Robinhood’s valuation continues climb with $460m funding
Robinhood has bagged $460 million in extended funding just one month after it landed a $200 million Series G led by D1 Capital Partners.
The fresh capital puts Robinhood’s valuation at $11.7 billion, an increase of $700 million since last month.
Robinhood claims it will use the more than half a million funding to improve its customer experience
Commits for the latest $460 million came from existing investors. These include Andreessen Horowitz, Sequoia, Ribbit Capital, 9Yards Capital, and D1 Capital Partners.
Originally, the plan was to raise this $460 million only, but then D1 Capital decided to throw in a last-minute commit of $200 million.
The funding will underpin the launch of a new cash management and recurring investment feature.
A spokesperson tells Reuters: “We’ve raised an additional $460 million in subsequent closings to our Series G to support our core product and customer experience and new offerings like cash management and recurring investments.”
Pressure to invest in customer experience
As well as backing a new product roll out, Robinhood also claims it will use the more than half a million funding to improve its customer experience.
This year has been riddled with technical issues for the fast-growing start-up. In March, it suffered three separate outages – one of which locked its then some ten million users out of trading for an entire day.
The fintech now faces a class action lawsuit based out of California, the recent combination of three different lawsuits waged by angry customers.
These technical issues haven’t gone away. This is despite promises by the start-up’s founders that it’s trying to improve the capacity its infrastructure can take.
In June, a 20-year-old student committed suicide after becoming convinced he was in $700,000 of debt after trading in options.
It later came to light that this negative balance was a temporary blip before the contract executed. The user, Alex Kearns, was never in any such debt.
Earlier this month, Robinhood fell into technical difficulties alongside three other digital trading apps.
Its users faced “delayed order status updates”, though order execution was not impacted by the display delays.
SEC probe into deal disclosures
Not only has Robinhood fallen into hot water this year over detrimental technical issues, it is also now under investigation for its deal disclosures.
According to Wall Street Journal sources, the Securities and Exchange Commission (SEC) could levy a civil fraud penalty against Robinhood of up to $10 million, depending on the outcome.
The probe follows the start-up’s failure to fully disclose its tactic of selling orders to high-speed trading firms.
The process is known as “payment for order flow”. It is used by retail brokerages like Robinhood to execute trades in exchange for sending them client orders.
Until 2018, Robinhood did not list this practice on a webpage dedicated to explaining how its business model made money.
Its new webpage states that the firm “receives rebates from executing brokers”. In October 2018, when it changed the page, co-founder Vladimir Tenev posted a blog entry about payments to high-speed firms.
