Robinhood's CEO Recalls Earliest Days, Fundraising Process

After moving on from Chronos Research, a technology and software startup designed to support fully automated trading that was built by Robinhood Markets Inc HOOD co-founders Vlad Tenev and Baiju Bhatt, the two set out on a journey to raise seed capital. 

In 2012, Tenev and Bhatt raised about $3 million for Robinhood, which Tenev described as a difficult undertaking in an interview on "Earn Your Leisure."  

Robinhood's Fundraising Process: The money came from a large aggregated group of small outside investors. The team tried many tactics to raise the necessary capital, Tenev said.

"You could find Robinhood on AngelList in 2012 or 2013 ... a lot of people were skeptical, but there were some people that made early bets into the business."

Some of the early investors in Robinhood included Index Ventures' Jan Hammer, Google Ventures and Tim Draper. 

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"There were some people that got very excited about it and I think that they looked at the quality of the team and that we were really passionate and basically, wanted to give it a shot right away," Tenev said, adding there were also a lot of people who shrugged off the idea of a new brokerage platform. 

"They looked at the competitors and said there hasn't been a new brokerage in a long time. You'll never make money. You'll never get customers."

Tenev admitted there were a lot of reasons why a rational person would pass on the investment opportunity. Fintech as a category didn't really exist at the time, he noted. 

Another problem the Robinhood co-founders faced was in dealing with regulations in the space.

"We had to actually get all of the regulatory approvals and the license before we could start marketing a brokerage product because it was so regulated," Tenev explained.

"It was a little bit of a 'chicken and egg' problem because we needed the funding to get the license, but you know, people would be hesitant to give funding if they thought there was a risk that you wouldn't get the license to be a broker."

Tenev and Bhatt talked to approximately 75 investors in order to raise the $3 million for Robinhood, the CEO said. 

The Robinhood co-founders built the relationships with angel investors from scratch, he said: "Even though we had gone to Stanford, we were like, in the math department and people don't start companies out of the math department."

Building The Robinhood Team: Tenev didn't have a background in computer science, so he didn't have the luxury of knowing people with computing backgrounds.

The Robinhood founders took a more traditional approach to hiring, Tenev said. 

"We would get a booth at the career fair ... and we would collect resumes. Baiju and I would man the booths ourselves with our T-shirts and hand out swag. A lot of our really, really great initial employees were just from the Stanford career fair."

"I think if you are scrappy enough, there's a way to make it happen," Tenev emphasized. 

Photo via TechCrunch on Wikimedia Commons.