Click here to view this article on with citations.
FinTech giant Robinhood has been on the money with its no-fee stock trading model. During a time of trading volatility, Robinhood is dominating the market in both company valuation and its user base.
Financial experts now predict a rise in mergers and acquisitions to stabilize the company’s path to an IPO in the next year.
Company Trajectory and Funding
Founders Baiju Bhatt and Vlad Tenev founded Robinhood in 2013. While competitors target high-net-worth individuals, Robinhood’s no-fee stock trading model and user-friendly mobile app, effectually democratizing trading to the public.
Since its launch, the company raised over $1.7 billion in funding, leading to an $11 billion valuation and roughly 10 million users. Early growth relied on an active younger audience and a diverse revenue stream. This includes revenue interest in cash-held accounts, trades placed and fees from its associated debit card.
The Seed funding round raised $3 million, led by GV, Index Ventures and Andreessen Horowitz. Sequoia Capital and Kleiner Partners represent a group of investors that raised additional capital.
Late-Stage funding raised $200 million led by follow-up investor Sequoia Capital, with another $200 million from D1 Capital Partners.
Prompted by Competition
Unlike competitors which include SoFi, Stripe and E-Trade, Robinhood has not made many early-stage investments or acquisitions. In order to remain competitive, Robinhood will likely expand into new offerings and partnerships.
Recently, SoFi announced it will acquire payment software company Galileo, which provides back end services to Robinhood. The move could push Robinhood to develop in-house services or find them through another acquisition.
Future Expansion
Company revenue in uninvested cash was valued at $2.6 billion at the end of 2019. However, that figure can be negatively impacted by current market’s low interest rates.
In the last year, Robinhood has expanded its management team. Additionally, at the time of writing, the company is currently seeking to fill roles for Corporate Development Manager and M&A Integration. The job description for the former includes creating strategic partnerships to “provide the opportunity for strategic investment or eventual acquisition.” The latter focuses on “integration details critical for acquisition success.”
Robinhood’s growing management, as well as incentives to maintain engaged consumers, is leading the company to operate more independently. It’s likely the move will follow similar digital-based companies Lemonade and nCino’s IPO exit. Financial consumers can expect to see more mergers, acquisitions and partnerships leading up to an IPO in the next 12-18 months.