Robinhood reaches $8.6 billion valuation after latest funding rounds
Monday 27th July 2020
On July 13 it was revealed that Robinhood’s Series F funding raised $600 million. In May it announced the $280 million Series F funding led by Sequoia, but in the end managed to raise an additional $320 million in subsequent closings from both new and existing investors. The post-money valuation of the retail investing platform is now a whopping $8.6 billion.
Robinhood has been one of the winners from the COVID-19 pandemic, as there was a rise of new retail investors who figured that they would try their hand at day investing. The company has clearly utilised this opportunity well, and after launching several funding series last year have come out with even more capital. In 2020 alone the platform has added over three million funded accounts – half of which were first-time investors. Retail investing has proven to be a popular trend as activity had risen 10% from the start of the year to now – and well-situated and accessible companies such as Robinhood have facilitated this well.
The risk of democratising investing
The only point of contention is the ethics of pushing such a trend. With a suicide already linked to Robinhood, a serious point should be raised regarding encouraging irresponsible investing. Whilst it is great that platforms are breaking down the barriers to the financial world and creating more transparency around money, we may see a rise of negative implications and rising personal debt as a result. Changes in volatility and momentum in the market have accelerated during the pandemic, and first-time investors can be swept along with this without having regard for long-term trading patterns. Furthermore, there is the real risk of inflating the valuations of companies, an example being in car rental company Hertz’s case.
The future of fintech
With an $8.6 billion valuation, the platform may be headed towards the public market in the future, hopping onto a trend that has seen fintech companies perform exceedingly well as they file for their initial public offerings (IPOs), a recent example being insurance company Lemonade. Disruptors have been entering the market at full force, forcing traditional financial institutions to change and adapt to compete as these new platforms offer seemingly better and more accessible services to consumers. However, a point to consider is whether the fintech space might be doing a full 360, leaning back towards safer and more conservative financial practices. Monzo has recently launched its Monzo Plus card which offers 1% interest on balances of up to £2000 and credit score checks as well as other services for a subscription fee of £5 per month. This is an interesting angle to evaluate, as fintechs have been increasingly popular for younger consumers because they are largely low cost and accessible. This return to fees and promoting more sustainable spending is more closely aligned with traditional banking institutions, so we could be seeing the start of the disruptors turning into the disrupted.
Overall, it will be interesting to see if this boom in retail investing continues as we emerge from lock-down and people start going back to work. There could be a dip in the market, so it looks like Robinhood ran its new series of funding at the perfect time. Alternatively, we could see a steady growth or maintenance in the trend as unemployment looms and consumers find new ways to make money.
