Robinhood

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There is infinite money for stock-trading startups

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Ready? Let’s talk money, startups and spicy IPO rumors.

Earlier this week TechCrunch broke the news that Public, a consumer stock trading service, was in the process of raising more money. Business Insider quickly filled in details surrounding the round, that it could be around $200 million at a valuation of $1.2 billion. Tiger could lead.

Public wants to be the anti-Robinhood. With a focus on social, and a recent move away from generating payment for order flow (PFOF) revenues that have driven Robinhood’s business model, and attracted criticism, Public has laid its bets. And investors, in the wake of its rival’s troubles, are ready to make it a unicorn.

Of course, the Public round comes on the heels of Robinhood’s epic $3.4 billion raise, a deal that was shocking for both its scale and speed. The trading service’s investors came in force to ensure it had the capital it needed to continue supporting consumer trades. Thanks to Robinhood’s strong Q4 2020 results, and implied growth in Q1 2021, the boosted investment made sense.

As does the Public money, provided that 1) The company is seeing lots of user growth, and 2) That it figures out its forever business model in time. We cannot comment on the second, but we can say a bit about the first point.

Thanks not to Public, really, but M1 Finance, a Midwest-based consumer fintech that has a stock-buying function amongst its other services (more on it here). It told TechCrunch that it saw a quadrupling of signups in January as compared to December. And in the last two weeks, it saw six times as many signups as the preceding two weeks.

Given that M1 doesn’t allow for trading — something that its team repeatedly stressed in notes to TechCrunch — we can’t draw a perfect line between M1 and Public and Robinhood, but we can infer that there is huge consumer interest in investing of late. Which helps explain why Public, which is hunting up a way to generate long-term incomes, can raise another round just months after it closed a different investment.

Our notes last year on how savings and investing were the new thing last year are accidentally becoming even more true than we expected.

Market Notes

As the week came to a close, Coupang filed to go public. You can read our first look here, but it’s going to be big news. Also on the IPO beat, Matterport is going out via a SPAC, I chatted with Metromile CEO Dan Preston about his insurtech public offering this week that also came via a SPAC, and so on.

Oscar Health filed, and it doesn’t look super strong. So its impending valuation is going to test public traders. That’s not a problem that Bumble had when it priced above-range this week and then skyrocketed after it started to trade. Natasha and I (she’s on Equity, as well) have some notes from Bumble CEO Whitney Wolfe Herd that we’ll get to you early next week. (Also I chatted about the IPO with the BBC a few times, which was neat, the first of which you can check out here if you’d like.)

Roblox’s impending public debut was also back in the news this week. The company was a bit bigger than it thought last year (cool), but may delay its direct listing to March (not cool).

Near to the IPO beat, Carta started to allow its own shares to trade recently, on the back of news that its revenues have scaled to around $150 million. Not bad Carta, but how about a real IPO instead of staying private? The company’s valuation more than doubled during the secondary transitions.

And then there were so very many cool venture capital rounds that I couldn’t get to this week. This Koa Health round, for example. And whatever this Slync.io news is. (If you want some earlier-stage stuff, check out recent rounds from Treinta, Level, Ramp and Monte Carlo.

And to close, a small callout to Ontic, which provides “protective intelligence software” and said that its revenue grew 177% last year. I appreciate the sharing of the numbers, so wanted to highlight the figure.

Various and Sundry

Wrapping this week, I have a final bit for you to chew on from Mark Mader, the CEO of Smartsheet, a public company — former startup, it’s worth noting — that plays in the no-code, automation and collaboration markets. That’s a rough summary. Anyhoo, I asked Mader about no-code trends in 2021, as I have my eyes on the space. Here’s what he wrote for us:

If you thought the sudden shift to remote work sped up corporate America’s shift to digital, you haven’t seen anything yet. Digital transformation is going to accelerate even more rapidly in 2021. Last year, the workforce was exposed to many different types of technology all at once. For example, a company may have deployed Zoom or DocuSign for the first time. But much of this shift involved taking analog processes like meetings or document signing and approval and bringing them online. Things like this are merely a first step. 2021 is the year the companies will begin to connect large-scale digital events to infrastructure that can make them automated and repeatable. It’s the difference between one person signing a document and hundreds of people signing hundreds of documents, with different rules for each one. And that’s just one example. Another use case could involve linking HR software to project management software for automated, real-time resource allocation that allows a company to get more out of both platforms, as well as its people. The businesses that can automate and simplify complex workflows like these will see dramatically improved efficiency and return on their technology investments, putting them on the path to true transformation and improved profitability.

We shall see!

Alex

 

Investor Alexa von Tobel on the biggest driver of social-media-fueled stock trading

Alexa von Tobel has always felt strongly that too many people are shut out of the stock market. She felt this as a 23-year-old who didn’t have $5,000 to open a brokerage account. She felt it while building LearnVest, a financial planning startup she launched in 2009 and sold in 2015 to Northwestern Mutual for what she says was ultimately $375 million. In fact, von Tobel — who two years ago launched her own venture firm with fellow entrepreneur and former U.S. Secretary of Commerce Penny Pritzker —  cares so much about the yawning gap between investors and non-investors that she has written books about how to take control of one’s money. (Perhaps unsurprisingly, she is also a certified financial planner.)

Little wonder that in late January, for a podcast that von Tobel routinely hosts for Inc., she interviewed Robinhood Vlad Tenev about the company’s quest to make investing accessible to all and how it had shaken up the brokerage landscape in the process. Neither foresaw what would happen days later, when a Reddit community of amateur investors didn’t try to occupy Wall Street so much as turn it upside down by using Robinhood, in part, to drive up the share price of companies like GameStop and AMC Theatres — then unwind those positions. As a 21-year-old college student who lost $150,000 over the course of several days told the outlet Vice, “This whole thing has numbed me to money.”

What happened? Education, in the view of von Tobel, who says it never became an integrated part of bigger picture. While the GameStop saga has “brought a lot of new learnings and new things that people have to process and consider,” paramount among these is the inadequate financial training that Americans receive.

“I want the tools to be democratized, where everyone can get equal access to the financial system,” said von Tobel in a lively chat with us late last week that you can hear here. “But I also want equal education, and that’s where we’re woefully falling behind as a society. It’s not taught in high schools, colleges, or grad schools. Very few schools even teach the basics.”

The issue only grows more important to address each year, she says. People are living longer, and they’re more responsible than ever for their financial well-being. Meanwhile, because of innovations in fintech, including at Robinhood — which became wildly popular very quickly precisely because it dispensed with many of the barriers to participating in the stock market — there is little to keep someone from making lousy decisions with outsize consequences.

So what’s to be done? For starters, she suggests that society begin to place as much emphasis on financial health as physical wellness. “If you’re close to having a major health crisis, doctors do a really good job of saying, ‘Here’s all the things that you need to do to protect yourself; here’s what needs to happen. The same needs to exist in the financial world.”

It will take a number of stakeholders, she believes. One of these is “platforms – all of them — that provide you with [financial] tools and resources, so you can understand the kind of risks you’re taking on [to the extent] that they can provide it.”

Another, she said, is regulators, including the Consumer Financial Protection Bureau. Created in 2010 to safeguard consumers in banking, mortgage, credit card and other financial transactions, the CFPB’s very constitutionality was called into question by the Trump administration, yet its guidance is sorely needed, suggests von Tobel. (“Regulation is always a step behind, and that’s a little bit of what we’re feeling” as a society right now.)

Of course, the third and biggest stakeholder of all is the U.S. educational system, says von Tobel, adding that “you need all three, working in unison” in order to have real impact.

As for any structural changes in the meantime that von Tobel thinks should happen — according to CNBC, for example, Robinhood is preparing to lobby against a trading tax that’s been floated as a way to dampen some of the frenzied activity seen in recent weeks — she declines to “pontificate too much.”

Still, she said she thinks that “getting a Citadel and everyday Americans on equal footing is where we want to end up,” and she isn’t without hope that we’ll get there.

For example, she thinks crypto is “here to stay” and that the infrastructure being created around it will be positive for innovators as well as end users. She’s also expecting “self-driving wallets” that pay bills and make investments to become the new normal, and she thinks they could minimize some of the financial distress we might continue to see otherwise.

Considering the chaos of late, the latter almost sounds too easy, but the “wallet is simply a math equation every day,” she says. “If you have so much [money] available free, where should it go? What’s the most optimal place? It’s a math equation that updates every single hour, and I do think elements of it will be self-driving based on your goals and what you want to accomplish.”

As she puts it, “I can’t wait for the day that that actually exists in a way where it automates on its own. I do believe that’s the future.”

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