Robinhood, the $1.3 billion San Francisco brokerage
firm, is known for introducing zero-commission
Cofounder Baiju Bhatt told Business Insider that his
company, which is popular with millennials, will never lose
sight of the first-time investor.
The startup recently said its user base surpassed 2
When Baiju Bhatt and Vladimir Tenev founded their online
brokerage, Robinhood, in
2013, they did so with the intention to give ordinary people a
platform with which they could tap into the wealth of Wall
Hence the company’s name, an homage to the English folk hero who
stole from the rich to give to the poor.
The San Francisco-based company launched in March 2015 and
quickly became a favorite among younger people looking to invest
without paying a commission for buying and selling stocks. Many
established brokerage firms, including
TD Ameritrade and
E-Trade, were charging close to $10 on both sides of the
trade when Robinhood came onto the scene.
Since its launch, Robinhood has amassed over 2 million users who
have bought and sold billions of dollars’ worth of stocks.
Meanwhile, Charles Schwab, E-Trade, and TD Ameritrade have all
brought down their fees.
Robinhood has catching up to do. TD Ameritrade, for instance, has
over 10 million users. And Charles Schwab has 10.5 million active
brokerage-account clients. But what Robinhood lacks in numbers it
makes up for in style.The
app itself is sleek and simple, a big part of why it won an
Apple Design Award.
Business Insider recently caught up with Bhatt to discuss
Robinhood’s growth, the brokerage industry, and one fallacy he
sees in the world of investing. The following interview has been
lightly edited for clarity and length.
(Also, check out
Business Insider’s podcast episode with Bhatt’s Robinhood
co-founder, Vlad Tenev, on how they built a stock trading app
millennials love, even
after 75 venture capitalists turned them down, below)
Frank Chaparro: How is business going?
Baiju Bhatt: Business is going well. Robinhood
Gold is doing really well. We recently released metrics around
our overall growth. We have done $75 billion in transactions so
far. And we recently hit 2 million users. We also have saved
customers $500 million in commissions.
Chaparro: You mentioned
Robinhood Gold. How has that been going?
Bhatt: It is doing very well. It’s serving a
need that we saw in a part of our core user base, which includes
people using Robinhood for the first time as well as those who
have been with us since the beginning. A really large percentage
of those users have become more mature investors. The No. 1 thing
they kept asking for was the ability to use a margin feature. So
that’s Robinhood Gold. We announced it at the end of last year. I
think it was right around the beginning of 2016 that we had the
100% rollout. And it has been growing pretty consistently every
single month. The revenue has been very strong, and it was one of
the key drivers of us being in a position to fundraise this year.
Editor’s note: Robinhood Gold is growing 20% month over month
since its launch, according to Robinhood’s Jack Randall.
Chaparro: Are you looking to continue to provide
advanced services similar to the ones offered by your more
established competitors to attract sophisticated investors to
Bhatt: I don’t think providing the exact same
products that incumbent brokerages offer is necessary for our
success right now. There is a way to address the needs of all of
our users, both new users and sophisticated ones, without
alienating the new generation of people who are just starting to
In time, as our users become more and more sophisticated, we will
continue to add features that match them. But we hope to never
lose sight of those first timers as well. Fundamentally, that
should be the most important thing for financial-services
companies. Making the entire industry something that serves the
broader market, not just the people who make them a lot of money.
Chaparro: So is your focus on the broader market
or just those first-timers?
Bhatt: Right now our user base is much more
heavily concentrated with younger Americans. If there is a market
we are “serving” it is definitely younger Americans. Our users
are primarily between the ages of 18 and 34. I think 90% or more
are under the age of 40. And that demographic, right, doesn’t
have that much overlap with the demographic of the people using
Within that demographic, however, are many different kinds of
investors. We have people who are actually quite sophisticated.
People who have been investing for a number of years and who
think about what they are doing with their money in a very
analytical ways. And we also have people who are just entering
the money class. They’re, basically, interested in saving some
money and making some money off their savings. Those two groups
have a different need. But that gives us a cool challenge to make
those interests work within an interface the size of a business
card and still make sure it is very useful for people.
Chaparro: How does it feel to have over 2
Bhatt: It is a very difficult number to
conceptualize. This is more of a comment on the human mind’s
ability to understand 2 million people. I think it is pretty
difficult. But that question makes me think of when we were much
An interesting anecdote: When we launched, the wait list for
Robinhood, on December 14 of 2013 — if you signed up it would
show you the number of people in line in front of you, and you
could share a referral link. If you got people to sign up with
your link you could move up in line.
We were spending a lot of time thinking, what if we have less
than 5,000 people who sign up? Then maybe we shouldn’t show them
how many people are ahead of them. We ended up blowing past that
number in 45 minutes. And the first weekend we were at 10,000
people. It’s kind of interesting. And I think it was after a
month that we hit 100,000 people. And that was the point at which
I was unable to fully appreciate our reach.
Chaparro: A lot of people, including
Betterment’s Jon Stein, have said that stock picking is a bad
idea since it’s so difficult to beat the market. Are Robinhood
users playing a losing game? Wouldn’t they be better off just
putting their money in an index fund that tracks the market?
Bhatt: This is one of the fundamental logical
fallacies that have been perpetuated in conversations about
finance and consumers. There’s this idea that the problem facing
finance is that there are too many people not on the efficient
frontier of investing. In other words, people are missing out
because their portfolio doesn’t particularly diversify and match
the market, and they are exposed to too much risk. That’s not the
problem. The real problem is that in 2017, 10 years after the
Great Recession, a lot of people don’t have savings.
A lot more people are working paycheck to paycheck. We think that
is a more important problem to solve. And among young people, the
employment rate is pretty high, which is a good thing. So we say
to them, there are a lot of parts of investing that may be
confusing to you. We say, the best thing we can say to those
people is ‘just do it.’ Build up the necessary confidence to hold
an investment for a month or for a year, and over time feel
comfortable with the amount of money you are saving and get in
the habit of putting a bit of money aside.
This is one of the fundamental logical fallacies that have been
perpetuated in conversations about finance.
Chaparro: One criticism made against Robinhood
is that it allows young investors, who don’t have the expertise,
to invest in poorly performing stocks such as Snap, Blue Apron,
and other tech startups just because they recognize the name. But
isn’t that the whole point?
Bhatt: I think it is the whole point. Because,
again, it comes back to the way we look at our role in the
financial-services marketplace as a whole. We view our role as
making the markets more accessible and giving people the full
control to invest. The question, however, is what can we do to
make better decisions? How can we take the actual things — such
as the fundamentals of whether a company is a good investment or
not — and communicate that to our users in terms that will make
sense to them? These are some of the challenges we are focusing
on right now on the product side.
This could be something as simple as a list of companies showing
the market cap of companies versus their sales growth. Showing
some of those things in a way that is easy to understand. This is
something we are excited about doing as we roll out more
Chaparro: You mentioned the Great Recession. And
that makes me think of this
question hanging over the investing space regarding apps like
Robinhood and other online investment startups. Without someone
to guide them through the bad times, do you think investors are
more prone to pull their money out if there’s a major correction?
Getty Images / Kiyoshi Ota
Bhatt: That’s an interesting question because we
have actually seen a correction since Robinhood launched.
Granted, it was not on the same scale as what happened in 2008.
But if you remember, in the beginning of 2016 there was a pretty
significant sell-off in Q1. And there were multiple days when the
markets witnessed single-digit drops in the S&P, and that was
kind of interesting. Because we saw for the first time how people
behave when the market is going down. And the behavior we saw was
actually pretty interesting. Those were the days we saw the
biggest net deposits we had ever seen.
With this younger generation, when the market takes a slide, they
see it as an opportunity to buy. They view the market as being on
sale. It’s kind of interesting, because I remember during Brexit,
Betterment decided they wouldn’t let their customers withdrawal
money. I think that stems from this mindset of not thinking
people should be in control of their money. It tends to be better
to give people control over their money, rather than restricting
their access to money during such times, because they’re more
likely to wait it out.
Editor’s note: Business Insider asked Betterment about
Bhatt’s remarks; it declined to comment.
With this younger generation, when the market takes a slide, they
see it as an opportunity to buy.
Chaparro: There’s a lot of talk about how
artificial intelligence and other emerging technologies will
change the way we interact with our money. What technologies are
you guys thinking of integrating into your offerings? For
instance, will Robinhood users be able to ask their Alexa how
their account is doing?
Bhatt: That’s actually interesting. I remember
we had a hackathon last year, and my cofounder, Vlad, broke an
Alexa integration for that. He’s been using it, but we haven’t
released it to the public.
When we think about new technology, there are a few things we
consider. I’ll have to pick my words carefully.
We ask ourselves one basic question: What are the things that
could have a meaningful impact on the financial lives of our
consumers —primarily younger Americans? That is the deciding
factor. We fundamentally want to make people’s lives
simpler. So we will look for technology that works toward that
Chaparro: What are those things?
Bhatt: I don’t think there’s a particular
technology that will set the trajectory for us moving forward. We
don’t want to be one of the companies that say AI is the next big
thing, let’s go build an AI application for Robinhood. That might
not work. It might be awkward.