The Exchanges

Q Can I ask, and open to Scott and Rick, in terms of like, you know, the internal response within NEA, now it seems like a very obvious solution and a brilliant investment. At the time, the consumerization of, you know, investing in fintech was not as obvious at all as it is today. What was the response like internally?

A It was actually pretty straightforward. I'm not going to lie. I mean, I, the way we looked at this investment at the time is a little bit different than kind of the look back on it, right? Because at the time we kind of looked at the history of brokerage firms. You had sort of this period where investment banks like Merrill Lynch really controlled the market. And then you had this whole period of discount brokerages coming in, some leveraging the internet very effectively like E-Trade, but you had E-Trade, Ameritrade, you had Schwab that came in and we really felt like it was time A new player emerged and could take advantage of a bunch of different trends around technology and distribution and just the consumer internet. So we kind of looked at it as like, look, there's about seventy billion dollars of market cap we think is ready to be disrupted in the same way that they had disrupted the incumbents that came before them. And we saw a pretty straight line there with Robinhood. Because we had gotten to know the company over a period of time, we invested and led the series B and they were still in closed beta at the time, but there were some really Interesting signals at the time, right? They had built this amazing waiting list of over 800,000 people that wanted the product. They had started letting in and inviting folks on from that waiting list over the previous three months …

AI assessment note: “It was actually pretty straightforward. I'm not going to lie.”

Q Not at all, but Rick, I'm going to start with you. I love a good story, so take me back to that moment. How did you first meet the Robin Hood Where was it? How did the conversation go? Paint that picture for me.

A One of our principals at the time, Sheil, knew Vlad and Beju very well from Stanford, and our partner Kitu was actually working closely with Jan Hammer over at Index, who had led the Series A. So we got to know the company very well there, and I rounded out the team at the time, you know, having previously been involved with Braintree and Plaid and sort of the FinTech experience. But I actually very vividly remember my first meeting with Vlad, and it's because it was at this dive bar in Palo Alto called Antonio's Nuthouse. And Harry, this is not the kind of bar that you and I would go and grab mojitos at. So just imagine it, you know, in the corner, there's this stuffed gorilla that's in a cage where you grab peanuts and there's peanut shells everywhere. But this is emblematic of sort of the relationship starting from there. And unfortunately that bar is no longer with us anymore. That's where I first spent time with Vlad, got really excited about what they were building and really hearing the founding story behind him and Beiju coming together for a third time, actually for Robin Hood.

AI assessment note: “I actually very vividly remember my first meeting with Vlad, and it's because it was at this dive bar”

Q Can I ask, what was it that so excited you in that first meeting? What was that unlock where you saw the potential, or actually was it in subsequent meetings that took a little bit longer for it to manifest?

A It was pretty quickly. I mean, Vlad and Beijou are such unique people in that they are very natively and authentically tied to the mission of the company, and also embedded in sort of consumer culture and consumer behavior. But if you look at kind of the prior experience to Robinhood, they were actually in the high-frequency trading world, so they were highly technical too. Pretty rare that you find that combination of things coming together in a set of founders. So they had built software for high-frequency trading firms, and you saw sort of this shift in their founding story when they kind of realized that they were part of the problem that was starting to manifest itself at the time with Occupy Wall Street, really the whole world kind of coming out of the global financial crisis, and they were hearing it from their friends about being part of the problem, and that's when they really kind of shifted their Their thoughts to Robin Hood and really what made Robin Hood great was sort of this idea of democratizing access to financial services, but they were so true to that mission through and through and continue to be today.

AI assessment note: “It was pretty quickly. I mean, Vlad and Beijou are such unique people”

Q Rick, your turn. He gets the optimistic, you get the pessimistic, sorry. What was your premortem here? Why would this maybe not work?

A I think a lot of it had to do with, you know, some of the questions you asked, which was, could millennial accounts scale? Right. The incumbents didn't really care about this demographic and there was a reason for that, but we felt compelled that, you know, there was a business model disruption here and a technology delivery mechanism that would allow those to scale. And that thesis turned out correctly. I think the other one was, you know, how would the company perform in volatile markets? And I think what we've seen is, you know, first of all, the markets have been pretty much up and to the right, and that's benefited this company. But as the company has expanded their product offering, I think they would fare really well in volatile markets too.

AI assessment note: “could millennial accounts scale? [...] how would the company perform in volatile markets?”

Q Can I ask, and open to Scott and Rick, in terms of like, you know, the internal response within NEA, now it seems like a very obvious solution and a brilliant investment. At the time, the consumerization of, you know, investing in fintech was not as obvious at all as it is today. What was the response like internally?

A It was actually pretty straightforward. I'm not going to lie. I mean, I, the way we looked at this investment at the time is a little bit different than kind of the look back on it, right? Because at the time we kind of looked at the history of brokerage firms. You had sort of this period where investment banks like Merrill Lynch really controlled the market. And then you had this whole period of discount brokerages coming in, some leveraging the internet very effectively like E-Trade, but you had E-Trade, Ameritrade, you had Schwab that came in and we really felt like it was time A new player emerged and could take advantage of a bunch of different trends around technology and distribution and just the consumer internet. So we kind of looked at it as like, look, there's about seventy billion dollars of market cap we think is ready to be disrupted in the same way that they had disrupted the incumbents that came before them. And we saw a pretty straight line there with Robinhood. Because we had gotten to know the company over a period of time, we invested and led the series B and they were still in closed beta at the time, but there were some really Interesting signals at the time, right? They had built this amazing waiting list of over 800,000 people that wanted the product. They had started letting in and inviting folks on from that waiting list over the previous three months …

AI assessment note: “It was actually pretty straightforward.”

Q Do you worry that they're going to churn out with increased wealth? Very much, you know, I always thought this with, like, Twilio. People would just build their own. I thought Algolia, people would just build their own. You know, the bigger you get, you churn out and do it yourself. You know, you have your own broker. So how did you think about when your AUM increases, you'd stay?

A I think you have to continuously innovate, right? And that's what we've seen from From the company. I think you start mobile first, for example, they released web, they released option trading, they released crypto. You become more and more embedded into not only this customer base that you initially acquire, but also sort of what is happening around you in the market and how you stay culturally relevant to that. And so you kind of grow and you innovate and you serve the needs of this cohort as they mature, as they have other needs that come in. And you see, even when you kind of look at Robin hood today, there's a whole gamut of financial services that they're offering. That we're all on the roadmap at the time when we invested, but certainly we're not built yet.

AI assessment note: “you serve the needs of this cohort as they mature”

Q Do you worry that they're going to churn out with increased wealth? Very much, you know, I always thought this with, like, Twilio. People would just build their own. I thought Algolia, people would just build their own. You know, the bigger you get, you churn out and do it yourself. You know, you have your own broker. So how did you think about when your AUM increases, you'd stay?

A I think you have to continuously innovate, right? And that's what we've seen from From the company. I think you start mobile first, for example, they released web, they released option trading, they released crypto. You become more and more embedded into not only this customer base that you initially acquire, but also sort of what is happening around you in the market and how you stay culturally relevant to that. And so you kind of grow and you innovate and you serve the needs of this cohort as they mature, as they have other needs that come in. And you see, even when you kind of look at Robin hood today, there's a whole gamut of financial services that they're offering. That we're all on the roadmap at the time when we invested, but certainly we're not built yet.

AI assessment note: “serve the needs of this cohort as they mature, as they have other needs”

Q Rick, your turn. He gets the optimistic, you get the pessimistic, sorry. What was your premortem here? Why would this maybe not work?

A I think a lot of it had to do with, you know, some of the questions you asked, which was, could millennial accounts scale? Right. The incumbents didn't really care about this demographic and there was a reason for that, but we felt compelled that, you know, there was a business model disruption here and a technology delivery mechanism that would allow those to scale. And that thesis turned out correctly. I think the other one was, you know, how would the company perform in volatile markets? And I think what we've seen is, you know, first of all, the markets have been pretty much up and to the right, and that's benefited this company. But as the company has expanded their product offering, I think they would fare really well in volatile markets too.

AI assessment note: “could millennial accounts scale?... how would the company perform in volatile markets?”

Q Not at all, but Rick, I'm going to start with you. I love a good story, so take me back to that moment. How did you first meet the Robin Hood Where was it? How did the conversation go? Paint that picture for me.

A One of our principals at the time, Sheil, knew Vlad and Beju very well from Stanford, and our partner Kitu was actually working closely with Jan Hammer over at Index, who had led the Series A. So we got to know the company very well there, and I rounded out the team at the time, you know, having previously been involved with Braintree and Plaid and sort of the FinTech experience. But I actually very vividly remember my first meeting with Vlad, and it's because it was at this dive bar in Palo Alto called Antonio's Nuthouse. And Harry, this is not the kind of bar that you and I would go and grab mojitos at. So just imagine it, you know, in the corner, there's this stuffed gorilla that's in a cage where you grab peanuts and there's peanut shells everywhere. But this is emblematic of sort of the relationship starting from there. And unfortunately that bar is no longer with us anymore. That's where I first spent time with Vlad, got really excited about what they were building and really hearing the founding story behind him and Beiju coming together for a third time, actually for Robin Hood.

AI assessment note: “vividly remember my first meeting with Vlad... dive bar in Palo Alto called Antonio's Nuthouse”

Q Can I ask, what was it that so excited you in that first meeting? What was that unlock where you saw the potential, or actually was it in subsequent meetings that took a little bit longer for it to manifest?

A It was pretty quickly. I mean, Vlad and Beijou are such unique people in that they are very natively and authentically tied to the mission of the company, and also embedded in sort of consumer culture and consumer behavior. But if you look at kind of the prior experience to Robinhood, they were actually in the high-frequency trading world, so they were highly technical too. Pretty rare that you find that combination of things coming together in a set of founders. So they had built software for high-frequency trading firms, and you saw sort of this shift in their founding story when they kind of realized that they were part of the problem that was starting to manifest itself at the time with Occupy Wall Street, really the whole world kind of coming out of the global financial crisis, and they were hearing it from their friends about being part of the problem, and that's when they really kind of shifted their Their thoughts to Robin Hood and really what made Robin Hood great was sort of this idea of democratizing access to financial services, but they were so true to that mission through and through and continue to be today.

AI assessment note: “It was pretty quickly. I mean, Vlad and Beijou are such unique people”

Q Can I ask, in terms of the targeted age demographic, Often people say, sure, but they also have the lowest value per account and are inherently flimsy in terms of their loyalty, their switch between apps, many different problems, but primarily they don't hold as much AUM as a 55 year old would do. How did you get over that concern?

A Yeah, you know, when you look at it, we were really excited about the velocity of new account creation of almost like market expansion in this demographic. You know, that was one of the risks was how long would it take for this Particular demographic to continue to contribute from a monetization perspective to increase AUM over time. That was the bet that we were willing to take because we felt like this was a superior product and a superior positioning and brand of the company that had been crafted by this team and by these founders. And it turned out to work out really well, just in terms of there were many, many years from the launch of this company where they didn't spend a dime on marketing and they just kept increasing that account number and engage customers. And so that part was, was really exciting for us, but you also have to have a business model that matches that, right? So if you're talking about it, first of all, like what I would say is as we dug into this space, it was pretty surprising to me and to the broader team that, you know, you look at the incumbents and only about a quarter to a third of their top line revenue really came from these trading fees. So you kind of think to yourself, if you're going to shrink that top line opportunity conservatively by a third, where do you make that up? And certainly one big part of the thesis was you're going to make that…

AI assessment note: “That was the bet that we were willing to take because we felt like this was”

Q mentioned E-Trade and Ameritrade. When you look at investing with public market comps today, often people will use public market comps as a guidance in terms of how big an investment could be if All things go well. I always don't like it because I kind of think you're mapping yourselves on incumbent value. Like, how do you think about using incumbent sizing as a guidance mechanism for future investment?

A This one was pretty unique, and certainly times have changed, too, in the sense that because we did have that sort of straight line base case, hey, look, there's seventy billion dollars of market cap that is ripe for disruption, and we see that. And there were just three models that we thought were very close to Sort of what Robin Hood was doing. In reality, we usually have many more comps for our companies and it's usually not that straightforward. And look, Harry, as you know, when you look at public comps today, there's actually plenty of disruptors and innovators that are getting high premiums in the public markets too. And so in some cases you're justifying higher valuations and you might be comfortable paying in the private market by looking at the comps in the public markets. And so things have kind of flipped a bit, but would love Scott's thoughts on this too.

AI assessment note: “In reality, we usually have many more comps for our companies”

Q mentioned E-Trade and Ameritrade. When you look at investing with public market comps today, often people will use public market comps as a guidance in terms of how big an investment could be if All things go well. I always don't like it because I kind of think you're mapping yourselves on incumbent value. Like, how do you think about using incumbent sizing as a guidance mechanism for future investment?

A This one was pretty unique, and certainly times have changed, too, in the sense that because we did have that sort of straight line base case, hey, look, there's seventy billion dollars of market cap that is ripe for disruption, and we see that. And there were just three models that we thought were very close to Sort of what Robin Hood was doing. In reality, we usually have many more comps for our companies and it's usually not that straightforward. And look, Harry, as you know, when you look at public comps today, there's actually plenty of disruptors and innovators that are getting high premiums in the public markets too. And so in some cases you're justifying higher valuations and you might be comfortable paying in the private market by looking at the comps in the public markets. And so things have kind of flipped a bit, but would love Scott's thoughts on this too.

AI assessment note: “In reality, we usually have many more comps for our companies and it's usually not”

Q Can I ask, in terms of the targeted age demographic, Often people say, sure, but they also have the lowest value per account and are inherently flimsy in terms of their loyalty, their switch between apps, many different problems, but primarily they don't hold as much AUM as a 55 year old would do. How did you get over that concern?

A Yeah, you know, when you look at it, we were really excited about the velocity of new account creation of almost like market expansion in this demographic. You know, that was one of the risks was how long would it take for this Particular demographic to continue to contribute from a monetization perspective to increase AUM over time. That was the bet that we were willing to take because we felt like this was a superior product and a superior positioning and brand of the company that had been crafted by this team and by these founders. And it turned out to work out really well, just in terms of there were many, many years from the launch of this company where they didn't spend a dime on marketing and they just kept increasing that account number and engage customers. And so that part was, was really exciting for us, but you also have to have a business model that matches that, right? So if you're talking about it, first of all, like what I would say is as we dug into this space, it was pretty surprising to me and to the broader team that, you know, you look at the incumbents and only about a quarter to a third of their top line revenue really came from these trading fees. So you kind of think to yourself, if you're going to shrink that top line opportunity conservatively by a third, where do you make that up? And certainly one big part of the thesis was you're going to make that…

AI assessment note: “That was the bet that we were willing to take because we felt”

Q Rick, can I ask for you, you know, in particular, we mentioned that evolution of, you know, the founders of the board. Investments sometimes change investor mentality. How do you think seeing this journey play out changed your investor mentality?

A Yeah, it's interesting. You know, Robin Hood, from the very beginning, struck a chord around this idea. I used to call it just consumer magic or consumer taste. Like, it's one of those things that it's so hard to quantify or describe until you see it, but both Beju and Vlad had it from the very beginning. They understood the consumer. They were part of that piece of consumer culture, and they, they were very natively meme-driven before it was mainstream and before it was cool, right? And they continue to be. But as this company has evolved, and as we've sort of seen it evolve, I think some of it has to do with not just really understanding the consumer, but becoming part of the culturally relevant conversation, which is what I think this company has become. And we think about all of These really big trends that are happening on the consumer fintech side around asset ownership and what is an asset, sort of the changing definition of what it means to be an investor. And I go back to this analogy that I love from Nike. And I know that Vlad is a big fan of Phil Knight and his memoir and Shoe Dog and things like that. But, you know, you look at Nike and one of their taglines is, if you have a body, you're an athlete. And seeing Robin Hood go out and execute on this mission of If you have a phone, you're an investor, and seeing that drive a lot of really interesting consumer shifts a…

AI assessment note: “that's what we're trying to capture when it comes to looking at companies”

Q Rick, can I ask for you, you know, in particular, we mentioned that evolution of, you know, the founders of the board. Investments sometimes change investor mentality. How do you think seeing this journey play out changed your investor mentality?

A Yeah, it's interesting. You know, Robin Hood, from the very beginning, struck a chord around this idea. I used to call it just consumer magic or consumer taste. Like, it's one of those things that it's so hard to quantify or describe until you see it, but both Beju and Vlad had it from the very beginning. They understood the consumer. They were part of that piece of consumer culture, and they, they were very natively meme-driven before it was mainstream and before it was cool, right? And they continue to be. But as this company has evolved, and as we've sort of seen it evolve, I think some of it has to do with not just really understanding the consumer, but becoming part of the culturally relevant conversation, which is what I think this company has become. And we think about all of These really big trends that are happening on the consumer fintech side around asset ownership and what is an asset, sort of the changing definition of what it means to be an investor. And I go back to this analogy that I love from Nike. And I know that Vlad is a big fan of Phil Knight and his memoir and Shoe Dog and things like that. But, you know, you look at Nike and one of their taglines is, if you have a body, you're an athlete. And seeing Robin Hood go out and execute on this mission of If you have a phone, you're an investor, and seeing that drive a lot of really interesting consumer shifts a…

AI assessment note: “that's what we're trying to capture when it comes to looking at companies.”