Robinhood raises $280M, pushing its valuation to $8.3B

As expected, Robinhood has closed a new round of capital. The late-stage, consumer investing app announced today that it has closed a $280 million Series F funding at an $8.3 billion valuation. This closely tracks prior coverage that the firm was hunting for a nine-figure round at a valuation of around $8 billion.

Robinhood raised capital several times in 2019, including a $323 million mid-year Series E that valued the firm at around $7.6 billion, counting the value of the investment.

The valuation gains that the Menlo Park, Calif.-based unicorn has enjoyed over time are slowing. The firm's 2017 Series C valued it at around $1.3 billion. That rose to around $5.6 billion the next year when it raised $363 million in its Series D. The firm's Series E's $7.6 billion valuation was strong, then, but a deceleration. And today's $8.3 billion valuation brings its slimmest valuation gain in years.

It seems likely that Robinhood is growing into its valuation as it scales. According to its blog post, Robinhood has added 3 million accounts this year.

According to Bloomberg, which broke the news of the firm's then-impending funding round, Robinhood recorded around $60 million in revenue this March, three times its February result. It is unclear if the firm can continue that pace of revenue generation during the remainder of 2020, but Robinhood's trailing valuation multiple would decline sharply if the feat was possible. (Revenue multiples are broadly contracting as the economy slows, and investors project slower growth amongst startups.)

A turbulent stock market is a boon to investing-focused fintech startups

But while Robinhood is caught in an updraft that is lifting the fortunes of many savings and investing apps, its road has not been entirely smooth this year.

Growing pains

Robinhood made headlines in March with less fortuitous news: three outages in two weeks. An outage, in the company's case, means that consumers were unable to trade during specific hours due to technical difficulties. As the financial services startup handles people's money - often tied to specific market movements - making any disruption to its operations the opposite of good news.

The stability of apps that handle your money is especially important right now, as people try to get their financial health in order amid rising unemployment and an uncertain future economy at large, let alone the stock market.

We don't know whether the round was closed before the outages and before COVID-19, but we wouldn't be surprised if discussions were underway months earlier. (We asked; Robinhood declined to comment.)

It's worth noting that when Robinhood suffered its first massive outage, its co-CEOs noted that the cause was largely due to a stress on infrastructure due to an unprecedented load of usage.

Robinhood has spent time in the last few weeks figuring out how to handle another increases in usage - sensibly, the new capital will be used to build out capabilities and prevent future crashes. (The company said in its announcement that it intends to continue to invest in scaling our platform.")

It's going to need that platform stability if the market keeps moving as swiftly toward its portion of the fintech world as it has in the last few months.

A savings boom

Robinhood's citing of unprecedented load" as part of the cause of its difficulties drove some snark. It's hard to fit a small brag into an apology, after all. But one thing TechCrunch has learned is that individuals are investing and saving during the pandemic.

Data for this abounds. Acorns, a savings and investing app, saw a record of signups on March 19, the same day that the company noted the stock market recorded their second-worst day of trading since 1987.

We've collected further data in the same vein, with Public (another free stock-trading app) reporting surging usage, and other fintech providers telling TechCrunch that more folks than ever are looking to save and buy stocks. Indeed, Robinhood later said that in March it saw more than 10x net deposits" when compared to the monthly average it set in the last quarter of 2019.

The company, then, raised around a usage high. This makes its failure to generate a larger valuation premium nearly confusing; after all, when would there be a better time for it to raise? The answer appears to be that the same market dynamic that gave it a surge in demand (the pandemic) is likely also the reason that its valuation gains were slight (falling revenue multiples and falling private investor sentiment).

Sequoia Capital led the round, which saw participation from NEA, fintech-focused Ribbit and smaller firms 9Yards Capital and Unusual Ventures.

Other companies are riding the same fundraising wave. Last week, investing app Stash raised a $112 million round led by LendingTree. In its most recent quarter Stash claims it had an over 100% increase in weekly customer deposits across banking and investing.

There are no shortages of other investing platforms for consumers during this time, even if that looks like a traditional incumbent bank. With a new nine-figure round, Robinhood will have to prove that it is competitive, and more importantly, reliable.