Robinhood, founded in 2013 by Vladimir Tenev and Baiju Bhatt, has transformed stock trading. From a cumbersome process to a free, mobile-first experience, it aimed to democratize finance. But their journey was filled with challenges and crucible moments.

Robinhood's Founders and Early Days

The co-founders met at Stanford while studying physics. After graduating, one joined Lehman Brothers during the global financial crisis. Inspired by the idea, they started hacking on trading strategies in San Francisco. The act of entrepreneurship was intoxicating, and they worked tirelessly, often waking up and sleeping with the business.

The Birth of a Mobile Trading Revolution

They worked on two trading companies that failed but noticed glaring shortcomings in the financial industry. The rise of electronic trading, mobile platforms, and discontent among young people created an opportunity. They designed Robinhood with a modern social media app look and feel, making it easy to use and commission-free. This opened up the market to more people, especially young ones.

Overcoming Skepticism and Regulatory Hurdles

Many were skeptical about the free trading model, but the founders believed in alternative revenue streams. They faced regulatory hurdles as a regulated entity, needing to demonstrate capital and get the license. They pitched to investors, committed to not paying themselves until approved, and got creative to overcome the catch-22 situation.

Generating Early Interest and Going Viral

Backed by VC financing, they looked for ways to generate interest. Inspired by Mailbox, they created an incentive for early adopters to share the product. The waitlist went viral on Reddit and Hacker News, with 50,000 signups in the first week and a million in the first year. This was a turning point, crossing the threshold from a financial service application to a culturally relevant one.

Converting Interest into Industry Change

When Robinhood launched publicly in 2015, hundreds of thousands on the waitlist converted to users. However, in 2019, incumbent competitors dropped commissions to zero, causing stock price drops and a need to distinguish themselves. They faced financial chaos in 2020 with trading volume exploding and system outages but managed to scale.

The Meme Stock Frenzy and Crisis

In 2021, the meme stock phenomenon emerged, gripping the market. Robinhood was thrust into the global spotlight, facing a $3.7 billion collateral call. They worked to lower the requirements and raise capital, but the restrictions on buying meme stocks sparked public outrage. They had to navigate through a difficult press cycle and rebuild trust.

Challenges in a Changing Market

In 2022, with rising inflation and interest rates, trading activity declined, and nearly half of users left. The Fed's rate hikes made investing less attractive. Robinhood had to adapt and re-invent, focusing on active traders and diversifying product offerings.

Serving a New Generation of Investors

They prioritized active traders and expanded beyond equities trading. With retirement accounts, high-yield cash suite balances, and securities lending, they served a wider range of customers. The evolution of the product stack was a reflection of the team's growth and the changing needs of the millennial generation.

Building a Legacy for Financial Empowerment

The strategy worked, and Robinhood set new revenue records in 2024. Despite having fewer users, they remained focused on giving people control of their finances. The company's legacy is not yet written, but they have earned the right to keep playing. They believe in using technology to solve financial problems and making tools available to mass-market consumers.Credits: Crucible Moments is produced by the Epic Stories and Vox Creative podcast teams, along with Sequoia Capital. Special thanks to Vladimir Tenev, Jason Warnick, Micky Malka and Andrew Reed for sharing their stories. Incidental audio created by Elevenlabs, a Sequoia Partner.