The archive · Money & Fintech · Product decision · 2013–2018
Robinhood's zero-fee trading bet survives 75 rejections, reaches a $5.6B round
Commission-free mobile trading got Robinhood rejected 75 times; five years later it raised $363M at a $5.6B valuation and pushed into crypto.
Robinhood
What the business is
Robinhood is a commission-free stock-trading app (later adding no-fee crypto trading) that aims to offer retail investors many financial services at the lowest possible price.
Starting capital：A $363M Series D announced 2018-05-10 at a $5.6B valuation, led by longtime investor DST Global with new investors Kleiner Perkins, Sequoia, Iconiq and CapitalG.
How it started
Vlad Tenev and Baiju Bhatt founded Robinhood and spent five years proving the premise that money could be made without charging for trades. Its first attempt to raise money was rejected by 75 investors, because a free trading service looked like a business with no revenue; the founders' bet was that an app good enough to make investing feel simple would win a mass retail audience anyway.
What happened
The app took off among millennials, and by March 2018 the WSJ reported Robinhood's valuation was heading above $5B. On 2018-05-10 the company confirmed a $363M Series D at $5.6B, led by DST Global with Kleiner Perkins, Sequoia, Iconiq and CapitalG joining. It hired Greylock's Josh Elman as vice president of product and began rolling out commission-free bitcoin and ether trading in ten US states, with Tenev saying crypto platforms had exorbitant fees and were hard to use.
How it ended up
As of the 2018-05-10 announcement, the five-year-old startup had turned the 'unfundable' free-trading idea into a confirmed $363M round at a $5.6B valuation, making it what Business Insider called a formidable contender in fintech stock trading, with plans to expand products and hiring.
Background
Robinhood built a commission-free stock-trading app that took off among millennials, and in May 2018 it confirmed a $363M Series D at a $5.6B valuation — remarkable for a five-year-old company whose first attempt to raise money had been rejected 75 times. The founders, Vlad Tenev and Baiju Bhatt, had bet that removing trading fees and building an app-first experience would win a mass retail audience that traditional brokerages ignored.
The path ran through the rejections: investors saw a free trading service and no obvious revenue model, and passed. The app then grew by word of mouth, and the money story flipped — The Wall Street Journal reported in March 2018 that Robinhood's valuation was heading above $5B, and on 2018-05-10 DST Global led the confirmed $363M round at $5.6B, with Kleiner Perkins, Sequoia, Iconiq and CapitalG as new investors. Robinhood used the capital to hire product talent like Greylock's Josh Elman and to roll out commission-free bitcoin and ether trading in ten US states.
The round made Robinhood a 'formidable contender in the fintech-stock-trading market,' in Business Insider's words, with co-founder Vlad Tenev framing the goal as many financial services at the lowest possible price. When the news reached Hacker News on 2018-05-13 it drew 143 points and 139 comments — an audience that five years earlier had watched investors turn the idea down 75 times.
What has to be true
- The product attacked a real friction — trading fees — and made investing feel like a consumer app, which is why it took off with millennials despite having no obvious revenue model.
- Most of the 75 early rejections came from investors who could not see how free trades would make money; the later $5.6B round was priced on users and growth, not on fees.
- Robinhood kept extending the same lowest-price promise into crypto and other financial services instead of adding fees, compounding the audience advantage.
- The zero-fee design was also a distribution machine: every trade and every headline about free trading recruited the next user.
What can be applied
A 'how will you ever make money?' rejection can be the tell of real disruption: 75 passes did not stop Robinhood, and later investors paid $5.6B for the audience the free product had won.
Aftermath
As of 2018-05-13 the Series D was confirmed and Robinhood was spending it on product expansion and talent. It was rolling out no-commission cryptocurrency trading (bitcoin and ether) in ten US states with more states to come, and Tenev declined to share crypto user numbers while describing demand as huge and the team as 'working as fast as we can.' The company was adding senior product leadership and expanding its product suite toward more financial services at the lowest possible price, with no further outcome — IPO, later funding, or profitability — established in the source.
Sources
- Stock-trading app Robinhood was rejected by 75 investors — now it's worth $5.6 billion
- Stock-trading app Robinhood was rejected by 75 investors — Hacker News
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