Retail investors have famously stayed out of the startup world. Robinhood is attempting to change this by allowing the general public to invest in portfolios of “some of the most exciting private companies operating today.”
To do this, the company that pioneered the commission-free brokerage model has acquired access to eight startups, including Databricks, Stripe, Mercor, and Ora, grouping them into a vehicle called Robinhood Ventures Fund I. The fund, which also includes Ramp, Airvelex, Revolut and Boom, set out last month with an ambitious $1 billion target, but demand for this new way of investing in private companies was lower than expected.
On Thursday, Robinhood announced that the fund had been raised $658.4 million – which could reach $705.7 million if the underwriters use their full allocation. Shares priced at $25 in the offering began trading on Friday and closed at $21, down 16% on the day.
RVI’s reception on Wall Street stands in stark contrast to another effort to give individual investors exposure to bustling startups. When Destiny Tech100 – a publicly traded, closed-end fund holding stakes in 100 venture-backed companies including SpaceX, OpenAI and Discord – went direct-listed on the NYSE in March 2024, its shares soared from a reference price of $4.84 to an early trading high of $8.25, eventually closing its first day at $9.00.
The Destiny Tech100 has been climbing steadily since its public debut. The fund closed Friday trading at $26.61, a 33% premium to its net asset value of $19.97, meaning its shares trade well above the intrinsic value of its underlying holdings.
So what explains why retail investors aren’t 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 companies expected to go public at huge valuations: OpenAI, Anthropic, and SpaceX.
Robinhood is looking to address this. RVI intends to add more startups to the fund, with the goal of eventually having what Sara Pinto, president of Robinhood Ventures, described to TechCrunch as “15 to 20 of the best late-stage growth companies out there.” CFO of the companyShiv Verma told Axios Pro on Friday that Robinhood is eyeing a connection to OpenAI.
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But gaining access to these high-profile companies is not easy. Robinhood aims to reach its cap table directly through a primary capital raising or secondary share sale — and that’s difficult even for a firm with deep roots in Silicon Valley.
A cap table – the official record of who owns equity in a company – is closely guarded at most high-profile startups, and to win a spot one must either be invited by the company or buy shares from existing investors with the company’s blessing.
“It is very difficult to get into any of these companies and the investment rounds are very expensive,” Pinto acknowledged.
This is one reason why democratizing private markets is easier said than done, and why the companies most retail investors really want to own remain out of reach.
