How RobinHood beat wall street

Reaching a $35 billion valuation and 23 million users

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Find and Scale
October 10, 2024

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Unicorn Startup vs Billion Dollar Banks

Robinhood disrupted the finance world by opening Wall Street to everyday investors. Founded by two Stanford grads, the startup’s commission-free model quickly amassed over 23 million users and reaching a peak valuation of $35 billion.

Startup Story of BeReal

The Path to Millions of Users

Robinhood was created to make stock trading more accessible by removing the high fees of traditional banks and trading platforms. Founders Vlad Tenev and Baiju Bhatt, both with backgrounds in finance, saw how these fees locked out smaller investors, motivating them to create a commission-free platform that leveled the playing field.

"We wanted people to feel part of something new, accomplishing what the banks had failed to achieve."

Co-Founder Vlad Tenev

The key to their early success was a viral referral program they launched in 2014. By creating a waitlist where users could "move up" by referring friends, Robinhood harnessed the power of social sharing and gamification. This strategy fueled growth, building a waitlist of nearly one million users before the platform launched in 2015.

The promise of commission-free trading—a concept that was unheard of at the time—generated significant buzz. Once the app went live, Robinhood’s mobile-first approach appealed especially to younger investors, who found traditional financial services cumbersome and expensive. With the high growth of their app the founders

“We saw the need for authenticity, especially among younger generations, if we could one get one friend on the app, the rest of their social circle would also join”

During the COVID-19 pandemic, the platform saw explosive growth as retail investing surged. By 2021, Robinhood had amassed over 23 million users, driven by a mix of viral marketing, user-friendly design, and the removal of barriers to trading.

Valuation, Controversy, and Challenges

Robinhood’s rise wasn’t without setbacks. Despite attracting 23 million users, the startup faced serious challenges. Its reliance on payment for order flow—earning revenue by routing trades through market makers—sparked criticism and regulatory scrutiny.

“We knew that our users wanted transparency and easy of use - something that was non existant with the larger banks.”

The biggest controversy hit during the GameStop trading frenzy in early 2021, when Robinhood restricted trades on highly volatile stocks. Users accused the platform of protecting the very hedge funds that they had promised to fight back against.

“It was a decision to protect the firm and customers amid liquidity concerns. Now that we have millions of users there are more rules to follow.”

Despite the backlash, Robinhood pushed forward with its 2021 IPO, reaching a $32 billion valuation. However, profitability remained elusive, and fines—including a $57 million penalty from FINRA—added to the startups challenges.

Investors and regulators continue to question whether Robinhood’s model is sustainable long-term, as the company navigates ongoing legal and reputational risks.

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Odin & Hari