0
5
10
15 M.
ROBINHOOD SCHWAB TD AMERITRADE E*TRADECHANGE IN THE NUMBER OF ACCOUNTS, DEC. 2019 TO OCT. 2020
OCT. 2020
15 .0 M.*DEC. 2019
10.0 M.14.3 M.6.0 M.13.7 M.* ESTIMATERobinhood is attracting customers faster than rivals...
ESTIMATED AVERAGE ACCOUNT BALANCE, OCT. 2020
LESS THAN
$5,000ROBINHOOD SCHWAB TD AMERITRADE E*TRADE$255,000 $110,000 $80,000...but they’re playing with small stakes.
AVERAGE DAILY TRADES,* JUNE 2020
* TRADES THAT GENERATED FEESROBINHOOD SCHWAB TD AMERITRADE E*TRADE4,310 1,800 3,839 1,114...and those customers love to trade...
SOURCES: COMPANY FILINGS, JMP SECURITIESignored, then providing more lucrative financial services as those
customers mature.
For this strategy to work, however, Robinhood must prove itcan attain maturity itself. The company’s stumbles on tech execu-
tion, regulatory compliance and customer service have prompted
skepticism about its ability to offer products and advice to
wealthier clients. Other critics have faulted the Menlo Park, Calif.,
startup for promoting risky trading. Even as Tenev wrangles tod-
dlers at home, he’ll need to bring discipline to
a com pany prone to behaving like a hormone-
addled teenager.S
IGNING UP for Robinhood
can feel like navigating a lazy
mobile video game. Exuberant
screens promise, “There’s free
stock waiting.” Others offer a
“Robin’s reward” digital scratch-
and-win ticket—which in my case deposited
$3.24 worth of an obscure health care stock
into my new account. Within 10 minutes, I was
able to trade stocks and stock options. It’s all
a quantum leap from the last time I opened a
brokerage account, five years ago. That process
took days, involved fax machines, and, need-
less to say, offered no scratch-and-win prizes.
I’ve since experienced the design nudges
that Robinhood uses to encourage trading.
Flurries of notifications arrive, unbidden, to
alert me to price moves in stocks I own. (I
receive frequent pings about that health care
stock.) When I do something new, an on-
screen confetti shower celebrates my move.
Little wonder, then, that Robinhood has
grown so quickly and generated such feverish
activity. In the second quarter, its users traded
nearly 60 billion shares of stock, a 150% year-
over-year increase, eclipsing totals at Schwab
and E*Trade. In June, the startup outstripped
its rivals for the first time on a widely watched
metric called daily average revenue trades,
posting an average of 4.31 million, half a mil-
lion more than runner-up TD Ameritrade.
Robinhood’s dominance is no fluke. It
caught on by deploying the right technology
at the right time: It launched in 2013, just as
smartphones became ubiquitous. Bhatt and
Tenev, who met at Stanford University, also
absorbed the Silicon Valley ethos that design
is king. The pair labored over Robinhood’s
interface, teaching themselves typography and
iOS design while riding Caltrain commuter
rail and fine-tuning the app by asking count-
less strangers to try it. They also pulled off the
startup trick of persuading early customers
to refer friends, creating buzz without the ex-
pense of a marketing campaign. It didn’t hurt
that their Stanford circle featured a who’s who
of future Valley moguls, including Snapchat
founders Evan Spiegel and Bobby Murphy,
Instagram’s Kevin Systrom, and media gadfly
and venture investor Josh Constine, who couldINVESTOR’S GUIDE • ROBINHOOD
A BIG BET ON SMALL ACCOUNTS
Robinhood has capitalized on a surge in
stock trading among young “retail” investors.
Its challenge: getting them to park more money
with the firm.