It is well known that individual investors are excluded from the startup world. Robinhood aims to change that by allowing the public to invest in a portfolio of what the company calls “some of the most exciting private companies active today.”
To accomplish this, the company, which pioneered the commission-free brokerage model, secured access to eight startups, including Databricks, Stripe, Mercor, and Oura, and grouped them into an entity called Robinhood Ventures Fund I. The fund, which also includes Ramp, Airwallex, Revolut and Boom, set an ambitious $1 billion target last month, but demand for this new way of investing in private companies was lower than expected.
On Thursday, Robinhood announced that the fund had raised $658.4 million, which could reach $705.7 million if the underwriters exercise their full allocation. The offering began trading on Friday at a price of $25 and closed the day at $21, down 16%.
RVI's reception on Wall Street stands in stark contrast to other attempts to expose retail investors to hot startups. When Destiny Tech100, a publicly traded closed-end fund that owns shares in 100 venture-backed companies including SpaceX, OpenAI, and Discord, listed directly on the NYSE in March 2024, the company's stock price soared from its base price of $4.84 to an opening price of $8.25, and ultimately ended its first day at $9.00.
The Destiny Tech100 has continued to rise since its public debut. The fund closed Friday's trading at $26.61, a 33% premium to its net asset value of $19.97, with the fund's shares trading well above the actual value of its underlying holdings.
So why aren't retail investors as excited about Robinhood's funds as they are about Destiny Tech 100? The most likely explanation is RVI's lack of exposure to companies like OpenAI, Anthropic, and SpaceX, which are widely expected to go public at huge valuations.
Robinhood is trying to address this. RVI plans to add more startups to the fund, ultimately aiming to retain what Robinhood Ventures President Sara Pinto described to TechCrunch as “15 to 20 of the best late-stage growth companies.” The company's chief financial officer, Shiv Verma, told Axios Pro on Friday that Robinhood is considering exposure to OpenAI.
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However, securing access to these well-known companies is far from easy. Robinhood is aiming to get directly onto the cap table through a primary capital increase or secondary stock sale, which is difficult even for a company with deep roots in Silicon Valley.
Cap tables, the official record of who owns a company's stock, are closely guarded at most big-name startups, and to get a spot on the cap table, you either have to be invited by the company or have the company's blessing to buy stock from existing investors.
“These companies are very difficult to get into and investment rounds are very expensive,” Pinto acknowledged.
This is just one reason why democratizing private markets is easier said than done, and why the companies most individual investors actually want to own are currently out of reach.