It’s sleek. It’s easy to use. It’s designed to give first time, small-scale investors a leg up on Wall Street hotshots.
And it just launched today.
Robinhood, a zero-commission brokerage app available for free download on Apple’s App Store this morning, is unlike any existing stock market app.
For starters, it’s mobile first. That has allowed the company to rethink traditional brokerage cost structures. With no human traders to pay – or ancient infrastructure running the trades – they’re able to cut out those overhead costs.
As a result, Robinhood doesn’t charge a commission for standard trades, nor do they require any minimum deposits.
"Imagine you’re a first time investor in your early 20s. You have a few hundred dollars – maybe a thousand dollars – to put in the market. You want to learn how it works. Seven to ten dollars eats into that quite a bit," said co-founder Vladimir Tenev.
That’s the going rate for most other apps. But Tenev and co-founder Baiju Bhatt think the $7-$10 fee is prohibitive to younger, smaller-scale investors.
Their "freemium" model allows customers to buy and sell U.S.-listed stocks and ETFs, place market orders and limit orders, track data in real-time, and customize watchlists for free. They will, however, charge customers for premium services like margin lending.
The co-founders were inspired to "democratize access to the financial markets" by the 2011 Occupy Wall Street movement, in which protestors, upset about large bank bailouts, occupied Zuccotti Park and other financial districts for months, denouncing Wall Street and the government’s leniency toward bankers.
At the time, Bhatt, now 29, and Tenev, 27, had just built their first finance start-up, an equities trading software company based out of California. They saw their institutional customers placing trades at no cost, and wanted to help everyday customers do the same.
"We kind of asked ourselves, ‘Could we do something bigger than this? Couldn’t we try to do something a little better than this?’ said Bhatt.
Tenev and Bhatt, former roommates who met while studying Physics at Stanford, used their new finance experience and their tech backgrounds to build Robinhood.
With it, they hope to inspire a new wave of investors.
In the 12 months since Robinhood was first announced, nearly 500,000 people have joined a waitlist to download the app. Nearly all of those people are in their twenties, and the co-founders know that most of them won’t be coughing up for its premium features.
But they’re okay with that.
"It’s true that a 20-something is going to have less funds than a 50-year-old, but they’ll become a 50-year-old at some point," said Tenev. He and Bhatt are confident they will still be there when that happens.
Robinhood’s angel investors are confident too. The company has raised $16 million from an array of investors, including Snoop Dogg, Jared Leto, and Andreessen Horowitz to name a few.
"It’s really, really, important that this country as a whole trusts its financial system," said Bhatt. "I think it’s really important that there actually is a company that thinks like that."
Though the app rolls out on iPhone first, they plan to expand to Android and web as soon as possible.
Robinhood only takes a few minutes to download and set up. Here’s what that process looks like:
Check out the the app’s pretty layout. This is where you’ll need to enter your invite code. (They’re being sent out in chronological order to each person on the waitlist.)
Once you log in, you can link your bank account and transfer funds to your Robinhood account by selecting your bank and entering your online banking password.
You’ll need to answer a few personal questions:
Then you’re pretty much set to go.
But before you can begin trading, you’ll need to wait for your information to clear and your bank transfer to go through:
But in the meantime, you can build a stock watchlist and start playing around with the app:
Then, trade away.
via Business Insider