- The popular investing app Robinhood publicly filed its IPO paperwork on Thursday.
- It’s had a tumultuous 2021.
- In a letter, Robinhood’s cofounders described the company’s key values and mission.
- See more stories on Insider’s business page.
Stock-trading app Robinhood has had quite the 2021.
Early this year, some of the app’s users helped fuel a trading frenzy around meme stocks like GameStop and AMC. Its cofounder and CEO, Vlad Tenev, was called to testify in front of Congress in the aftermath. Just this week, Robinhood was slapped with a record $70 million fine from FINRA.
Now the company is going public. On Thursday, it publicly filed paperwork with the US Securities and Exchange Commission to list on the NASDAQ under the HOOD ticker. In a founders letter accompanying the filing, Tenev and fellow Robinhood cofounder Baiju Bhatt discussed the company’s goal to democratize investing and detailed its four key values.
Read the full letter below:
To our customers and future shareholders
Our mission is to democratize finance for all.
From our beginnings, we have built products for everyday people. While we are only six years into our journey, we have already seen profound transformations in how people think about their money — the next generation of investors is younger and more diverse than ever before, and finance is now as culturally relevant as music and the arts. By untethering investing from the desktop computer, we’ve seen new categories of people, including gig economy workers, first responders, construction workers, and many more, discovering Robinhood and becoming investors. We believe democratizing finance for all is a one-way door, and these forces of change are more likely to accelerate than reverse.
We’re proud to serve this next generation of investors, and it’s painful to see them continually lambasted in the news reports. Anecdotes of people winning (and losing) large amounts of money garner more attention than the more pedestrian truths – the majority of our customers prefer to buy and hold. With our recent investments in education through Robinhood Learn, along with new features like DRIP and recurring investments, it’s never been easier or more delightful to build a portfolio and invest for the long term.
Some pundits deride individual stock ownership and say that people should only be investing in passively-managed funds through an advisor. We reject this, and we believe that it’s important – not just for investors, but also for the broader markets — to be able to own stocks directly in the companies you love, without any middlemen. The results so far support this conclusion. As of the end of March 2021, our customers had seen appreciation of their assets of approximately $25 billion. While markets go up and down, and things may be different in the future, this tells us our product is profoundly benefitting everyday Americans, at a time when they need it the most.
We are proud to open this offering to our customers on equal terms as institutional investors, and we recognize that for many of you this will be the first IPO you have had a chance to participate in. We’d like to help you better understand our company, and perhaps the best way to do so is through our core values. which provide a blueprint for how we build our products and how we endeavor to operate every day. If you like these values, you may like the stock.
In priority order, they are: Safety First, Participation Is Power. Radical Customer Focus, and First-Principles Thinking.
Robinhood is a safety-first company.
This starts with the reliability of our platform, which is of paramount importance. We’ve had our growing pains as we’ve navigated the acceleration of our business at scale, and over the last 3 years we’ve made wholesale changes to our infrastructure to add redundancy and capacity and to make it easier for our engineers to test and release product updates.
As a result of these investments, we believe we are prepared to handle over 30x the volumes that we struggled with back in 2020, and we systematically prepare for 3x the highest load we’ve seen in the past, so that we’re there when our customers need us most.
We also understand that sometimes customers will have questions or encounter unexpected issues. For that, we’ve increased and accelerated our investments in customer support. We’ve rolled out live phone support for the most pressing issues, opened three new service centers, and more than tripled the size of our full-time customer support team in 2020 alone. We’re employing machine learning and natural language processing to improve our triage and routing, and we’re constantly making upstream product improvements to prevent the most acute customer support interactions from happening in the first place. You will see us continue to make significant investments to ensure that customers can get support quickly and conveniently when they need it.
Finally, we provide education and build safeguards into our products so that our customers are in the best position to succeed. Over 50% of our customers are first-time investors, and first-timers in particular don’t have a reference point for how to begin their investing journey. That’s why we created Robinhood Learn, which as of March 31, 2021 had over 7 million views, with monthly unique visits up six-fold from January 2020 to March 2021. Our customers also love Robinhood Snacks, which gives bite-sized digestible daily financial content to over 32 million subscribers. We will continue to experiment with new content and mediums in an effort to meet you where you are, and we commit to speaking clearly and transparently to you.
Participation Is Power
At Robinhood, the rich don’t get a better deal.
Other financial companies, both old and new, tend to prioritize their larger, wealthier customers. They give wealthy customers great deals while charging the little guys higher fees, hoping they won’t notice or care. We don’t believe in that. That’s why we have no account minimums and a user experience that was designed from the ground up for small accounts. And across all of our products, everyone gets the same deal and the same customer service no matter how large their account balance.
We’d rather serve many small customers than a few large ones, and. while our competitors strive to go further “upmarket,” we continue to see opportunity in serving those left behind, including underbanked customers, not just in the United States but all over the world.
We are proud to have removed barriers and contributed to a more diverse investing public, with the number of women on Robinhood nearly tripling in 2020, and more than double the industry average of Black and Hispanic investors on our platform. Despite the progress we’ve made, only about half of US households invest in the stock market. There is always more to do, and there’s no going back.
Radical Customer Focus
We exist to make our customers happy.
From the early days of Robinhood, we prioritized getting direct customer feedback on what we were building.
We believed then, as we do now, that listening to our customers would greatly increase our chances of building new products that people love.
We’d walk through Stanford’s campus and ask people to come to our offices and try our products and prototypes. We believe that being close to our customers in this way is unique relative to other financial companies, and our customer focus forms the kernel of the product development process we have today.
We know customers love our low fees. Other companies feel compelled to increase fees in an effort to improve margins. Instead we ask how we can lower costs for you as we attain more scale and operational efficiency – just this last December, we lowered our already competitive 5% margin rate down to 2.5%, irrespective of account balance. When coupled with a Robinhood debit card, this allows our customers, even ones who can’t qualify for credit cards, to borrow money for their day-to-day spending at a competitive APR.
From January 2020 through March 2021, we have provided customers approximately $1.5 billion in price improvement and saved customers as much as $1.6 billion in crypto transaction fees and $700 million in options contract fees (as compared to the fees charged by our major competitors).
We also know that our customers expect low prices and a great experience from every product we offer. Other financial companies talk about how they can “cross-sell” more products, but we take a different approach. We build every product so that it’s compelling on a standalone basis, and so that you know when you are using a Robinhood product, no matter the category, you are getting great pricing and a best-in-class experience. Employing this strategy is difficult and requires discipline, but the benefit is that when Robinhood releases a new product, you’ll know exactly what to expect.
We make bold bets and challenge the status quo.
Many other financial companies look to competitors and industry trends to drive their product roadmaps. This may work in the short term, but we believe it’s not the best way to build products long term.
Our foundation is in art, science, and pure mathematics, and we have a deep appreciation for the scientific process. We develop hypotheses and design experiments to test them. We reduce complex problems to their constituent bits. This isn’t just true in product and engineering, but also in how we think about our business.
When we started Robinhood, we wanted to build a company that operated at 1/10th the margins of other financial companies, but with 10x the customers. This led to us obliterating trading commissions across stocks, options, and cryptocurrencies.
In 2016, we decided to vertically integrate our core business by building Robinhood Securities, the first clearing system built from scratch using modern technology in over 10 years. This was a monumental two-year effort. Other financial companies prefer to partner with established vendors, and that would have certainly been the easier path. However, without our investments in clearing, our customers may not have gotten real-time fractional shares or Cash Management. We see our investment in Robinhood Securities as a huge benefit for our customers in the form of better, faster, lower-cost products for years to come.
In 2018, we launched Robinhood Crypto and became one of the first financial platforms to offer cryptocurrencies alongside traditional assets. We chose to not partner with an existing platform to offer cryptos, and rather decided to build it in house to have more control over the cost and the customer experience. This approach allowed us to offer commission-free crypto trading out of the gate and has propelled Robinhood Crypto to over 9.5 million customers trading approximately $88 billion of cryptocurrency on our platform in Q1 2021.
Over time, we strive to make Robinhood the most trusted, lowest cost, and most culturally-relevant money app worldwide.
You should expect us to continue to pass back value to our customers, charging lower fees over time as we achieve greater scale and operational efficiency. We will continue to launch new products that strive to be 10x better in their category on a standalone basis, and we will never take our ability to cross-sell for granted.
We will continue to make bold multi-year investments when we believe they will lead to the opportunity to deliver lower prices and a 10x better experience. At times, we may sacrifice short-term profitability, but we’ll never sacrifice what’s in our customers’ long-term best interest in order to “make our quarter.”
We will continue to hold our small customers on equal footing as our biggest account holders. And most of all. we’ll never sacrifice the safety of our customers’ money.
Thank you for your interest in Robinhood and our offering.
Vlad Tenev – CEO, Co-Founder
Baiju Bhatt – Chief Creative Officer, Co-Founder