Robinhood Opens the Private Market to Retail Investors

Robinhood CEO Vlad Tenev kicked off the week with a short skit.

Tenev, putting on his best “insider,” takes a mock phone call from someone called “boss.” This “boss” is informing him about another $100-million raise in their new round, showing, however awkwardly, how retail investors are almost always left out of these types of “insider” conversations.

Tenev, in short, wants to open the private market up to the public. The trading app company is launching Robinhood Ventures Fund I, that will soon trade on the NYSE. Its purpose is to act as a bridge for retail investors to bet on private companies yet to go public. The fund’s portfolio allocation breaks down as follows: Databricks (23.24%), Revolut (14.30%), Mercor (14.23%), Airwallex (7.11%), Boom Supersonic (7.11%), Oura (7.11%), Ramp (7.11%), and Cash & Cash Equivalents (19.78%), per marketing materials. Robinhood clearly has a soft spot and bullish outlook for the enterprise Software/AI-infra Sector with around 23.4% allocation, along with Fintech/Payments/Global Banking, Frontier/Industrial/Hardware, Consumer Health/Wearables, and Labor Marketplace/AI Recruiting with Mercor (14.23%), an “AI-driven” talent marketplace that sits between HR tech and AI labor automation.

So how does this actually work? RVI raises capital by selling its own shares to investors in the fund’s IPO. That capital becomes a fixed pool of cash the fund uses to buy stakes — equity, preferred shares, or convertible instruments — in late-stage private companies like the ones noted above. After launch, investors trade RVI shares with each other on the NYSE. The fund does not redeem shares daily, as a mutual fund does. The underlying startups remain private and illiquid and the liquidity lives in the publicly traded wrapper.

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If a portfolio company like Databricks goes public or gets acquired, RVI’s stake converts into public shares or cash, which, in theory, should strengthen the overall balance sheet and can eventually be redeployed to new companies.

The benefit for retail investors is a seat at the private market big boy table, with no minimum investment or liquidity issues, and the ability to gain exposure much earlier in the investment cycle.

We can look at Databricks to get a sense of that potential upside. It’s RVI’s biggest holding, and even former Speaker of the House Nancy Pelosi and her husband are investors. In a September 2023 funding round, the company was valued at about $43.4 billion. By late last year, media reports suggested that the company was pursuing new funding at a valuation of roughly $130 billion — an over 300% increase over the last round. That’s what Robinhood hopes to bring to retail investors.

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