December 19, 2013
Robinhood is for the Have-nots as the name suggests. It is as much a story of helping the small/individual traders as it is a technology product & service. To trade on stocks, a fee of $7 to $10 is usually charged by Scottrade, E*Trade and other financial companies. Robinhood, a mobile investment startup, seeks to remove the divide between Haves and Have-nots with a mobile app that enables users to trade in stocks without being charged any commission. To this end, the company announced today (December 19th, 2013) that it had raised $3 Million in Seed Round.
Robinhood was Co-Founded in 2012 by Baiju Prafulkumar Bhatt, Vladimir Tenev, and Nate Rodland (COO). The company has received a funding of $3 Mn through investors Index Ventures, Andreessen Horowitz, Rothenberg Ventures, Howard Lindzon, Tim Draper and IT Ventures. Google Ventures was an early investor.
So if the users are going to trade for free, what is Robinhood’s revenue model? The company plans on charging for API access. Also, it could enable other apps to build on top of its trading system for a fee. Another stream of revenue would be charging users to trade on credit, if their own money is unavailable some reason. The company will charge in other ways too such as margin accounts or for broker-assisted trades.
Another service called Zecco offered free trading in 2006, but they started charging a fee eventually. Some of the other companies operating in this space include E*Trade (charges between $7.99 and $9.99) & Scottrade; traditional brokers like Fidelity & Schwab that charge $8 to $9. Fidelity and Schwab have account minimums of $1000 and $500 respectively. Robinhood is currently available only in California, but it plans to begin operations in all 50 states in the U.S.
This is a video where Vlad Tenev and Baiju Bhat talk about Robinhood, and what it is all about: