Despite its multiple outages, investors continue to pour money, and at a rising valuation, into the no-fee investing app Robinhood. Announcing the new mega-fuding Monday, Robinhood has nabbed $320 million at an $8.6 billion valuation in a round led by previous investors as well as new backers including TSG Consumer Partners and IVP.
Earlier in May, the popular app had landed an $8.3 billion valuation after it raised $280 million in Series F funding. The round was led by Sequoia Capital, one of Silicon Valley’s biggest venture investors, and was joined by returning investors, including NEA, Ribbit Capital, 9Yards Capital, and Unusual Ventures.
At the time, co-CEO Vlad Tenev said they had grown rapidly in 2020, having added three million funded accounts in the Jan-April period to count more than 13 million usres. The Silicon Valley startup, mostly used by millennials to trade stocks and cryptocurrency, said in December 2019 it had hit 10 million accounts milestone, up from its one million subscribers in 2016 and six million accounts in 2018.
The growth came despite significant outages that plagued the fintech since the start of the year. Most recently, Robinhood on June 18 reported technical issues that kept clients from trading equities, options and also affected cryptocurrency trades. The platform was also down for consecutive days during the first week of March. Clients have complained about not having access to their accounts and having long wait times for customer service.
As such, part of the new funding round will certainly go to improve its app’s infrastructure-related issues.
To put its impressive metrics in context, the New York startup has been able to bring on more customers than TD Ameritrade, which onboards 11 million users and has been in the online brokerage industry since 1975. One of Robinhood’s biggest competitors, E-Trade, had 4.9 million brokerage accounts at the end of 2019, with an annualized new account growth rate of seven percent.
Six years after Robinhood launched with no-fee trading, major brokerages were catching up with a wave of fee-eliminating announcements over the past six months. In the span of just a few weeks, nearly all US online brokers eliminated commissions, which could be a direct hit to the startup that kicked off the trend in 2013.