Robinhood Opens Venture Capital to Everyone

ringing the opening bell here at the New York Stock Exchange today.

Robin Hood is bringing seed stage VC directly to public markets with the IPO of Robin Hood Ventures fund to under tickle symbol RBI.

Well for $25 a share and with no accreditation required, everyday investors can now access a portfolio of 80 seed stage Y combinator startups.

Now this is a corner of Silicon Valley previously reserved for accredited investors as well as insiders, and here to break down the thesis as well as the risk reward profile is Rich Abraman, portfolio manager of RVII which great to have you here.

Thank you so much for joining me.

It's a pleasure to be here.

All you're fresh off ringing the opening bell this morning.

So tell us about the why and the timing for this fund.

Uh, the why is that Robinhood's mission has always been to democratize and give access to finance, and one of the most insular, hardest to access asset classes by definition is early stage venture capital, um, but by definition it also has the highest return potential, and so we're excited to.

Build a large diverse portfolio of early stage companies and give access to everyday Americans.

Yes, and for our viewers out there who might not be as familiar when we're talking about Seed Stage VC as well as Y Combinator, walk us through this.

These are startups, these are technology companies from software to space to therapeutics.

That are precocious, often young founders that want to dent the universe, and we give them the capital along with other investors in Silicon Valley to be able to do so.

And when we're talking about YC, we know that some famous startups have come out of there and some that we take for granted, whether we're talking about Airbnb or other companies out there.

So when it comes to this fund, which we're watching right now here on the screen to begin trading, can you tell us a little bit about the structure fees as well as?

Yeah, so, uh, well, I'll start with YC.

So if you don't know what Y Combinator is, it's a premier early stage incubator in the heart of Silicon Valley, and it funds precocious young founders that want to make a huge impact.

Um, the fee structure is the same as it is for traditional VC.

Uh, it's a 2 and 20% fee structure, uh, 2% of fees on the, uh, fund value, and 20% performance fee on capital gains, um.

I think that answers your question.

Yes, absolutely.

So when we're talking about this Robin Hood Ventures fund too, which we're awaiting trade, tell us about the difference from the other fund that Robinhood has.

So RBI fund one was concentrated positions in pre-IPO late stage private companies, which makes sense where if you're investing at a later stage, you kind of know who the market leaders are at that point.

And these are logos that you know it's OpenAI, it's Stripe, it's Data bricks, but Fund 2 is a large diversified portfolio of early stage companies.

It would be surprising if you knew any of them because they are young startups, often less than 1 year old, many of them pre-revenue, but the hope is that some subsection of that portfolio will be names that you know 10 years down the road.

And finally, you mentioned a lot of keywords here.

So when we're talking about risk versus reward, give us the reality when it comes to some of these startups.

Part of the reason why you have a large portfolio is because many of them will fail.

And when you have a company that's 3 or 6 months old, you don't have a ton of signal to be able to make that initial investment.

You're really assessing the kind of team and the market opportunity.

And so in the industry, you would say it's a power law dynamic.

Where almost all of the returns are generated by a very small subset of those companies, but the winners, if you get the unicorns or the decacorns or the scenticorns, they pay for all of the companies that might not be able to make it and hopefully a lot more.

So we're talking about exponential returns here, correct, if they're successful.

You talk about exponential increase in value from the entry price.

It's hard to talk about the return of what the fund will be, but.

Early stage investing is high risk, high reward, and the goal is that you are tapping into an asset class that has the potential to outperform all others.

And finally, Rich, before I let you go, of course you mentioned off the top that this is about democratizing access for investors out there and for viewers out there, tell us about the vision as you move forward for this fund.

Take it personal.

Like when I started my company, my parents couldn't invest in my company.

They weren't accredited investors, and they probably shouldn't have because when you invest in one startup or two startups, the likelihood that you catch the big winner is small.

You need a big portfolio and so to be able to allow, you know, when I was coming up, people didn't invest in startups.

Angel investing and technology was kind of a new concept and now almost everybody.

I know knows that you can invest in the next Facebook or the next DoorDash and so to be able to give you a vehicle by which you can do that in a diversified way is is a kind of a career moment for me.

Well, Rich, congratulations on the bell as well as this fund.

I understand this is a full circle moment for you, so thank you so much for joining us today on FinTech TV.

Thanks for having me.

Thank you so much.