Jan Hammer.
Eight years ago, Jan Hammer heard of a new application that allowed anyone to buy and sell shares on the stock market without commissions.
At the time, Robinhood Markets Inc. was actually more of a place where people could exchange stock tips and advice.
Hammer, a partner at venture capital firm Index Ventures, saw the potential that the app had and hosted a video conference via Google Hangouts with the founders.
He signed them a check for $ 500,000 (about 420,000 euros at current exchange rates).
That investment, and the others that Index subsequently made, was the basis for reaching a stake that is now worth more than $ 3 billion in Robinhood's Nasdaq debut on the Nasdaq.
Around the same time as Hammer's initial contact, a young Google Ventures investment partner named Blake Byers met with the young founders of Robinhood and told his older colleagues about them.
The directors of the Alphabet division, now known as GV, liked the idea of the
start-up
and contributed around $ 250,000.
Today, that stake is worth more than $ 140 million.
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“75 investors slammed the door in our faces when we were doing the first round of financing.
But not Jan.
He believed in us from the beginning, ”Baiju Bhatt & Vlad Tenev, co-founders of Robinhood are quoted on Index Ventures' own website.
Robinhood has delivered exceptional returns for many venture capital firms.
The main one is Index Ventures, but there are many other investors.
NEA, Ribbit Capital and DST Global add stakes worth a combined $ 7.4 billion with the IPO.
GV could have been on that list if it had invested at the same rate as those other partners (although it's hard to get mad at a $ 140 million profit).
Wesley Chan, a partner at GV, was the one who defended the initial investment in Robinhood, but left shortly after, leaving the start-up without a strong believer among the other partners, according to a source familiar with the situation who asked not to be. identified because details are private. Alphabet bought another stake in 2018 through a different investment vehicle, Capital G, but by then, Robinhood's valuation was more than $ 7 billion.
None of the seed capital investors, those who invest in a
startup
first, could even imagine the phenomenon that Robinhood would become, says Kittu Kolluri, a former member of the
startup's
board
who led a 2015 financing for Robinhood in NEA name.
"That was kind of a
spray-and-pray round
," recalls Kolluri, now the founder of Neotribe Ventures.
Retail brokerage
Hammer had introduced Kolluri to Robinhood founders Vladimir Tenev and Baiju Bhatt. Kolluri and the entrepreneurs discussed the company on a walk around the Stanford University campus. Kolluri's faith in the company grew stronger after speaking with the former CEO of E * Trade Financial and learning how lucrative retail brokerages or brokerages were, even without commissions.
E * Trade also served as an inspiration for Hammer's investment. In blog posts and talks, Hammer has explained how her time working at General Atlantic, an E * Trade booster in the 1990s, gave her confidence about a commission-free brokerage. He learned that they could tap into many other sources of income. For example, Robinhood has generated substantial revenue by sending orders to Wall Street market-making firms, a practice that got the company into some trouble in the past.
So after the initial investment of half a million dollars, Hammer urged Index to spearhead Robinhood's next funding round in 2014. Index continued to accumulate more capital as the company grew. Those bets are what ultimately made his stake in Robinhood not just a huge investment, as in the case of GV, but a colossal one.