Historically, investments in private companies have been largely limited to major Silicon Valley venture capital firms, with individual investors largely excluded from this rapidly expanding market where valuations have soared in recent years.
The fund, trading under the ticker symbol “RVI,” holds stakes in well-known private companies including software startup Databricks, fintech company Ramp, and financial services firm Revolut.
“There’s a significant gap in the market where the retail client can’t access private assets,” said Shiv Verma, Robinhood’s chief financial officer, in an interview.
Some private companies now command valuations that rival or exceed the market capitalization of companies within the S&P 500. Databricks raised funds in February based on a $134 billion valuation, while Ramp was valued at $32 billion in November.
The fund carries risks, including fluctuations in the valuations of private companies, though these are not unique to it, according to analysts. The broader venture capital exit market has also been turbulent in recent years due to a slowdown in initial public offerings (IPOs).
Robinhood priced the IPO at $25 per share and sold 12.6 million shares, raising less than its initial target. Investor appetite for IPOs remains uneven, as markets remain volatile amid geopolitical tensions and concerns about disruption from artificial intelligence.
Verma noted that Robinhood deliberately selected sector-leading companies at an advanced stage of development, which are “much less risky” than early-stage startups.
“These are excellent investments, they’re going to perform well, and if there’s some short-term volatility in the interim, as it’s a closed-end fund, you’re not obligated to sell,” he added.
Verma also indicated that the fund, which could eventually expand into other sectors such as energy, robotics, aerospace, and defense, also garnered demand from institutional investors during the roadshow.
Formerly known primarily as a trading app for retail investors, Robinhood has since evolved into a broader financial services platform, contributing to a market capitalization exceeding $72 billion. The move into venture capital reflects the company’s ambition to diversify its revenue streams and cater to a wider range of investor interests.
