The Lotus slowly pulls into a parking lot in a nondescript office park. Tenev, wearing jeans, a black T-shirt, orange flip-flops, and a friendship bracelet made by his young daughter, walks into his office. He’s still thinking about cars as he presides over a cross-team strategy meeting called “Black Widow” internally. The theme: a redesign of a broad platform. The goal, Tenev says, is to make Robinhood “more serious.”
The team was discussing a new yellow color for one of its app pages, but Tenev wasn’t happy. “I think it’s better, but I don’t think it’s iconic,” he said. He then launched into a short monologue about Lamborghini’s Countach, the 1970s sports car that upended the automotive design world by replacing friendly, bubble-like shapes with sharp fins and a streamlined body.
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The discussion turned to a technical issue, with Tenev asking the team to get rid of the “loader,” the icon that Robinhood and other sites use to tell users that a page is about to appear. Some team members objected, saying it was impractical, but Tenev smiled and persisted.
The meeting, however, was dominated by discussion of color. The team spent 10 minutes arguing over shades of green. A new yellow block prompted cheers. The team briefly considered changing the familiar “green up” and “red down” stock prices until someone pointed out the “cognitive load” of challenging a learned behavior.
The obsession with color and design runs deep at Robinhood. Edward Tufte’s masterpiece, The Visual Display of Quantitative Information, is revered within Robinhood. When asked which companies serve as inspiration, executives won’t mention brokerages or banks: Tesla and Apple are Robinhood’s aesthetic North Stars.
Co-founders Vlad Tenev, right, and Baiju Bhatt attend Robinhood’s initial public offering at the New York Stock Exchange. Credit: Mark Lennihan—AP Photo The obsession with design began with Tenev’s co-founder Baiju Bhatt. Bhatt stepped down as co-CEO in 2020 and left the company in March to launch a soon-to-be-announced aviation startup. Bhatt, who still has a full head of shoulder-length hair (Tennev cut his flowing locks into a fluffy bob), is praised by those around him as a product genius. He is more emotional than Tenev, who is almost inhumanly taciturn.
“One of the highest levels of product design is when you see and use a product for the first time and you can feel who designed it,” said Barth, who considers Apple a preeminent example of product design. “I say that to distinguish it from products that feel like they were designed by a committee.”But unlike other design-focused companies, Robinhood’s goal isn’t to encourage users to buy cars or tablets; it’s to induce a single action: trading stocks. Like other app developers, Robinhood strives to ensure that every screen and every click delivers a small pleasure.
All of this has made stock trading faster, easier and more enjoyable than ever before. But it has also made Robinhood and its founder, at times, an object of widespread distrust and even hatred.
4 a.m. calls rarely bring good news, and one on January 28, 2021, was no exception. The Robinhood team tried to contact Tenev, but he was working up to 20 hours a day for several days in a row, following a digital hygiene regime of sleeping in one room and leaving his phone in another. Tenev’s wife, Celina, later answered the phone and woke her husband.
The situation was dire: A securities regulator informed Robinhood that it had to post $3 billion in collateral that day or the company would be forced to shut down all trading.
The request is a black swan event that stems from the height of the coronavirus pandemic, when people were trading stocks on a scale beyond imagination, in addition to watching the documentary “Tiger King” and hoarding toilet paper. A large number of first-time stock traders invested billions of dollars in so-called Internet-famous stocks such as GameStop and AMC. And Robinhood became the platform of choice.
The problem is that while the ease of buying stocks has greatly improved by 2021, the financial infrastructure in the United States has not improved. It still takes 48 hours for trades to settle, and brokerages have to act as guarantors to provide cash to support transactions as they pass through inefficient clearing houses. In most cases, this is not a problem. But because investors frantically bought Internet celebrity stocks on Wednesday, January 27, regulators required Robinhood to pay $3 billion as collateral.
Such a huge amount of money was shocking. And Robinhood’s response was equally unexpected. By 4:30 a.m., Tenev pulled his mentor, Mickey Malka, out of bed. Malka is a venture capitalist known for his connections in the fintech field. Malka, Tenev and other executives kept calling to raise funds, assuring investors that although Robinhood was facing a crisis, its basic business was in good condition. At the same time, Robinhood banned investors from buying GameStop and a dozen other popular stocks, a move that reduced the amount of deposit the company had to pay.
The emergency action paid off. Robinhood pulled off an unprecedented feat, raising more than $1 billion on that fateful Thursday and, by the end of the week, more than $3.4 billion in new investment from investors including Malka’s Ribbit Capital, Sequoia, and Andreessen Horowitz.
The success was a product of prescience. In 2020, after a severe 36-hour outage, Malka and Tenev drafted a “contingency” plan for situations that might force the company to urgently raise funds. The plan, Malka said, was modeled after the memorable 2008 financial crisis, when Goldman Sachs and Bank of America issued convertible notes to Warren Buffett for emergency funding.
But the masterclass in crisis agility has had an impact on the public image of the company and its founders. In a matter of months, the public perception of Tenev and Bhatt went from being beloved entrepreneurs to being the epitome of self-interested tech assholes. Some critics have accused them of peddling risky trading strategies, especially options, to novice investors. Now, after the deposit call and the subsequent trading halt, social media is abuzz with conspiracy theories accusing Tenev of conspiring with hedge fund kings like Citadel’s Ken Griffin to deliberately obstruct GameStop and protect short sellers.
There’s no evidence that any of these things ever happened, but conspiracy theories have spread widely on Reddit and other popular forums around the internet. Online mobs have bullied Robinhood executives, and a small number of real-world mobs have even, on at least one occasion, smashed a bag of excrement into a company office window.
It was a terrifying experience. As more and more death threats were made, the Teneves had to leave their home, hide out in a hotel, and hire a security team. The situation proved even more damaging to the more sensitive Bart, who almost had a complete physical and emotional breakdown, according to two Robinhood colleagues. Bart denied the allegations, saying he had resigned as co-CEO to focus on his newborn baby.
These events were a test most corporate leaders had never experienced, recalls Scott Sandel, chairman of venture capital firm NEA. “Outside of a war zone, I would say very few people could handle that kind of pressure—several standard deviations above average. Vlad could handle it. But for Baiju and most people, it was unbearable.”
The abuse of founders has even spread to Hollywood. The 2023 movie Dumb Money depicts the David-and-Goliath story of retail investors triumphing over hedge fund billionaires, who are in cahoots with Robinhood’s founders as villains. One scene depicts a drunken Tenev (played by Sebastian Stan) partying all night with Robinhood’s celebrity clients and rudely hitting on a woman he mistakenly thinks is flirting with him.
The film does a good job of capturing the general context of the Internet celebrity stock frenzy, but it does a poor job of portraying Tenev, who quit drinking in 2017 to show his couple’s solidarity while they were expecting their first of three children. His wife, Celina, graduated from Stanford University and has her own medical startup. Today, the couple’s favorite drink is fancy coffee, and Tenev doesn’t like the life of drinking and women, but instead finds joy in chess, math problems and his children.
Still, other elements of “Dumb Money” ring true, including a scene in which Tenev eloquently describes the founders’ immigrant background to a reporter. The broad outlines of the film’s backstory are accurate. Barth was born in Kansas and raised in Alabama and Virginia to Indian parents; Tenev immigrated to Delaware from Bulgaria when he was 5, and his economist father once persuaded university librarians not to check out books by Marxists.
Still, one former Robinhood executive believes the founders are emotionally thoroughly American and have harped on about their immigrant experiences a little too often. The executive claims the story is part of a broader, self-serving startup mythology — one in which Robinhood is a product of the Occupy Wall Street movement, the socialist-tinged protest movement that broke out in the United States after the 2009 financial crisis. “This was part of the story they created to add legitimacy to this brilliant business idea,” the insider noted, adding that the founders came up with the Occupy Wall Street angle with the help of venture capitalists, who told them that new startups needed to have a story.
The company disputes that interpretation. In any case, there’s little record that the company’s founders have ever been avid capitalists. That’s especially true of Mr. Bhatt, who said in a recent book that he likes to park his Porsche where he can see it from his office window. Mr. Tenev and Mr. Bhatt together own about 14% of Robinhood in roughly equal shares, according to proxy filings, a stake worth about $2.7 billion as of mid-July.
Malka, a venture capitalist, said he and Tenev had bought tickets to see the movie “Dumb Money,” but changed their minds before the show started. As for Bart, he told the media that he didn’t care how the movie portrayed him and Robinhood. However, he was very interested in one element of the movie. “I heard that the actor who played me wore a wig. This is all natural.” He pulled his thick and flowing hair and exclaimed. “Let people know that this is not a wig.”
Even after the angriest attacks faded, Robinhood’s handling of the January 2021 crisis continued to provide fodder for populist critics. As it turned out, Robinhood’s ultra-fast response meant the company needed only $1 billion to satisfy regulators, but in the spirit of “not letting a crisis go to waste,” the company raised an additional $2.4 billion. The extra funds gave insiders the opportunity to buy Robinhood’s pre-IPO shares at a 30% discount.
That might have been fine if the July 2021 IPO had gone smoothly. But the company’s shares were priced at $38 and fell 10% on the opening day, bottoming out at $6.81 a year later. That was a bitter pill for the many Robinhood customers who bought shares at the opening.
It’s been a tough time for Tenev. In addition to being despised by analysts and former fans, Tenev has had to endure another insult from crypto scammer Sam Bankman-Fried, who acquired a 7% stake in Robinhood in early 2022 and threatened to restructure the company.
Tenev invited Bankman-Fried to his home. The two sat in the backyard, and FTX founder Bankman-Fried laid out his plan. Tenev recalled: “To my surprise, he came up with his plan in all seriousness. He said, ‘Well, there are some things we can do together, you know, derivatives, European trading – can you use Alameda as a counterparty?'” (Alameda was Bankman-Fried’s personal hedge fund that he used to plunder FTX customers’ funds.)
Tenev demurred, and the discussions fell through. Robinhood reacquired Bankman-Fried’s shares after he was arrested in late 2022 and is currently serving a 25-year prison sentence for wire fraud.
During this period, the company also experienced a series of events such as poor financial performance and layoffs, which put Tenev in a dilemma that he had never been in since the founding of the company: unhappy. As a pragmatist, he formulated a series of measures to turn around Robinhood, including clearing out those “mercenary-driven” employees whose motivation for joining the company was to get a piece of the IPO.
The process also included a brutal ritual of self-critique, in which the team would imagine Tenev being fired by the board during quarterly meetings. “Let’s say the board brings in a really good CEO, like the archetype of the best CEO on the planet,” Tenev recalls. The team imagined the CEO saying, “Let’s undo everything my asshole predecessor did and clean up the mess. That was a useful exercise.”
Apparently, Tenev was not ousted. (He and Bhatt together own more than 60% of Robinhood’s voting shares.) The company has also gradually recovered. Robinhood achieved profitability in the 12 months ending March 31, a new milestone. Its stock price, while far from its high point when it went public, has more than tripled from its low of $7.
But Tenev’s work is far from done, and he faces two major challenges: He must convince investors that Robinhood can grow into a first-rate company; he must also convince the public that the superficial stereotype portrayed in the movie “Dumb Money” does not represent him and his company.
A generation ago, the vast majority of stock traders were middle- and upper-class men who paid $10 or $20 to make trades over the phone with their brokers. But the internet began to change that, with platforms like E*Trade lowering the financial and cultural barriers to buying stocks. Still, it was Robinhood that really opened the door. The company introduced commission-free trading in 2013, eventually forcing the entire industry to follow suit, thanks to the app’s rejection of the industry’s aura of middle-aged white masculinity.
The U.S. stock market is the biggest wealth creator in history, and it’s important that Robinhood helps millions of Americans who were once excluded get a chance to participate. Robinhood says its median customer age is 34, compared with 58 for existing industry investors, and that its user base is more diverse. A recent survey funded by Robinhood found that African-American and Hispanic customers make up 4% and 8% of existing brokerage users, respectively; at Robinhood, the proportions of these two groups are 14% and 16%, respectively. At the same time, the company has also launched customized products for customer groups that have long been ignored by the industry. For example, Robinhood offers individual retirement account (IRA) investment plans with matching rates of 1% to 3% for employees of gig economy companies such as TaskRabbit and Grubhub.
“Most households’ first entry into the stock market is when a family member receives stock as compensation for work, and historically that has not included women or people of color,” said Sergio Ricci, who co-authored a paper with law professor Christina Sautet arguing that services like Robinhood have lowered the barrier to wealth accumulation.
Of course, there is no guarantee that entering the market will pay off. For example, in the recent bubble of Internet celebrity stocks and cryptocurrencies, many novice investors often lost a lot of money when using Robinhood. But importantly, there is evidence that these traders are not the majority. Vanda Research, which focuses on studying the behavior of retail investors, found that over time, the investment ability of novices who stick with it has improved. Since the beginning of 2021, these investors have been less willing to chase popular trends and prefer more stable big-name stocks or index funds. “A lot of retail investors have learned a lesson in the process of losing capital,” said Marco Iachini, vice president of Vanda.
The result is a legion of young investors who appear committed to investing for the long term, millions of whom are Robinhood customers. The question now is whether Tenev and his team can build a business around them that can compete with giants like Fidelity and Schwab.
There are good reasons for skepticism. For one, the average balance in a Robinhood account has been stuck around $5,000. That reinforces the perception that many customers use Robinhood as a play account, keeping the bulk of their money with more established firms, and that as new customers get wealthier, they’ll do the same.
Robinhood’s chief financial officer, Jason Wernick, said he was acutely aware of the potential for exodus, which he called “graduation risk.” The company’s response was to follow the lead of Amazon — where Wernick worked for 20 years — by continually adding products so that customers wouldn’t want to leave.
Robinhood has made great strides in this area over the past 18 months, launching a retirement account product and its first credit card. Robinhood offers attractive incentives for both products: a 3% match on individual retirement account transfers for Robinhood’s $5-a-month Gold tier (1% for other users), and credit card travel and rewards offers that rival those of industry leaders. Warnick said these incentives are designed to ensure that both products become profitable as soon as possible.
The measures will help mitigate a historical weakness in Robinhood’s strategy: an over-reliance on trading, which has produced big returns when markets have risen but has left the company struggling when they have fallen. Robinhood makes most of its money by providing batches of trades to market makers, a practice known as “payment for order flow,” or PFOF. But that revenue stream dries up when trading volume falls.
Matt Harris, a fintech investor at Bain Capital Ventures, points to the huge gap between the “adrenaline-driven frequent trading strategy” in Robinhood’s DNA and the wealth management model that drives revenue growth at Fidelity or Schwab. The latter is more profitable, but also requires fiduciary obligations to put customers’ financial interests first, which means more red tape and fees. But Harris does not rule out the possibility of Robinhood’s transformation. “Sometimes, pirates become the navy,” he noted. He added that the company also has a trump card: Unlike most financial companies, the company has a “bottom-to-bottom” technology stack, which makes it less dependent on partners and more capable of making profits.
But ultimately, Robinhood’s future is tied to Tenev, a battle-hardened man now in his late 40s, the age when other notable entrepreneurs are at their peak. Speaking to Tenev, one gets the sense that his ambitions are only just beginning. He’s laying out plans for two technologies he believes will reshape the financial world: cryptocurrency and artificial intelligence.
Robinhood recently acquired one of Europe’s oldest Bitcoin exchanges — a move that will expand its overseas reach and provide a beachhead for developing institutional cryptocurrency businesses. More importantly, Tenev predicts that blockchain and traditional financial channels will merge, allowing companies that excel in both to become leaders. As for artificial intelligence, Tenev sees a huge opportunity in financial advice. Tenev recently led a round of funding for a startup focused on improving the mathematical skills of artificial intelligence. He said that the current financial advice business is too rudimentary and overpriced for ordinary investors, while wealthy clients pay too much for flashy advice services.
Tenev predicts his company will be at the forefront of a world where customers can get affordable wealth management guidance from an AI advisor who has a deep understanding of their financial situation and provides human assistance when necessary. If this strategy works, Robinhood will not only become a financial giant but also a design and engineering pioneer. For founder Tenev, who has praised the breakthrough achievements of Lotus cars and Lamborghini Countach, this is the equivalent of popularizing flying cars. It will make Tenev and Robinhood true icons.
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