Robinhood – the US-based stock trading application that allows investors to trade on a fee-free basis, has just raised a further $323 million in Series E funding. The latest funding round now gives the company a current valuation of $7.6 billion. The series E funding process includes a range of venture capital firms, including the likes of DST Global, Thrive Capital, and NEA.
While it was originally thought that the platform would raise in the region of $200 million, Robinhood exceeded expectations by a mere $123 million. Launched in 2013, those behind the fundraising campaign note that Robinhood will utilize the funds with the view of “democratizing finance for all.”.
Fee-Free Trading
For those unaware, Robinhood is has been somewhat of a revolutionist in the online brokerage space, not least because it has stuck to its word of offering commission-free trading throughout its 6-year lifespan. This has subsequently lead to an industry-wide knock-on effect, with traditional online brokers forced to reassess the fees they charge retail clients.
Nevertheless, the latest valuation – which takes the California-based company to $7.6 billion from its previous 5.6% mark-up, is welcome news for financial backers after its recently failed launch of its US checking account services.
Regulatory Attention on Robinhood’s Checking Account
At the tail-end of last year, Robinhood announced that it would be launching a fully-fledged checking account that would pay a whopping 3% interest on savings – all of which is to be offered on a fee-free basis. In comparison to the likes of Chase and Well Fargo, who still offer just 0.1% interest on checking account balances, this sparked up a significant amount of excitement in the FinTech space.
However, this quickly raised red flags with the US regulatory community, with SIPC President and CEO Stephen Harbeck announcing that he would be speaking with the Securities and Exchange Commission regarding his concerns about investor protections.
The overarching concern with the Robinhood checking account offering was that there appeared to be a flaw in its FDIC-backed insurance protection. This meant that in the event the company ceased to exist, it could not be guaranteed with any certainty that customers would get their money back.
Robinhood Continues to go From Strength-to-Strength
Nevertheless, the recently concluded series E funding round further highlights the positive long-term sentiment surround Robinhood, which, aside from its recently botched checking account offering, has seen the company go from strength-to-strength over the past 12 months.
For example, the company was able to increase its customer base last year by a remarkable 2 million, taking its end of the year client base to 6 million. Moreover, the stockbroker has since expanded its asset suite to include financial products outside of the traditional stocks space. As such, customers can now obtain fee-free trading services on options, ETFs, and cryptocurrency trading for assets like Bitcoin and Ethereum.
In terms of making a profit, the vast majority of Robinhood’s revenues are generated from its margin trading service. However, as per co-CEO and Founders Vlad Tenev and Baiju Bhatt, the overarching long-term vision is to eventually float the platform via its very own IPO listing.
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