How Robinhood Made Investing Easy and Accessible to Everyone

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Welcome to success story, the mostuseful podcasts in the world. I'm your host, Scott Dclary. The successstory podcast is part of the hup spot podcast network. That spot podcast networkis the audio destination for business professionals who seek the best education and inspiration onhow to grow a business. How spot podcast network hosts act as onman mentorsentrepreneurs startups and scale ups through practical tips and inspirational stories. Listen, learninggrow with the Hupsot podcast network at House spotcom slash podcast network. Today I'mgoing to break down the story of Robin Hood, the Fintech company that justipoed and has billion dollar plus valuations. I'm going to walk you through theirstrategy for growth, how they took their product to market and how they evolvedas a company, some of the hurdles, some of the ethical and regulatory hurdles, they went through on their rise to the top. This is abusiness case study. So today we're going to talk about Robin Hood and howRobin Hood basically made investing easy and accessible for everyone, which in it isa feat in it of itself. But let's break down how they actually didit. So what I want to do is. I want to talk aboutthe industry, I want to talk about the status quo, I want totalk about the Robin Hood Story on talk about the founders, the revolutionary businessmodel, and then I'm going to talk about after I go through the wholestory and we talked about how they've grown and how they've gone through ups anddowns and highs and lows, and there's been some positive there's been a lotof negative to and then let's talk about where they are now and then I'mgoing to bring it all back with a really, really smart, viral taketo market strategy that made all this happen. But first I want to I wantto walk you through the story and then I'm going to show you whatactually let them achieve such massive growth. So first let's talk about Fintech,financial technology. Financial Technology, or Fintech, is a rapidly expanding industry. We'retalking about CRYPTO, we're talking about Robin Hood, we're talking about allthese new financial vehicles and instruments and APPs that are letting people approach finance differently. FINTECH companies are focused on adapting their...

...products according to the preferences of ayounger generation and demographic we're talking simplicity, user friendliness transparency. These are theguiding principles of Fintaic apps that just crush it, and a company that's beensuccessfully doing this is Robin Hood. Robin Hood was one of the first.Now there's a lot of Fintech APPs, the Robin Hood was one of thefirst that really focused on these three guiding principles being the things that get ayounger generation excited about finance. Robin Hood is leading the modernization of investments becauseit offers everyone equal opportunity to participate in financial markets, and before Robin Hoodit wasn't so easy. You had there were a few options, but youcould have some sort of broker are, you could go to a waterhouse,you could go to a variety of different places that would allow you to invest, but it definitely wasn't as simple as picking up your phone, opening anAPP and investing from the comfort of your couch. There was steps to thisand also some of the ways that you could invest required a lot of capital, so some people wouldn't even talk to you unless you were investing x amountof dollars. So Robin Hood is getting rid disrupting that entire system. Totallydemocratizing finance and investment vehicles. So let's talk about the founders. Let's talkabout let's go way, way, way back. So to stand for graduates, I know it's kind of a little bit classic start up story, butanyways, to stand for graduates, Bej you Bat Vladimir Tenev. They foundedthe company. So, following their experience in the in them trying to invest, they decided that they could do it better and they started Robin Hood inMenlo Park, California. This is obviously a very, very popular start offspot. So this is a little bit traditional. This is, you know, classic Silicone Valley. The name Robin Hood was drawn from the fairy tale, and Robin Hood the Fairy Tale, you know, the main characters missionis to steal from the wealthy give to the poor. Well, slight spenton this. The Robin Hood was to give access to financial markets to anyone, not just the wealthy. And since...

Robin Hood's launch in two thousand andthirteen, it's been quite evident that consumers find value in their product. Theyjust ipoed, so they've been in the news a lot recently. Just ipoedat a thirty five billion dollar valuation. So there's definitely a product market fitthere. There's a need for this. So Robin Hood users during two thousandand fifteen to two years after it launched were over eighty percent millennial, onaverage twenty six years old. So, as a result, founders proved outtheir thesis that young people were not opposed to participating in financial markets. Itwas just that their wealth or their access or their knowledge or the cumbersome natureof the existing systems in place stop them from truly being able to access investmentchannels. So the reason why Robin Hood was so successful was because, firstof all, it was building an APP in the fintext space, allowing anybodyto invest in anything, but also they had a very interesting business model.So Robin Hood began as a platform for trading stocks and etfs. The RobinHood Platform offer this feature without charging users a commission fee, which is strange. So in response to the growing subscriber numbers, not the revenue, thecompany was able to raise significant amounts of money and venture capital. Let's justpause on that for a second. So what a lot of companies, nota lot, but some companies, do is they'll focus on getting critical massand they'll focus on attracting hundreds of thousands or millions of customers and then andthey will be not profitable, they will not be making money. This issomething that happens in startup land. So they will not be making money,they'll be getting a lot of subscribers, they will usually be getting those subscribersat a discount and then they'll be attracting venture capital money to allow them togrow. In the venture capital money is a money that is actually sustaining thecompany and as a company grows, there will be a point in the company'sfuture when they'll try and incorporate more heavy handed revenue model so that they canbecome profitable. One example that you're seeing this with right now, that we'reactually living through, is Uber. So Uber originally they basically artificially lowered theprices so that they would get a ton...

...of people, so hundreds of millionsof people on the APP, and now they're trying to be profitable. Soif you've noticed, your Uber Rides are getting a little bit more expensive.Will now shareholders are asking for some sort of profitability. Other companies that arenot profitable. If I'm not mistaken, Netflix is not profitable. Yet Uberwas not profitable for the longest time and I don't even know if they arenow. So this is not new, but it's something that companies do justto win business from the start, from the GECKO, but regardless. Let'sgo back to Robin Hood. So Robin Hood has a huge growing subscriber base. They are not charging fees for these traits or not charging commission fees,and they derived revenue from payments for order flow. So they got rebates frommarket makers and trading venues. They they use those rebates as revenue. Basically. Now this was much different than the old system of collecting brokerage feast.So this business model was truly revolutionary and to expand the company's consumer base andgenerate more revenue revenue streams, they did could eventually add on a subscription model, which we'll talk about in a second, but for a long time they werereally disruptive because they were charging absolutely nothing and if you think about thetraditional broker that would allow you to buy stocks and trade and whatnot, theycharge fees. So they charge a significant percentage on every single trade. Socost a lot of money for an individual to buy something. So Robin HoodGot Away with most fees. Now, in two thousand and sixteen they didoffer a ten dollar per month subscription plan, which still was way less than whata traditional broker would charge. So in two thousand and sixty may launchedthis subscription model. They charged ten dollars for a monthly fee for the subscription. This would allow users to upgrade to a quote unquote, complete Robin HoodPlatform. And what the gold subscribers that? It was called Robin Hood Gold.What the gold subscribers would get on top of just being able to trade, which already was not there was no charge for those trades. Goal subscribershad access to professional research reports, they...

...can trade on margin and they candeposit money instantly from their trading accounts. So they added on a whole bunchof other things that broke ridge is usually do for still a relatively low fee. Again, very very disruptive. Now, if you actually use Robin Hood it'savailable at a much lower price at five dollars per month. So itwasn't even something they were depending on for revenue. In addition, Robin HoodsCash Management Services allowed users to have uninvested funds from their broke cours account managedby the company offering a higher yield than most banks. So FDIC insurance isalso available for accounts with managed funds of up to one point two five million, meaning if you just had money on Robin Hood and you weren't even investedin any stocks or ets or anything else, you could just let that money sitthere and they would manage that money for you and invest it and theywould give you a higher return than any bank would usually ever give you.And as Robin Hood grew, they started to engage in other interesting fintach ecosystems, let's call it. So they started to work with Crypto. So thatwas the most recent product from Robin Hood where they realize their target market,their audience or subscriber, cares about new age, forward thinking financial tools,which cryptocurrency is obviously one of them. So they allowed their audience to investin Crypto and that was a new financial market that most traditional brokers largely ignored. So, as a result, Robin Hood again was able to present anew opportunity to a key demographic they cared about, that was their subscriber base, in a way that was non complicated, very user friendly and provided a littlebit of safety compared to some cryptocurrency exchanges that perhaps didn't have the sameinfrastructure or security behind them. So they tailor again to somebody who wants toget into markets. But you don't have to be a developer or somebody highlytechnical to use Robin Hood and feel safe. For example, one thing they didwhich allowed people to feel a little bit more comfortable about their cryptocurrency purchaseswas to protect their users from drastic price...

...changes. So Robin Hood actually restrictspurchases to one percent and sales to five percent. This prevents orders from beingexecuted if a cryptocurrency price radically changes over or below five percent. So,of course, with safety becomes comes limitations, and some people don't like that,but for the person who isn't technical or isn't as aware of how volatilecrypto markets has, this is of safety. This is a safety tool that canactually benefit them, and taking steps like this was one of the mostattractive things for young investors who were just trying to learn how to invest.Again, you have a lot of young people on the platform and and RobinHood Time and time again demonstrates his ability to think like a consumer and actin a way that meets its users evolving needs, unlike traditional brokerages or traditionalinvestment institutions that are very, very slow to react. Now, as theplatform matures, more people are using it. Of course, it's a financial tool, which means that it is under a lot of scrutiny when things don'twork well, and that's something that we have to take into consideration as wellas we're talking about Robin Hood Story, because it wasn't all positive. Soup until March of two thousand and twenty it was very positive. On Marchsecond of two thousand and twenty, Robin Hood experienced a massive service outage onone of the most intense trading days in the history of the US financial markets. The outage, unfortunate, really lasted for an entire day, causing massivedamage to its users. It was so bad that several media outlets said thatthis would be the downfall of the FINTECH giant. However, outrage did fadeand Robin Hood rebounded quickly. To point to some numbers, by two thousandand twenty and the two thousand and twenty, the firm proved to maintain market shareabove fifty percent for all net new brokerage accounts opened in the US,which is more than all incumbent legacy brokerage firms combined. More than three millionRobin Hood accounts were opened in the first half of two thousand and twenty alone, and as Robin Hood now grows and in two thousand and twenty one nowit's ipoed, we also have to consider the ethical responsibility of being the incumbentthe main investment brokerage tool that now people...

...use. So, for example,we have to consider the fact that the company is obligated to its users toprovide and maintain solid, consistent information for storing all the data, protecting userdata, and also to monitor markets and to make sure there's uptime, becausepeople's money is invested here, as well as monitor cryptocurrencies and cryptocurrency markets.There's a lot of things that are moving that Robin Hood has to keep upwith, which means there has to be some smart people that are keeping upwith these things and are focused on delivering the best technology and the most securetechnology for one of the largest investment vehicles that now probably has like several severalseveral billion dollars of assets under management and, in all seriousness, could be responsiblefor the livelihoods and retirements of many individuals. One ethical dilemma that stemmedfrom Robin Hood's growth and massive scaling over the past couple years was that it'sgiving financial power to individuals who may not understand what some of the things thatit offers are. So I'll give you one story. So in two thousandand twenty Robin Hood had an ethical issue involving the suicide of a twenty yearold man. He opened his account during the covid pandemic. He thought hehad lost over seven hundred thousand dollars by trading on the platform. His accountshowed a seven hundred thousand dollar however, after they investigated, the user hadnot suffered losses of that size, but the Robin Hood APP had not includedthe stocks option positions. So as a result, that young man ended hislife due to a misunderstanding caused by a delay and seeing the correct account balanceon the application. So there is controversy whether or not Robin Hood is thatfault in the situation. On one hand, their opening markets and they're opening opportunityand they're giving opportunity to people that normally wouldn't have had it before,but on the other hand, with that opportunity becomes there's a lot of riskinvolved, because now you're giving people financial...

...freedom to invest as they see fit. Yet over all of this, over all of the ups and downs,the massive growth, some of the regulatory or concerns, some of the outages, some of the ethical concerns, Robin Hood has still maintained its position asone of the number one tools and instruments for people who are interested in investmentsand it is continuing to grow year over year and I do not see theuser base switching to a legacy brokerage firm just because Robin Hood is always focuson those three core tenants we talked about at the beginning, that usability,the simplicity and the affordability of the platform. And then just recently, if wefast forward to present day Robin Hood, they've just ipoed at a thirty fivebillion dollar valuation. So I can't see them slowing down anytime soon now, after this incredible success, I do want to take a second and walkthrough three particular things that Robin Hood did well. Outside of all the techand all the Ui Ux, all the things they have navigated over their growth, there are three particular things they did extremely well when they were taking theirproduct to market back in two thousand and thirteen. That are notable things.That are lessons that you have to learn from this story that maybe you canapply to your own business. So there are three growth lessons from Robin hoodstake to market strategy or take to market playbook that allowed it to secure overa million customers before they even had a product and that cascaded through Robin Hood'slife cycle to this to the thirty five billion dollar Ipoh. So I wantto go through these three growth lessons from the Robin Hood Story and I haven'tspoken about these yet. So the first when they were taking their product tomarket back in two thousand and thirteen was Fomo. They used Foma. Thatused a private Beta, invite only sign up list to get people to wantto sign up before they even had a product. They had a landing pagewith a sign up with a form that allowed you to sign up for aprivate Beta. They pushed a massive PR campaign around the private Beta, whichis picked up by made your news outlets,...

...cementing hundreds of thousands of initial customersbefore they even had a working product. And if you ever wanted to runsomething like this. You're setting up a website and then use something likea newswire or Presley or press hunt Dot ioh to get the word out andjust drive people to a private Beta. FOMO works. People want to bepart of something exclusive. The second thing they did was a game of FIDbeyond boarding experience. So after you signed up, a Robin Hood created areferral based on boarding process that offered rewards and prizes for joining the Beta.So after you signed up, you were presented with a graphic that showed howmany people were on a waiting list ahead of you. Once on the waitinglist, you had options to share a certain affiliate link that was unique toyou. That would actually move you ahead on the waiting list. So ifsomebody else join the Robin Hood Beta by clicking your link in an email,or if you posted this on social and somebody clicked on your social post andsign up for the Beta, you would be bumped up in the waiting list, so you would get there ahead of time. This led to exponential growth, numbering the millions of subscribers before the product even went live. To notonly did they have a private Beta, but then the game of fide theaccess of the private Beta and allowed you to share it and create this viralloop around the private Beta. And then, lastly, the most important. Ohactually, you know what, one more thing on that. If youif you want to do this yourself and you don't want to code it,there's actually a tool that you can use that's out of the box called prefinerycom. There's probably a few more, but that's the one that I've seen workand do this for companies. You can go there. You can set upyour own viral affiliate take to market private Beta program very similar to what RobinHood did. And lastly, the third thing that allowed them to get overa million customers before they even had a product was simplicity in their sign upprocess. So the number one problem the companies have when they're creating any sortof sign up or on boarding for their product or service or their hardware orwhatever it is, is they make it too confusing. To conflate it.We're talking about the on boarding that got them a million plus customers. Forthis on boarding, they had that page, remember that had that private Beta accesswhere you put in your you know,...

...your name and your email and yougot you got pushed into this line for private Beta access. That page, they removed all the text from that page, from that Web page,and they made the call to action as straightforward as possible. On that pagethat they were trying to get people to sign up to the private Beta on, they had the text that read Robin Hood, Zero Dollar Commission Stock Trading. Stop paying up to ten dollars per trade. And then the only butand they had on that page was one that said opt in to get earlyaccess. That's it, that's it said, that's all it's said. There wasa picture of somebody on a phone. It's sort of like a behind thetext, so it was like a nice little image, but that's allthe text that was on that landing page. When people hit that landing page therewas no other option. There was no more reading about Robin Hood,there was no more understanding about the team, there was no more looking at allthe different features and getting distracted. It was that sentence, email captureand a button and that's it. And that, combined with Fomo, combinedwith game of fine, blew up their waiting list so that they had overa million customers subscribe before they even launched a product. And then that iswhat kicked off this incredible story. It's incredible growth story. So Robin Hoodhas always been focused on making things as simple as possible for customers, soit only makes sense at the onboarding fell in line with that prerogative. Sotake some notes that virality, gamification, Faemo, simplicity. That equals yourbillion dollar IPO. Anyways, that's the story of Robin Hood. That's howthey started, that's how they grew. Scaled up en xt, I'd morethan ten x actually ipoed, and I hope that gave you some inspiration foryour business.

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