’04 Alum’s Start-up Brings Investing to the People
Did you know that if you wanted to, you could buy and sell stock from your phone anytime for free? A TJ grad and his college roommate have made that possible with their fast-growing start-up, Robinhood, a stock brokerage that allows customers to buy and sell US listed stocks and exchange-traded funds with zero commission. Co-founder Vlad Tenev, TJ ’04 (see also March 2015 newsletter), was recently featured as #1 on Forbes list of 30 Under 30 in Finance. (In a proud moment for a class that only celebrated its tenth reunion last year, Divya Nettimi, TJ ’04, an investment analyst with Viking Global Investors, also appeared on the elite list.)
Tenev and his Stanford roommate and math and physics classmate, Baiju Bhatt, founded a start-up while still in school, but it was their second start-up, Chronos Research, that caused Tenev to drop out of his math PhD program. While on Wall Street marketing Chronos, a company that made trading platforms for some of the world’s largest financial institutions, they discovered that electronic trading firms pay effectively nothing to place trades on the market. They decided to return to Silicon Valley, the new center of innovation in financial services, to build a platform that would make trading accessible and free to everyone, one that would “democratize access to the financial markets, help shrink the gap between the ‘haves’ and the ‘have nots’ and lead to a healthier, more robust global economy.”
Launched a year ago, Robinhood has completed over $2 billion in transactions. The start-up has grown rapidly by adding features and integrating with existing sites, with the result that real-time stock information and other useful personalized data are now available on its user-friendly trading platform. In November, the company released an application programming interface (API) so developers can embed Robinhood’s purchasing capability into their own products.
The start-up has already raised over $66 million from major Silicon Valley investors and earned several coveted awards: Their app was one of only three to be recognized in both Apple and Google’s “Best Apps of 2015” features; it won a Product Hunt 2015 Golden Kitty Award for sexiest product of the year; and the company was the 2016 TechCrunch “Crunchie” runner-up for Best New Start-up and a top-5 finalist for Best Mobile App. Because the company has always treated design as a critical element of a consumer product that targets millenials, its app also received the Apple Design Award.
This year, in addition to adding new features and services such as margin trading and a web platform, Robinhood is also rolling out its app abroad. In the US, discount brokerages such as E*trade, Scottrade, and Charles Schwab charge $7- $10 per trade (and also require a $500 – $1,000 minimum balance — Robinhood has no minimum), and in other countries those charges can be significantly higher. The company is able to beat the competition by maintaining a lean, web-only presence and relying on social media and word-of-mouth for advertising. It makes money by accruing interest on uninvested cash balances and by collecting interest from customers who choose to upgrade to a margin account (such accounts, now in beta testing, let customers borrow up to half of the cost of purchased securities). To safeguard users, margin trading and day trading are off-limits for the majority of customers.
You can find out how to use the app on Business Insider (Nov. 17, 2015) and can read more about the company on TechCrunch (full disclosure — the author of several pieces is a Stanford friend of the founders).
Like many other alumni start-up founders, Tenev first spread his entrepreneurial wings at TJ: “I was part of the inaugural Summer Mentorship Program started by Mr. Berenty, in which I worked full-time at NIH on microbiology research and got used to working really hard and spending my full energy on a singular goal. I was also the Co-Founder and Co-President of the TJ Yoga Club with my high school buddy Teddy Baker! This was my first experience as a co-founder, and we learned many things that were helpful to me as a tech entrepreneur, such as organizing people, getting backing from Ms. Doff who served as our sponsor, and coordinating with external instructors. It was also my first experience with compliance, as after a few classes the administration required us to obtain a signed waiver from all attendees!”
Perhaps TJ also had something to do with the spirit behind Robinhood. According to Tenev, the name reflects not only the founders’ “egalitarian ideals and mission of bringing investing to more people around the world,” but also “a bit of our rebelliousness.”