worth $5.6 billion

How quickly things change! Robinhood is fresh off a new round of funding that will enable it to scale crypto trading all over the U.S.

The series D funding round of $363 million is in the books, and the company’s valuation now sits around $5.6 billion. It’s gunning for Coinbase, and it’s a great alternative that’s cheaper for young first-time crypto investors.

It’s going to use the money to snag new talent, offer more financial-service options — among them a cryptocurrency-trading platform — and spearhead product growth.

Robinhood is a bit like the underdog to Coinbase, that you want to win. At least, that’s how I feel about it. In March, The Wall Street Journal reported that Robinhood, a commission-free stock-trading app, could be valued in excess of $5 billion. Lo and behold, I guess they were right! But let’s look at some numbers provided by CNBC and others:

  • Stock and cryptocurrency trading app Robinhood has doubled its total accounts to 4 million in the past year.
  • The fintech start-up closes a $363 million series D funding round Thursday (May, 10th, 2018), valuing Robinhood at $5.6 billion.
  • “In the next couple of years I think you’ll see Robinhood looking like a full-service consumer finance company” says Baiju Bhatt, Robinhood co-founder and co-CEO.

The round brought in new investors like Kleiner Perkins, Sequoia, Iconiq, and CapitalG, said Vlad Tenev, a Robinhood cofounder.

This means reputable VCs are signing on and it will help Robinhood scale immensely. Coinbase is, however popular, an expensive platform to use. According to Business Insider, Robinhood’s unique value proposition is as follows:

Robinhood’s primary offering is a zero-fee trading app that has taken off among millennials. The company is rolling out a cryptocurrency-trading platform, where users in 10 US states can trade in fiat currencies for digital coins like bitcoin and ether. (Business Insider)

Zero-fee, Millennial, Robinhood feels a bit less like a Silicon Valley profit-orientated startup, and a bit more like an app we can all relate to just as people that doesn’t just want to cash-in on the hype.

Tenev declined to share the number of users trading in cryptocurrencies through Robinhood’s app but said there was a “huge demand” for the service. A huge waiting list doesn’t necessarily translate into a huge customer base quite yet, as Coinbase ramped up their customers in the crypto Singularity of Decemember 2017, Robinhood while nascent, is still suffering from ‘new kid on the block’ status, which is both a blessing and a curse.

Still, 4 million brokerage accounts on its platform — is not nothing! Coinbase be damned, we need better alternatives.

“Cryptocurrency platforms have exorbitant fees, and they’re hard to use,” Tenev said. “I think it’s fair to say that our goal is to build the best product on the market, where users can have all of their investments in one place.”

Interestingly Coinbase isn’t really a direct competitor yet of course, E-Trade Financial, which also has a mobile app, had 3.7 million brokerage accounts. Robinhood is making waves, just as it should be!

“Crypto has certainly added to our growth,” Baiju Bhatt, Robinhood co-founder and co-CEO, told CNBC on a phone interview. “In the next couple of years, I think you’ll see Robinhood looking like a full-service consumer finance company.”
The start-up’s products, which have done $150 billion in volume since their introduction, tend to cater to the “millennial” population, roughly ages 18 to 35. These aren’t people that are necessarily going to play the stock market, however they are enthusiastic about getting their feet wet with crypto and supporting blockchain innovation.

Robinhood’s pilot has been so far limited to about 10 states. The company is rolling out a cryptocurrency-trading platform, where users in 10 US states can trade in fiat currencies for digital coins like bitcoin and ether. While they are certainly rushing, they aren’t skipping steps either. Robinhood released a web platform in November, along with new stock research tools, and announced cryptocurrency trading in February.

Is Robindhood the Discount Financial Platform of the Future?

Robinhood’s core base of users, many of whom do not have the $2,000 in savings required to trade on margin.

The company generates revenue by taking a tiny fraction of a cent per dollar from each trade order as well as collecting interest on customer deposits. In September 2016, the start-up launched a paid subscription service called Robinhood Gold.

The millenial-orientation of this app is what really interests me as it mirrors consumer trends I follow closely in the future of retail. For instance:

“The number of people that own individual stocks on Robinhood is almost a perfect reflection of people’s liquid net worth, which is oftentimes a reflection of the fact that savings rates on the whole in the U.S. are very low.”

In an era where the debt to household income margins are thin, we need to re-think how investing and financial services is going to work for the next era of the Middle Class. If you haven’t noticed, many Millennials and GenZ will have it different in the decades to come. Robinhood in its best case scenario, will be customer-centric in this regard.

This entire trend we know will basically up-end Wall Street and traditional Financial Services and related firms. This is huge! According to Fortune, Robinhood essentially is bucking the model of traditional brokerages — which rely on trade commissions to make money — the three-year-old Robinhood has shown an ability to rapidly overtake incumbents in one of the oldest Wall Street industries.

Millennials are disrupting retail, financial services and banking norms on almost every level. It’s only natural that we’d want a cheaper and easier to access crypto trading component of this. Is Robinhood the ideal? Maybe not, but it’s more viable to our actual wallets than Coinbase.

9 Likes

Wonderful news. I love this.

4 Likes

More competition = better services. At least I hope so.

I am on their list to try crypto, but I’ve got 700k in front of me :open_mouth:

2 Likes

💰 YEN · YouTube ·️ YEN.CAMP 🧠