Robinhood’s private market fund stumbles in NYSE debut

Robinhood is attempting to allow the general public to invest in a portfolio of private companies. To do this, the commission-free brokerage firm grouped eight startups—including Databricks, Stripe, Mercor, Oura, Ramp, Airwallex, Revolut, and Boom—into an investment vehicle called Robinhood Ventures Fund I. However, demand for the fund was lower than expected. On Thursday, Robinhood announced the fund had reached a total size of $658.4 million, falling short of its ambitious $1 billion target. The fund size could reach $705.7 million if underwriters exercise their full allotment. Shares of the fund, which were priced at $25 in the offering, began trading on Friday and closed the day at $21, representing a 16% decline.

The reception on Wall Street stands in contrast to Destiny Tech100, a competitor closed-end fund holding stakes in 100 venture-backed companies, including SpaceX, OpenAI, and Discord. When Destiny Tech100 direct-listed—meaning it listed shares on an exchange without an underwriter—on the NYSE in March 2024, its shares surged.

A comparison of the two funds’ financial performance highlights the differing market receptions:

• Robinhood Ventures Fund I: Raised $658.4 million against a $1 billion target, with shares priced at $25 in the offering before closing at $21 on Friday, a 16% decline.
• Destiny Tech100: Debuted from a reference price of $4.84, opened at $8.25, and closed its first day at $9.00. On Friday, it closed at $26.61, representing a 33% premium to its net asset value of $19.97 (the value of a fund’s assets minus its liabilities).

The most likely explanation for the performance of Robinhood’s fund is its lack of exposure to companies expected to go public at enormous valuations, such as OpenAI, Anthropic, and SpaceX. Robinhood intends to add more startups to address this. Sarah Pinto, the president of Robinhood Ventures, stated that the fund aims to hold 15 to 20 late-stage growth companies. Additionally, Robinhood CFO Shiv Verma stated that the company is eyeing exposure to OpenAI.

However, securing access to these high-profile companies is difficult, even for a firm with roots in Silicon Valley. Robinhood aims to get directly onto their cap tables—the official record of who owns equity in a company—through primary capital raises or secondary share sales. Pinto, the Robinhood Ventures president, acknowledged the challenge, stating, “It’s very difficult to get into any of these companies, and the investment rounds are very expensive.”

Why it matters

Robinhood’s struggle to democratize private market investing highlights the significant barrier to entry for retail investors. Securing access to the most coveted, high-valuation startups remains difficult even for major platforms, as high-profile companies tightly guard their equity ownership.