Robinhood raised $280 million despite decrease in fintech funding - Business Insider

The mega-round is likely due to increased consumer interest as consumers look to capitalize on market volatility and lockdown measures reduce traditional spending. Robinhood's that allow users to trade commission-free and start with as little as $1 can be particularly attractive to consumers who are new to investing. And given the recent heightened market volatility, more people may be attracted to the allure of making fast money. increase in downloads and increased trading volume.

We believe Robinhood should exercise caution and focus the large cash injection into making its business model sustainable over the coming months. Leveraging this large raise to expand the company into a new office in Denver and a hiring spree may stretch the company too thin during the economic downturn.

In addition, we suspect it has yet to reach profitability since Vlad Tenev, the cofounder and co-CEO, previously to comment on whether the fintech is profitable. As a result, we think the funding should be used to develop and optimize products that will bring in revenue, such as Robinhood Gold, its premium account that starts at $5 a month and allows investors to trade with up to $1,000 of margin.

Establishing a sustainable business model would enable Robinhood to take full advantage of the opportunities brought about by the lockdown measures and market volatility, by earning a profit from consumers using its products. This would also improve its reputation as a sustainable business and justify its high valuation despite the economic downturn.

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