in August, in part because the site’s users

included hedge funds scanning for trading

patterns they could profit from.)

Financial threats loom, meanwhile, for

all brokers. Repetto, the brokerage analyst,

predicts that trading volumes will decline as

the pandemic eases. And payment for order

flow, Robinhood’s main artery, may itself be

at risk. Tabb, the Bloomberg Intelligence

analyst, expects that pressure from consumer

advocates will lead the SEC to require broker-

ages to display prices differently for the “odd

lots” that include many retail trades. Those

changes would narrow the bid-ask spread on

such trades—hurting market makers’ margins

and leaving less revenue for PFOF. Tabb says

that such changes, along with fierce competi-

tion, may eventually even lead brokerages to

reimpose commissions, undoing the era that

Robinhood ushered in.

Warnick, Robinhood’s CFO, flatly rejects the

idea that the company might charge commis-

sions. But for now, Robinhood continues to

keep its actual revenue-generating plans close

to the vest, even as it grabs customers at a

breakneck pace.

The likelihood of Robinhood turning those

traders into profit-generating, long-term

customers seems uncertain—especially given

the incumbency and deep pockets of its com-

petitors. But Joe Grundfest, a Stanford Law

School professor and former SEC commis-

sioner who knows Tenev and Bhatt, says such

skepticism underestimates the power of a true

innovator. “By that logic, Walmart should be

kicking Amazon’s ass, CBS should be wiping

the floor with Netflix, GM should be kicking

the corn out of Tesla,” he says.

All Vlad Tenev has to do now is execute like

Jeff Bezos, Reed Hastings, and Elon Musk.

mated solutions are preferable to the old-fashioned (and expen-

sive) alternative of hiring humans. “Most people aren’t yearning

for a call to customer support,” he says. “They don’t want to talk to

an agent. They just want the quickest solution to their problem.”

Nonetheless, in a bow to reality and to its own future ambitions,

Robinhood is hiring hundreds of agents to staff call centers in Ari-

zona and Texas. The company says these agents are now making

outbound calls in response to digital requests for help—but it has

no immediate plans to publish a phone number.

R

OBINHOOD’S AWKWARD adolescence hasn’t kept

it from raising very grownup sums. In September,

the company announced it had raised $660 million

in a new funding round from prominent venture

capital firms including Andreessen Horowitz and

Sequoia Capital. Following two earlier rounds this

year, Robinhood has raised $2.2 billion in total, with a current

valuation of $11.7 billion. The gusher of cash amounts to a bet that

Robinhood will challenge or even eclipse the old guard.

It is also a bet that Tenev is ready to run a public company. Robin-

hood is expected to announce an IPO in the coming months, and the

company said on Nov. 20 that Bhatt would step down as co-CEO,

leaving Tenev as sole chief. (Bhatt will remain on Robinhood’s board

and work on product development.) Tenev is reading history to find

leaders to emulate. “Alexander the Great was a leader who led from

the front,” he enthuses. “That courage and boldness is inspirational.

Alexander was on his horse and going to battle while his generals

were still talking.” His own supporting cast of generals, meanwhile,

now includes more seasoned executives, including Jason Warnick,

an Amazon veteran who became CFO in 2018, and Dan Gallagher, a

former SEC commissioner who is now Robinhood’s top lawyer.

For now, the team has momentum on its side. The pandemic-

driven surge in trading has produced a bigger pie for all brokers:

TD Ameritrade and E*Trade recently posted record quarterly trad-

ing revenues (each had PFOF in part to thank). Even so, Robin-

hood’s progress stands out: Investors are downloading its app at a

pace 10 times as great as those of rivals.

Still, impressive scale doesn’t guarantee Robinhood will evolve

into a Fidelity or Charles Schwab. Those companies’ diverse,

profitable revenue streams include asset management and banking

services, as well as interest earned from customers’ cash balances.

The incumbents are also beefing up their offerings by consolidat-

ing: Charles Schwab is in the final stages of acquiring TD Ameri-

trade, while E*Trade has just been absorbed into Morgan Stanley.

Building a comparable suite of services at Robinhood will take

time and money—and it’s no sure thing that current customers

will embrace them. Some market-watchers suspect that many

investors use Robinhood for entertainment, wagering small

amounts on its zippy platform while keeping the bulk of their

wealth elsewhere. Robinhood’s small account sizes lend credibility

to that theory. “A lot of people use it as a secondary brokerage—

like a play account,” says Casey Primozic, who runs a site called

Robintrack that compiles data about the most popular stocks on

Robinhood. (Robinhood stopped sharing data with Robintrack

$

11 .7B

ROBINHOOD’S VALUATION

on the private market, based on a funding round

in September. The valuation implies that venture

capital investors believe Robinhood can

both keep growing and become profitable.

INVESTOR’S GUIDE • ROBINHOOD