You have to wonder why a startup is named after an English folklore hero who stole from the rich to give to the poor.
For the founders of Robinhood, the inspiration came from the fees that stock brokerage firms charge their customers simply for making trades. To fight these fees, the company announced today that it has raised $13 million in new funding.
In short, Robinhood is building a stock brokerage service for today’s young adults. Because they spend more time glued to their phones than anything else, Robinhood is mobile-first. And because many of them haven’t made it to the big time financially-speaking, Robinhood doesn’t charge any trading fees, which make up a huge part of traditional brokerage firms’ revenue. Instead, it will make its money from margin lending and other brokerage services.
“We noticed that people our age aren’t investing,” Robinhood co-founder Vlad Tenev said in an interview with VentureBeat.
As mentioned, young adults between 18 and 29 often don’t have as many financial resources as their parents, making the fees a real deterrent to trading stock, according to Tenev.
“If you look at stock brokerage in general … nothing has changed. The fees have gone down a bit but they’re still high,” said Tenev.
Robinhood’s team is also hoping that bringing it to mobile and with great design will appeal to young adults and make it comfortable for them to use. “We wanted to make it as simple as posting a picture on Instagram,” Tenev said.
He also said that because many of Robinhood’s customers will be first-time stock traders, the user experience will include clear disclaimers and instructions that will walk users through the processes of setting up stock trading accounts and making trades.
And with more than half a million people already signed up before the app is even released and 80 percent of them being in that age range, the Robinhood team is optimistic about its approach. The company is targeting early 2015 for the public launch of its service.
Although other services such as Wealthfront and SigFig also offer technology-heavy investment services, Tenev said he doesn’t see them as competition because Robinhood doesn’t aim to do the investing for its customers as these services do.
Index Ventures led the round, with Ribbit Capital, Howard Lindzon, Aaron Levie, Dave Morin, Jared Leto, Snoop Dogg, and Nasir Jones (rapper Nas) also chipping in. Index Ventures’ Jan Hammer will be joining the board as part of the round.
Robinhood was founded in 2012 by Vladimir Tenev and Baiju Prafulkumar Bhatt and is soon moving to Palo Alto, Calif. The company previously raised $3 million in seed funding from Index Ventures, Andreessen Horowitz, Rothenberg Ventures, and angel investors.