Robinhood Attracts $200 Million as Valuation Swells to $7 Billion: Report

By CCN: Who says millennials don’t like to save and invest their money? By building a commission-free stock brokerage and trading app with a slick interface, Robinhood has built a $7 billion business in just six years. That’s the company’s valuation as it nears a $200 million funding round from its current financial backers, Bloomberg reports. The investment round is still unfolding and once complete could reportedly result in Robinhood fetching a valuation as high as $10 billion.

Robinhood closed its most recent funding round last year at which time a $5.6 billion valuation was attached.

The stock trading app boasts a stellar track record of growing its user base and monetizing its services.

According to Nasdaq, Robinhood Markets Inc. made $8 billion in revenue in 2017 and is projected to rake in $47 billion annually by 2020. It is already the fastest growing broker of all time.

Last year the investment app blew passed E*Trade after doubling its user base to 4 million. E*Trade, which was started in 1982, had 3.7 million user accounts at the time.

How Does Robinhood Makes Its Money?

With no commission fees, a common question people have when they first hear about Robinhood is: ‘How does the app make money?’ It’s a fair question.

Robinhood’s profits come from three sources:

  • Interest earned by lending money held in Robinhood accounts
  • Selling orders to high-volume exchanges seeking more liquidity
  • Robinhood Gold subscriptions that charge users $10 to $200 a month to borrow anywhere from $2,000 to $50,000 to trade on margin

The sale of orders to high-frequency exchanges is a practice that has attracted some criticism for a lack of transparency.

Robinhood’s Merry Band of Millennials

Robinhood is very popular with millennials. The lack of commission fees is a big selling point for millennials, who have less cash to spare than their parents did when they were that age. The app’s friendly interface and slick design is also likely a draw for the young-ish crowd.

Millennials Also Love Cryptocurrency

There’s no doubt that the mobile app’s selection of cryptocurrency investments is also attractive to millennial savers and daytraders.

One nationwide survey found 43% of millennials trust crypto exchanges more than stock exchanges. A further 90% of millennials prefer cryptocurrency to gold.

Robinhood Co-Founder and co-CEO Baiju Bhatt told CNBC last year:

“Crypto has certainly added to our growth. In the next couple of years I think you’ll see Robinhood looking like a full-service consumer finance company.”

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