Robinhood was founded in 2013 by Vladimir Tenev and Baiju Bhatt

Robinhood, the investment app that lets you buy and sell stocks and cryptocurrencies without paying commissions, was started by Vladimir Tenev and Baiju Bhatt in 2013. The two met while working at other financial technology companies and decided to build a trading platform designed for ordinary people rather than professional investors or wealthy clients.

The company launched to the public in 2015 after spending two years building the app and getting regulatory approval. Tenev and Bhatt named it after the legendary outlaw Robin Hood, who was said to steal from the rich and give to the poor — a reference to their goal of making investing cheaper and more accessible to everyone.

Key Takeaways

  • Robinhood was founded in 2013 by Vladimir Tenev and Baiju Bhatt, two engineers who previously worked in financial technology.
  • The app became available to the general public in 2015, after the founders spent two years developing the platform and obtaining regulatory licenses.
  • The company's original mission was to eliminate commission fees that traditional brokers charged for stock trades.
  • Robinhood has since expanded beyond stocks to include options trading, cryptocurrency, and other investment products.

Why the founders built Robinhood

Tenev and Bhatt noticed that most people could not afford to invest because traditional brokers charged fees every time you bought or sold a stock. A single trade might cost $5 to $10 in commissions, which meant small investors lost money just by entering and leaving positions. They wanted to remove that barrier so that someone with $100 could start investing without watching half of it disappear in fees.

The two founders also saw that technology had made it possible to automate much of the work that brokers did manually, which meant the fees did not have to exist at all. By building a mobile app instead of a traditional brokerage office, they could keep costs low and pass those savings to users. This was a direct challenge to the business model that had dominated Wall Street for decades.

How Robinhood grew after launch

When Robinhood opened to the public in 2015, it was revolutionary for retail investors. Within a few years, the company became one of the most popular investment apps in the United States. Other brokers, including established names like Charles Schwab and Fidelity, eventually dropped their own commission fees to compete with Robinhood's model.

The company expanded its offerings over time. By 2018, Robinhood added options trading, which lets users bet on price movements without owning the underlying stock. In 2019, it began offering cryptocurrency trading. The app also added fractional shares, which let users buy a portion of an expensive stock rather than waiting to save enough for a full share.

Robinhood's business model and how it makes money

Even though Robinhood does not charge commissions, the company still needs to make money to operate. Robinhood earns revenue through several methods: interest on cash balances customers hold in their accounts, premium subscription fees for advanced features, and payment for order flow — a practice where market makers pay Robinhood to execute customer trades.

Payment for order flow has been controversial because it creates a potential conflict of interest. Market makers pay Robinhood to route trades to them, which raises questions about whether Robinhood is always sending trades to the venue that gives customers the best price. The company has faced regulatory scrutiny over this practice and has had to defend its execution quality in public filings.

Major events in Robinhood's history

In January 2021, Robinhood became the center of a major financial controversy when it restricted trading in GameStop and other stocks that were being heavily bought by retail investors. The company said it had to restrict trading to meet regulatory capital requirements, but the move sparked outrage and congressional hearings. Robinhood later lifted the restrictions after raising additional capital.

In 2023, Robinhood went public and began trading on the NASDAQ stock exchange under the ticker symbol HOOD. This allowed the company to raise capital and gave early investors and employees a way to sell their shares. The company has continued to add features and expand its user base since then, though it remains subject to the same regulatory oversight as any other brokerage.

Who owns Robinhood today

Robinhood is now a publicly traded company, which means it is owned by shareholders — anyone who bought stock in the company. Vladimir Tenev remains the chief executive officer and still owns a significant stake in the company he founded with Bhatt.

The company has received investment from major venture capital firms and other financial institutions over the years. These investors helped fund Robinhood's growth before it became a public company, and many of them sold their shares when Robinhood went public in 2023.

Frequently Asked Questions

Is Robinhood still free to use?

Robinhood does not charge commissions on stock, ETF, or cryptocurrency trades. However, the company offers a paid subscription called Robinhood Gold that provides margin trading and other premium features. Basic account access remains free.

Why did Robinhood restrict trading in 2021?

Robinhood said it restricted trading in GameStop and other volatile stocks because it needed to meet regulatory capital requirements. The company had to post more money with clearing houses to may provide customer trades. Robinhood later lifted the restrictions after raising additional capital.

Can I trust Robinhood with my money?

Robinhood is a licensed broker regulated by the Securities and Exchange Commission and the Financial Industry Regulatory Authority. Customer cash and securities are protected by the Securities Investor Protection Corporation up to $500,000 per account. Like any brokerage, Robinhood carries risks, and you should understand those risks before investing.

How many users does Robinhood have?

Robinhood has millions of users in the United States and has expanded to other countries. The exact number changes as the company grows, so check Robinhood's latest investor reports for current figures.