In 2014, Robinhood was founded to give the average person a simple and affordable way to buy and sell stocks. The company’s slogan is “Investing for everyone.” They also offer commission-free trading of Bitcoin and Ethereum. Robinhood has been widely acclaimed for democratizing access to the stock market and providing a valuable service at a low cost. But who owns Robinhood? How do they make money? This article will explore some of the more financially-focused aspects of the company so you can get a better understanding of their investments and finances.
Who Owns Robinhood?
Robinhood is a private company that has raised over $130 million in funding from a number of notable venture capital firms. Institutional investors include the likes of Andreessen Horowitz, Sequoia Capital, Union Square Ventures, and DST Global. But Robinhood also has 2.5 million individual investors who have collectively invested in the company, totaling $80 million.
Robinhood currently has 7 full-time employees and is run by Vlad Tenev and Baiju Bhatt as Co-Founders and Ilya Sukhar and Baiju Bhatt as Co-CEOs. The company is privately held and does not publicly release financial information. However, based on the company’s current legal documentation, Robinhood has a current market cap of $1.3 billion.
Robinhood has been operating at a loss since it launched.
How Does Robinhood Make Money?
Robinhood makes most of its money from a commission-free trading commission that users pay in each market they access. Additionally, users who access their app for the first time automatically incur a $10 sign-up fee every time they make a purchase. The company also receives a 2.5 percent management fee for each purchase that the user makes and a trading fee for each trade. Robinhood users can choose to make their purchases and trades with a debit card or a pre-paid card.
Robinhood currently has 24 million users, and by 2020, the company is targeting 80 million users. Investors have taken note of Robinhood’s popularity, and more than $1 billion has been invested in the company by VC firms.
What is Robinhood?
Robinhood is an app available on Android and iOS where you can buy and sell stocks for a small fee, and very little setup is required. The company offers zero-commission trading of stocks. They have five financial products (brokerage, brokerage stock trading, market-making, lending, and investment management).
Robinhood has become a household name, but it is not the first person-to-person trading app. Fundstrat estimates that U.S. stocks are already worth $40 trillion, but the United States has just 40 million households, so each has only $6,000. The market is not easily accessible to most, thus the need for technology like Robinhood. In 2014, Robinhood was the most downloaded app in the Apple Store and, by early 2017, had 2 million active users.
How to withdraw money from Robinhood
As mentioned before, Robinhood uses its network of hardware stores. People can log in and make a purchase. They can then choose to be billed and withdrawn via PayPal, Venmo, bank wire, or another payment method. The transaction fee is 0.25%.
How to Link your bank accounts to Robinhood
If you’d like to keep all your stocks in your portfolio, you can use Robinhood’s services without linking your bank accounts. However, if you prefer having funds available in your bank account, you can use their link to transfer funds between banks.
How much do I pay Robinhood every month?
This varies. When writing this article, there are no recurring charges on the account, but they do charge you a one-time $10 withdrawal fee.
How does Robinhood Work
Robinhood is a stock brokerage app with over 500,000 users. Like many other companies, Robinhood is structured as a B Corporation, a for-profit company that uses the power of its brand also to be a public benefit entity. Robinhood claims that it “provides a modern and convenient brokerage experience to consumers who want to manage their own investments, diversify and monitor their accounts.” Like many other brokerage firms, Robinhood focuses on providing a low-cost alternative to traditional Wall Street brokerages, including TD Ameritrade, E-Trade, and Fidelity.
How Much Money Does Robinhood Make?
The company does not share its financial information publicly, so the best way to understand its finances is to look at its regulatory filings.
What is the business model of Robinhood?
Robinhood has a “freemium” system where users can try it out for free and access more features when they pay a monthly or yearly fee. The platform offers 7 categories of different funds broken down into 5 other accounts for free users: one stock, one ETF, one E*Trade account, one hedge fund, and one individual fund.
The trial period ends when a user chooses a brokerage and changes to the standard pricing, which starts at $9.99 per month.
You can start with either a free or premium account and pay for the products through either Robinhood’s standard pricing or directly with the funds. The Robinhood Premium service gives you the ability to buy a Robinhood Premium Investment account with more shares, access to trades at 1X, and quicker and easier withdrawals.
What’s the plan for Robinhood?
Robinhood raised $112 million in an August 2016 funding round, bringing the total to about $187 million. Their model relies on selling users Robinhood Gold, a paid service that adds features like commission-free trading, no minimum account size, and upgraded customer support. Most users can get a free trial to the Gold service before deciding whether to pay. Robinhood’s original base of users are college students, but they see most of their growth from those over 35. Robinhood’s core appeal is to people who don’t know much about investing, so they aim to make it as easy as possible.
While Robinhood is competing with established financial firms like Fidelity and Charles Schwab, they will not sell investment advice, or at least not directly.
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