Robinhood raises $50M

http://blog.robinhood.com/news/2015/5/4/onward

by benjlang • 11 years ago

80 58 11 years ago

blog.robinhood.com

quotha• 11 years ago

This company is going to put serious pressure on the pretty high commissions that the discount brokers are currently enjoying.

nemo44x2• 11 years ago

But first they will need to offer a few more things:

  -Ability to set limits and stop losses
  -Ability to use margin
  -Ability to buy and sell call and put options
  -Ability to trade after hours
  -Ability to short (likely comes with margin)
  -Ability to set trailing losses
  -A better UI
  -Ability to analyze trades and examine bid/ask spreads

I used Robin Hood a few months back and possibly it has gotten better and I'm sure the overall experience will get better. But since that experiment I cashed out of that account and just use my online brokerage account.

I do look forward to a better experience down the road.

kolencherry• 11 years ago

Stop loss, stop limit, GTC orders were rolled out recently. See below: http://blog.robinhood.com/news/2015/4/23/introducing-robinho...

They've started that they will be releasing margin trading in 2015.

shitlord• 11 years ago

I wish they had an Android app. Hopefully, it's in the works, because I would definitely try it out.

timboslice• 11 years ago

I've been waiting so long for an Android app. It will happen, eventually

droidist2• 11 years ago

They're working on it: https://robinhood.com/android/beta/

72deluxe• 11 years ago

Are Android developers that hard to come by? I can write for Android, if anyone needs it.

atomicmat4• 11 years ago

No, but it's expensive, and it's more cost efficient to iterate on iphone first.

rifung• 11 years ago

I wish you could just trade through their website. I don't understand why they think people would prefer to trade on their phone over their computer.

JDiculous• 11 years ago

I have an Android, and I'm more eager to get the web app. I'm typically in front of a computer during market hours, so I'd rather not have to whip out my phone just to make a trade (especially if I'm day-trading). It's faster and more efficient. I wonder why it's taking so long to make the web app.

kasey_junk3• 11 years ago

This is pure speculation on my part and I have no basis for saying it so take it with a gigantic grain of salt. It is important to remember when someone offers you a free service you are NOT their customer. So you need to determine who is the customer.

In this case the obvious, though maybe not correct, inference is that their customer is the order execution companies that they are selling their order flow to. If that is the case, it is in robinhoods best interest to make that order flow as "dumb" as possible such that it doesn't make order volume go down.

It might be that it is a tactical decision not to provide high fidelity trading interfaces (via the web or otherwise) because those make their product (you) less valuable to their customer (the order routers).

Again, purely speculation, but it seems a reasonable hypothesis.

kolev• 11 years ago

I put $1,000, which is not stuck in there as I don't have an iOS device at my disposal anymore. I can understand that writing a mobile app for Android is an extra effort, but their app is not that complicated! It's a lame excuse and we're allowing companies not to develop on the biggest mobile platform in the world. I think iOS hackers should boycott non-Android platforms as well as a matter of principles (like accessibility, equality, free choice, etc.) and not be selfish and allow this negative trend to continue!

soldergenie• 11 years ago

From what I can see, the only way they differentiate themselves from their well established competitors is by not charging commissions. Yet I don't see how their costs of running a brokerage would be lower than their competitors, and they don't seem to have any revenue streams their competitors don't also have. So how will they eventually be profitable? Discount brokerage isn't an especially profitable industry to begin with

Competing on price alone doesn't seem like a good strategy to creating a valuable company.

towelguy• 11 years ago

On a business where the objective is increasing your wealth?

With Robinhood, you will be able to buy and sell US listed companies, ETFs, and many of the largest companies in your home country.

This also looks like a nice addition.

riffraff• 11 years ago

If they charge less than the competitors, they earn less but that doesn't mean they are not viable.

I.e. transferwise.com charges a ton less than my bank to send money with a conversion. My bank could charge less and not lose customers, but it will probably take them some decades to do that.

PublicEnemy111• 11 years ago

I was coming here to say exactly that.

from: http://techcrunch.com/2015/05/07/free-stock-trades/ > Tenev says Robinhood is charging a 3.5% fee to trade on margin in a private beta of the feature

It looks like they're planning to monetize via margin. That would work great if the economy was perpetually in an upswing... but I don't think they would have survived in the great recession.

Not to mention the irony of Robinhood making margin calls.

poopsintub2• 11 years ago

They take a pretty good fee to withdraw money. I'm not sure that would be a decent part of their revenue, though.

this_user• 11 years ago

They are likely also making money by selling the customer's order flow to large institutions/HFT firms who will happily pay significant sums for this. This is something most other retail brokers are also doing and have been doing for a while. The result is that you as the customer are paying indirectly by getting screwed on your fills.

http://en.wikipedia.org/wiki/Payment_for_order_flow http://blogs.wsj.com/moneybeat/2014/06/13/payments-to-big-br...

bt3• 11 years ago

Not only this, but I get the feeling that Robinhood is bypassing some corporate social responsibility (and possibly fiduciary duties) if they begin suggesting/ allowing first time investors to start using margin accounts.

This is just fuel on the fire of uneducated first-time investors being lured by "$0 commissions".

__john• 11 years ago

If I understand it correctly robinhood makes their money on the spreads[0] they offer (see point number 3). So much so that in many cases it's better to use a broker like interactive brokers or etrade.

[0] https://news.ycombinator.com/item?id=6907334

kasey_junk3• 11 years ago

Depending on what you mean by "spreads" that is probably not correct.

One thing they are certainly doing is selling their order flow. Large HFT firms like Knight & Citadel pay brokerages like Robinhood for the privilege of routing retail orders. You can find the documents in their "Disclosure Library".

https://brokerage-static.s3.amazonaws.com/assets/robinhood/l...

http://public.s3.com/rule606/apex/APEX_1Q2015_Rule606.pdf

It's important to note that it is likely that all retail brokers are doing this, so this is not how Robinhood is able to offer no fees.

Either they have significant cost advantages (new infrastructure/cheaper labor etc) or they have better deals with the people executing their orders.

[edit] Also http://external.s3.com/rule606/apex/APEX_2015Q1Disclosure.pd...

atomicmat4• 11 years ago

Recently talked to one of their shareholders. Sounds like they're not focused on monetization right now. They're #1 aim is to acquire consumers (millenials preferably), gain scale, and then figure it out. Note that by acquiring millenials they're not gaining share from traditional brokers, they're more likely to expand the pie and get new people to trade. Hopefully these people are quite sticky, and will trade bigger and bigger amounts, by which point they'll be able to offer premium monetization options.

It's a long term play. They're going to be loss-making for a while. Their VC backers can handle it. It's like Transferwise (similar backers) who launched three years ago and who are still loss-making even though they've already processed >$1 billion in transactions...

kordless• 11 years ago

#1 aim is to acquire consumers (millenials preferably), gain scale, and then figure it out

The definition of a bubble, if there ever was one.

ShinyCyril• 11 years ago

That's interesting that Transferwise are making a loss given that they are charging a commission. What is their monetisation strategy?

jonheller• 11 years ago

Reminds me of Zecco and another company I'm forgetting the name off. Offered free trades for a year or two and then charged the same fees as the rest of them.

INTPnerd2• 11 years ago

Just so you know, Zecco and TradeKing have merged, so now people just use the TradeKing website. They are still one of the cheapest online trading services. Their website and customer service are great.

curiousphil• 11 years ago

This assumes that the other competitors aren't vastly overcharging for their services. The current commission structure for most brokerages is still based on a time when computers couldn't execute a trade nearly instantly and a lot of paper and people were involved with the execution. There's really no good reason for a trade costing between $5-10 dollars to execute today. So far my experience with the Robinhood app has been pretty great. When you aren't trading thousands of dollars per trade, not having a commission is pretty dang nice and removes a good sized barrier for light hobbyist investors like myself.

themartorana• 11 years ago

Completely agree. I'm playing with investing ideas with under $2000. I could run through 10% of my money in 20 trades.

This has nothing to do with the validity or intelligence behind being an armchair day trader. This is entirely about my ability to participate in the market in a small way, without trade fees having a significant enough impact to wipe out short-term gains completely.

lhnz• 11 years ago

When are they coming to the UK?

memossy• 11 years ago

Saving $2.4m on $500m traded implies that typical trade < $300.. Looks like they want to make back the money they lose on margin trading, margins for them will likely not be that great as a result - a good corollary is spread bet providers in the UK tbh

quan• 11 years ago

My experience with Robinhood has been completely negative. I recently worked on a loan and needed to show the Robinhood transfer to my bank. Since there's no web interface you can't get the current month printout. There's no phone number to call, and it took them 3 days to reply to the zendesk ticket only to say they can't do anything and I have to wait til end of the month. The actual statement is only available a week after beginning of the month. Never again. I closed out my account and deleted the app.

jackreichert• 11 years ago

It used to be available on their site, but they do have a number: http://online-brokers.credio.com/l/128/Robinhood

Not cool that they took it off.

pfista• 11 years ago

I've had issues trying to get statements as well, but they've since improved that and you can access all your statements in the app.

That said, this is one of the most solid apps I've ever used. I don't think it has ever crashed or shown any strange UI bugs.

zwtaylor2• 11 years ago

I agree that a mobile-only interface is just not enough when you're dealing with something as intricate as investing. They've tried to abstract away the many layers of paperwork from investing/trading, but it leads to things like the problems you've had.

I tried Robinhood for a few days and started to feel that it was turning investing, something that should require significant forethought and research, into a bit of a toy. The fact that it specifically targets a younger millennial audience who most likely have no experience investing makes me a little uneasy.

That's not to say the app isn't well designed and good-looking, but that a mobile-only app just might not be the best medium for investors.

INTPnerd2• 11 years ago

I'm not seeing your point about targeting a younger audience. A great investor can come from a combination of being self taught and from experience. The earlier you start the better better chance you have to make mistakes, learn from them, and get good at it. When you are young, you probably don't have much money to loose anyway. Not investing until you are older, and have a substantial savings is when lots of money really gets lost or else they are completely depended on financial advisers, but still not knowing which of them to really trust.

Ryel• 11 years ago

Maybe they can use some of that $50M to fix their broken password recovery.

dataker• 11 years ago

It's quite interesting they're moving to Australia after the US.

Usually, companies goes to EU first while moving overseas, but it appears it's becoming more and more bureaucratic, so why spend its limited resources?

semerda2• 11 years ago

Australia is a financially savvy market. Most people I know there trade stock and have at least 1 investment property. Great move by Robinhood!

semerda2• 11 years ago

"Stop paying up to $65 for every trade." I am assuming this is in reference to 10K+ trades not the average trade that last time I checked was around $19.

Either way Congrats on the big raise. Good move on focusing next on a financially savvy market like Australia!

physcab• 11 years ago

I love Robinhood because it has made trading so accessible to me. I started out by putting in $100 and as I gained confidence and started doing more research, I started adding more funds. I've tried many services in the past - Schwab, ETrade, Scottrade, and they all felt a bit too "heavy-weight" for me. I don't have significant amounts of income invested, I just want something low friction that I can use as a learning tool. I have friends who are more "serious" investors and they don't use Robinhood, but I see Robinhood satisfying a different use case at the moment.

humbleMouse• 11 years ago

This is sweet. Short term trading with no commission costs? Great.

Robinhood raises $50M

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