What’s Robinhood’s Next Chapter

So Robin Hood was founded 10 years ago With the mission to make uh to give Everybody access right to the trading Markets and then since then it's grown To be much more than that now you can Trade crypto you can save for retirement And you can do a lot of stuff on there To talk to us about the challenges that Still remain we have CEO Vlad Tennant Here and we will be speaking with Moderate moderator ramondolet thank you And let's welcome them to the stage Thank you [Music] [Music] Vlad it's always great to have you here At disrupt thanks for having me Roman The first time you told me it's the Third time right I think so although It's been a couple of years I joined you Guys in New York once and once before in San Francisco and we were very small Company yeah and it's been 10 years Since you created Robin Hood At first the mission was pretty clear it Was You can trade stocks without any Commission commission free trading it's A very basic and simple Mission Everybody could understand since then You've launched dozens of products so Many products it's hard to keep track Earlier this summer you announced that You acquired X1 a credit card company

That's right you launched crypto trading Of course retirement savings uh a way to Earn interests on on cash With Robinhood gold How would you describe the mission Statement for Robinhood today Yeah well the mission of Robin Hood is Broader it's to democratize finance for All and The idea that we had when we started it Which which I think is very very Powerful today is that Um If you're if you're someone that is Privileged in in the US you have access To all sorts of things like institutions Have access to trade unlimited amounts Uh commission free you get access to Excellent wealth management you don't Have to worry as much for saving for Retirement you get access to credit at Affordable rates and with great rewards And Um They're sort of these high barriers of Entry in brokerage it's either account Minimums or high account balances to Qualify for premium services And Robinhood wants to lower the barrier Uh both in terms of the user experience And the accessibility and also the value So if you hear about a Robin Hood Product being released to Market it Should be very very clear to you that

You're getting the best possible deal And the user experience is going to be Of the highest possible quality and of Course we started as you pointed out With trading and investing But more recently We've been helping customers with their Comprehensive set of financial needs so We see a world where We can not only help you trade but we Can help you save for retirement and we Can help you build up an emergency fund And we can help you sort of manage your Money holistically regardless of of what Stage you are and and really help you Achieve your financial goals and Um I think that's that's been really Resonating with customers and customers Are kind of pulling all these additional Products and services out of us so Trading it's it's elite as you said Crypto it's edgy retirement it's weird I Guess I wouldn't call it weird I don't Know if it fits with the demo of Robin Hood users Um I think that retirement is something That Everyone aspires to right a lot of the First Um a lot of people's first introduction To retirement is through an Employer-sponsored 401k and that's also For a lot of people their first kind of

Introduction to investing Um That said The nature of work is changing you know You run into a lot of people that don't Want to Work at a traditional employer they Don't want to feel like you know they're They're a cog in a machine at some big Company and having losing access to a 401k which has traditionally been the Most important vehicle driving Retirement Um is kind of a consequence of that so If you're an entrepreneur if you're Someone that wants to work for yourself Then you don't really benefit as much From something like a 401k and so Robin Hood released a product which is the First Ira with a match and it's really For people that want to manage Their retirement themselves They don't want to rely on an employer To do it because they're sort of like Self-driven they're solo entrepreneurs Or or entrepreneurs themselves and using Kind of our economics and our efficiency We can give them a match similar to how An employer would via 401K but uh Without without needing the employer Bring us best bring us back to the Meeting room when you were talking about The roadmap and you were like okay we Can launch this that or retirement why

Did you prioritize retirement over other Potential products Because we saw a big need it was Actually something that Um Probably we we started hearing about From customers Four years ago or so Um and We do a lot of Live customer research I Think it's somewhat rare for a financial Company because a lot of our competitors Tend to just look at what competitors Are doing and and build products that Way which one but uh The vast majority of them But uh Yeah we would go across the country and Talk to customers in their homes right Whether they be options Traders or you Know people that are building up Investment portfolios for the first time And everyone uh actually was was talking About investing in the context of Long-term goals that they want to Achieve retirement being a very very Important one and so we asked ourselves Like how how can we actually make a Retirement product that's not just Another account type that you select When you're creating a Robinhood account How can we make it so that we actually Show that Robinhood is going to help you Not just open an account and start

Investing but but reach your your dream To retire and so we started like Figuring out that this idea of Compounding is very very important you Know if you put a Six thousand five hundred dollars away Every single year and Robinhood is Capable of matching that and you do that Year after year Um that adds up to real money tens of Thousands of additional dollars and just Communicating that visually and making It clear how our offering can help People achieve that end goal um Well once we kind of figured that out we Realized that we had a special product For people and to see that grow to over A billion in Assets in the first couple Of months Um I think it's been It's it's been really really important For Robin Hood and for our customers and I think it shows us that we can help People not just trade and invest but Like achieve a really important Long-term goals as well And do you think Robin Hood is the right Brand for retirement savings given that People associate Robinhood with you know Very instant trades on the market right Now like every day Do you think it's the right brand I I Think that um Yeah it's an interesting question

Um I think Brands and products are more Connected than people think Um so of course the brand influences What kind of products people are Receptive to but the products influence The brand as well so I'll give you an Example Um I think a few years ago it probably Wouldn't have made sense because we Didn't have a retirement product so even Though we built all these tools like Recurring Investments that allowed you To to build up and and produce these Diversified portfolios not a lot of People would take uh Robin Hood Seriously for long-term investing I mean The same tools and kind of economic Benefit of no commissions that make it a No-brainer to be a Trader also make it a No-brainer to build a portfolio and Become sort of a passive long-term Investor But when we rolled out retirement now We're seeing Robin Hood Being mentioned and discussed in all Sorts of other forums like Bogle heads Or passive investing Forums on Reddit Where you know Robin Hood was probably Considered more of a toy product but now People are saying well look we're an Incredibly rational group of people we Know how compound interest works this Match starting at one percent and now We're offering three percent for our

Gold members is just a unbeatable deal So you have people saying like we just Can't ignore this anymore the value prop Is so strong and you're seeing more and More of that discussion happening across All these forums and I think over time That'll actually change the brand right Like it will become a brand that Transcends just active investing and Novice investing talking about forums And Reddit I have to mention the GameStop short screens at this point Did you build this project as a reaction To what happened in early 2021 when the Short squeeze happened and you couldn't Process orders no um you know we were Thinking about it before then I think The the reality was uh In 2020 and 2021 Um Robin Hood went through a lot of Growth it was a surprising amount of Growth I mean there were some days in Early 2021 where we processed you know 20 million trades per day like tens of Billions of traded volume right and uh Like the the volume increased three to Four x month over month and The product roadmap I think Unfortunately took a backseat during Those days I think the most important Thing was just making sure that we were Stable like we were yeah we were scaling We could actually like handle the the Demands on the business so um yeah I

Think we We did uh we made a lot of progress and Now you know the customers support the Infrastructure the the reliability of it Improved dramatically Um and as we kind of got out of that Into the new regime of high interest Rates we've been able to focus again on Kind of accelerating the product roadmap But 2021 and 2020 in 2020 we were sort Of focused on different things and now That the test has settled a bit can you Bring us back to the moment when you Realized that things were going sideways During the GameStop short squeeze and You wouldn't be able to process orders Did you receive a phone call yeah Um yeah I mean that was definitely a Stressful day I hadn't gotten much sleep Because Um We we had had our moments of instability And kind of service reliability issues In 2020 and I think we felt really good That we had moved past that right we had Just had the election which Traditionally is a very volatile time And a lot of our major competitors Actually had outages and Robin Hood Stayed up through that time Um but then early 2021 brought a crazy Amount of activity and Um sort of the The issues that we had with uh

Processing those trades definitely made A lot of customers uh unhappy but at Some point you had to you had to make a Call say okay let's stop everything Well um so the way it works is because Um Because I'm not a licensed broker I have Presidents of the Brokers that uh that Run kind of the the regulated entities So Um you know Jim who was the president of Robin Hood Securities our clearing firm Actually was the one that that made the Decision Um But yeah I think it was it was Incredibly difficult in the sense that We know customers were were not happy And you know I played back through my Head lots of times since that moment Um But we had no choice I think the Alternative would have been much worse Um and of course I know it's uh not satisfying for people Who were you know interested in trading GameStop that day and things like that But Um what we can do is learn from it and And make sure that we improve the Service and focus on providing Great Value and shipping more products to Customers do you think Robin Hood now is Rock Solid and it wouldn't happen again

Um We've made a ton of progress so I feel Very very confident that if the same Situation occurred we would be you know Across the board much better equipped to Handle it and you've launched new Features around stock trading as well is That right Oh plenty so one of the things that I Think we learned from the crypto markets Is Um Crypto has operated pretty well uh 24 7 Around the Clock you know you can you Can buy Bitcoin and any other Cryptocurrency they settle instantly and Um I think bringing the experience and Kind of the accessibility of that to the Traditional markets is something that is Is like very clearly uh the future so Earlier this year we've rolled out 24-hour market which is basically a way For customers to trade uh top individual Stocks and ETFs Around the Clock except on weekends and We've we've been expanding that offering Now it's close to a hundred individual Stocks and ETFs including many of the Most commonly traded ones and Um I think it's it's just another Example of how Robin Hood wants to push The industry and be at the Forefront of Providing tools and technology for Traders and investors and it's also

Something that I think paves the way for Us to expand the product internationally I mean if if you're in in Europe or Asia The overlap of your waking hours with Kind of Standard East Coast working Hours is pretty small so for those Customers uh 24-hour trading is even More important because you know it's Like going to a store that's only open While you're sleeping it just doesn't Make sense the experience is not quite There and and that makes it less Accessible to people yeah talking about International markets you you've teased For quite a while that you were going to Launch in the UK when is that going to Happen that's going to happen uh in the Next few months so you're you're Definitely right uh it's one of those Things that it was planned for 2020 but When covet happened and we were focused On scaling and making sure we were there For the customers that we had we had to To delay it a little bit and it was Painful and uh Unfortunately it was I think the the Right decision but now we're coming to The UK with a much better product much Better tools and much better uh offering Across the board so I'm very excited to Bring the best of American markets to to The UK market and and really become a Critical part of of our customers Financial experience after the UK do you

Have other plans for the markets yeah I Mean I think I mean I think that it's it's really Just the beginning I mean we've uh since The last time I was here at disrupt We've grown tremendously we were a small Private company then now we're a public Company Um but we're still only in the U.S and We're still starting to like take our First steps outside of novice trading And active trading Um I think that In addition to rolling out all sorts of Products to help customers manage their Money here we can expand uh overseas and As a technology company I think we have Certain advantages that our competitors Can't match we don't need a ton of brick And mortar we rely on automation to uh To provide a lot of the services that we Offer and so we can take the Infrastructure that we're building and Now expanding to the UK to expand to Europe to Asia and and really to make it So that anyone with a smartphone can Access robinhood's products and services And we can help them achieve their Financial goals at the lowest possible Cost and with you know the same Delightful experience that customers Have come to understand us with stock Trading here yeah let's let's switch Gearb here a bit you mentioned that

You're a public company now Um before that you you had some large Individual investors one of them was was Sam Bachmann freed He owned I think seven percent of the Company and you bought back his share Recently because He's no longer an investor in in the Company we did yeah that's right that's That's a really good friend you had here Do you know him personally Um I've had a couple of conversations With him but I wouldn't say I know him Super well no So how did he get in touch with you and And and Expressed interest in Robin Hood and Buying a steak in Robin Hood well to be Clear Um I think his his entity Um and this is all very very complicated Emergent Fidelity shares uh was the Entity behind Sam bankman Freed's uh Investment they just purchased shares to My knowledge on the open market once we Were public so you know when when you're A public company anyone can buy shares You can buy shares I mean uh the uh There's there's really I'm not in the Middle of those of those transactions um And so I I think that's what ended up Happening they were just buying shares On the open market and the best of my

Knowledge and when did you decide that You didn't want him as an investor Anymore Well I think that um Once you know the all the issues with FTX happen in November and Um sort of uh the state went through Bankruptcy proceedings and and went Through the courts Um we just saw an opportunity to remove Sort of the the overhang and the Distraction and we have the the balance Sheet to be able to do that comfortably You know uh with over 6 billion in cash We saw an opportunity to kind of not Just remove that distraction but sort of Deploy that Capital to lower the number Of outstanding shares and it was sort of A win-win like good for us but but also Good for shareholders Do you think at some point he it would Have been even more interconnected it Could have been even more interconnected Between FTX and Robinhood And that they could have Basically bought Robin Hood Um I don't think so uh I think I mean it's Obviously you know before before Difficult to rewind time and uh and Assume uh any of these things but uh Bajre and I were from the very beginning Very very passionate about building a Public company that uh

Could Outlast us right would be around For hundreds of years with the ideals of Like Not just providing a great product but Really putting money back in customers Pockets Um and I think We've just we've taken like one or two Steps there but uh there's just so much Left to do and that's why I'm I'm so Passionate about all these things like Not just retirement but getting Robin Hood in every single country uh getting Super deep and helping customers with Like every aspect of their financial Needs not their not just their trading Um And I think there's just much to do so Yeah it never really even occurred to us It sounds like you're well positioned For the long term given High interest Rates uh you can you know create savings Products and and benefit from these high Interest rates Do you have a plan in mind if the Interest rates go down You know it's really funny because uh I'd say a year and a half ago when Interest rates were zero yeah uh there Was this whole thing like uh zero Interest rate phenomenon right and um The the bulk of Robin Hood's Revenue was Transaction based and the criticism Behind Robin Hood was well you've done

Really well when there's like stimulus Going into the market interest rates Have been zero so people are investing In stocks more what's going to happen When interest rates go up it was one of The most common questions and it's taken A lot of work over the past year and a Half but we've transformed the company Entirely and the way we we went about Doing that is we saw the increasing Interest rates as an opportunity I mean There's a lot of companies that have Thrown up their hands and they're saying You know we're just gonna like weather The storm and wait for the markets to Improve the fed's gonna cut interest Rates eventually like it's a a bad time To be a mortgage will happen anytime Soon anyway so right I mean it's it's a Bad time to be like a mortgage lender Right now right for sure but um we Didn't take that approach we were like These are high interest rates this is an Opportunity for us how can we serve our Customers and we rolled out uh Robin Hood gold which offers customers among The highest possible yields on their Cash right now you're getting 4.9 Percent here uh in US Dollars which in The past you would have to be an Institutional Investor I mean to get That type of rate at like a traditional Brokerage firm you'd need you know Millions of dollars committed in your

Account and we're just making that Available to to everyone and of course Following that up with all the work that We've done for for active Traders Retirement Um it's kind of transformed the Financial picture of the company to one Where rather than 80 90 percent of our Revenue coming from transactions uh more Than half comes from net interest margin So interest that we collect on assets And we've been able to do that while Also putting more money in our customers Pockets through high yield and through Retirement so it's it's taken a lot of Work but I think the work we've done is Kind of Diversified Robinhood and made Us a stronger company that can weather All kinds of different market conditions From zero interest rates to crypto Environment so yeah let's say let's come Back to what happened over the past Three years There was a crypto boom now it's a Crypto winter Um stock trading was really popular During and after kovid now less so Because of high interest rates Do you think you found a way to create Predictable Revenue quarter after Quarter and as a public company it's Going to be easier going forward Well if you look at financial Performance of the company we've had you

Know positive and growing free cash flow Four quarters in a row Um we had our first Gap profitable yeah Quarter last quarter Um which is a huge milestone I mean it Took took a lot of work Um the same this quarter Gap Profitability I can't make any any Predictions about the quarter uh Otherwise the SEC is going to yeah nice Try nice try Roman um But I'm just asking questions you know I'll tell you over the long run Um You know we're we're still in the U.S We're just beginning our our path to Offering more products to customers you Alluded to credit so we we made uh we Acquired an awesome team X1 that has a Great credit card and we've been Thinking about that space for a while And if you think about like Where there's a lot of opportunity and Financial services consumer credit and Offering those products to customers Making them more useful Um I I think that's a that's a huge Opportunity for us and we see that we Hear that from our customers so Um yeah long-term uh we're still in kind Of the the first inning of our journey All right so when can we expect a Robin Hood credit card uh I know the the team

Has been working very very hard uh on That so uh stay tuned in the next few Months I I can't say anything specific But uh Yeah I won't not say anything thank you For the conversation Stay Nemo as Robin Hood keep pivoting Until you find a way out and thank you Vlad for me thank you [Music]