The archive · Money & Fintech · Financial decision · 2013–2017
Robinhood confirms $110M Series C at a $1.3B valuation, joining the unicorn club
Zero-fee trading app Robinhood raised $110M from DST Global at a $1.3B valuation after reaching 2M users with 17% monthly growth in Gold.
Robinhood
What the business is
Robinhood is a commission-free stock-trading app that makes money through Gold subscriptions (instant deposits and margin), order-flow rebates and interest on idle cash rather than charging per trade.
Starting capital：A $110M Series C announced on 2017-04-26 at a $1.3B valuation, led by DST Global with NEA, Index Ventures, Ribbit Capital, Thrive and Greenoaks; about $176M raised in total.
How it started
Robinhood got its start in 2013 as a zero-fee stock-trading app for younger, less-wealthy users, run by a lean engineering team instead of a brick-and-mortar brokerage network. Before this round it had raised about $66 million — including $50 million from NEA in early 2015 — and launched a premium Gold tier with instant deposits and margin trading to answer the standing question of how a free broker would make money.
What happened
By April 2017 the bet looked validated: Robinhood passed 2 million active users (up from 1 million in October), was adding about 140,000 accounts a month — more than E*TRADE added in all of 2016 — and had processed $50 billion in trades, saving users an estimated half-billion dollars in commissions. Gold, priced from $6 to $200 a month depending on borrowing power, was growing 17% month over month, supplemented by order-flow rebates and interest on idle cash. On 2017-04-26 the company confirmed a $110M Series C at a $1.3B valuation led by DST Global, with NEA, Index Ventures, Ribbit Capital, Thrive and Greenoaks participating, and launched a referral program that gave each side a free share of stock. The money was earmarked for doubling down in the US after expansion abroad proved harder: a planned China launch through Baidu Finance was abandoned as the regulatory climate shifted, and progress with regulators in Australia was slow.
How it ended up
TechCrunch declared Robinhood had joined the unicorn club, and co-founder Baiju Bhatt framed the round as proof that a finance company could grow like an internet company — with Gold answering how it would make money. The 80-person company said it would add products and services and hire across every department in Palo Alto to keep attacking incumbents like Charles Schwab that were cutting their own fees in response.
Background
Robinhood was founded in 2013 on a bet that stock trading could be free: a simple mobile app, no commissions and no minimums, run by engineers instead of a branch network, aimed at younger Americans the big brokerages ignored. The perennial objection was revenue — how does a free broker make money? — and by April 2017 the company had an answer: a Gold subscription tier, margin and interest on idle cash were growing fast enough that DST Global led a $110M Series C at a $1.3B valuation.
The numbers behind the round: 2 million active users (doubled since October), roughly 140,000 new accounts a month — more than E*TRADE added in all of 2016 — and $50 billion in trades processed, which co-founder Baiju Bhatt said had saved users about half a billion dollars in commissions. Gold subscriptions, priced from $6 to $200 a month, were growing 17% month over month.
The cash was earmarked for doubling down in the United States after expansion abroad stalled: a China launch planned with Baidu Finance was dropped as the regulatory climate shifted, and progress with regulators in Australia was slow. The company also launched a referral program that gave each side one free share of stock from a set including Facebook, Apple, Ford and General Electric, and faced rising competition as Charles Schwab cut its own fees.
What has to be true
- The product attacked an entrenched fee: making trades free on a phone created growth so fast that the company added more accounts a month than E*TRADE added in all of 2016.
- Gold answered the revenue objection with a subscription, margin and interest model, so investors could finally see how a free broker makes money.
- DST Global's persistent courtship — calling monthly — showed growth-stage capital believed in the model enough to lead at a $1.3B valuation.
- Staying lean at 80 people and US-focused after the China retreat kept the cost structure that made free pricing sustainable.
What can be applied
Free can be a moat, not a giveaway, when subscriptions and margin monetize the audience: Gold's growth is what answered the revenue question at the $1.3B round.
Aftermath
As of 2017-04-26 Robinhood had joined the unicorn club at a $1.3B valuation with about $176M raised in total. The Series C was earmarked for new products and services and hiring across every department at the Palo Alto headquarters, while Bhatt stressed the need to keep clamping down on fraud, face Schwab's fee cuts, and educate first-time investors about the risk of betting real money. No later outcome was established in the sources for this entry.
Sources
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