Retail investors are famously locked out of the startup world. Robinhood is trying to change that by allowing the public to invest in a portfolio of what it calls “some of the most exciting private companies operating today.”
To do this, the firm that pioneered the commission-free brokerage model has secured access to eight startups – including Databricks, Stripe, Mercor and Oura – and grouped them into a vehicle called Robinhood Ventures Fund I. The fund, which also includes Ramp, Airwallex, Revolut and Boom, was launched last month with an ambitious $1 billion demand target, but did not invest in private companies this month. expected.
On Thursday, Robinhood announced that the fund had departed $658.4 million – which could reach $705.7 million if the underwriters use their full allocation. The shares, priced at $25 in the offering, began trading on Friday and closed the day at $21, down 16%.
RVI’s reception on Wall Street stands in stark contrast to another effort to give individual investors exposure to busy startups. When Destiny Tech100 – an exchange-traded, closed-end fund that holds shares in 100 venture-backed companies, including SpaceX, OpenAI and Discord – went live on the NYSE in March 2024, its shares rose from a reference price of $4.84 to an opening trade of $8.25, eventually closing at $9.0 on the first day.
The Destiny Tech100 has continued to climb since its public debut. The fund closed trading Friday at $26.61, a 33% premium to its net asset value of $19.97, meaning its shares are trading well above the actual value of its underlying holdings.
So what explains why retail investors aren’t nearly as excited about Robinhood’s fund as they are about the Destiny Tech 100? The most likely explanation is RVI’s lack of exposure to the companies widely expected to go public at huge valuations: OpenAI, Anthropic and SpaceX.
Robinhood is looking to solve this. RVI intends to add more startups to the fund, aiming to hold what Robinhood Ventures president Sarah Pinto described to TechCrunch as “15 to 20 of the best late-stage growth companies out there.” The company’s CFOShiv Verma, told Axios Pro on Friday that Robinhood looks at exposure to OpenAI.
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But securing access to these high-profile companies is far from straightforward. Robinhood aims to tap into their cap tables directly through primary capital raises or secondary share sales – and that’s difficult even for a company with deep roots in Silicon Valley.
A cap table — the official record of who owns shares in a company — is closely guarded at most high-profile startups, and winning a spot on one requires either being invited by the company or buying shares from existing investors with the company’s blessing.
“It’s very difficult to get into any of these companies, and the investment rounds are very expensive,” Pinto acknowledged.
It’s just one of the reasons why democratizing private markets is easier said than done, and why the companies most retail investors actually want to own remain out of reach.