Stock trading app secures family office investors in latest funding round
Robinhood, a Silicon Valley startup, which offers commission-free share trading to its users is steadily moving upmarket. But it may have no choice.
Daniel Sundheim’s D1 Capital Partners, which invests on behalf of family offices, has just led Robinhood’s latest $200 million funding round, valuing it at $11.2 billion. Analysts talk of an IPO by 2021.
Robinhood, a US stock trading app, started by Vladimir Tenev and Baiju Bhatt, set out to use technology to democratise financial markets, in the same way Amazon revolutionised the buying and selling of physical goods and Uber changed cab hire.
To this day, it offers free share trading, setting out to make money from interest received from client cash, sales of data back to Wall Street, and margin lending.
A PitchBook report credits Robinhood’s success to a high number of first-time investors who used its app to profit from stock oscillations caused by market volatility during Covid-19. However, it is now attracting more sophisticated users who also like to keep a close eye on its popular trades.
Family office adviser Stephen Martiros says the app’s “usage patterns and trading data” could make Robinhood an attractive tool for family offices looking to make stock market investments in the future.
Robinhood may need to attract increasingly wealthy, and sophisticated, investors in the months ahead, given the controversy over the use of Robinhood by inexperienced millennial users who risk losing large sums in a volatile market. However, it has agreed to ramp up its internal controls.
Robinhood’s previous $323 million funding round attracted prominent investors including Hong-Kong based investment group, DST Global, owned by Israeli-Russian IT investor, Yuri Milner and Thrive Capital, an investment group owned by Joshua Kushner.
The app has also seen larger average revenue trades in June this year than its publicly listed rivals such as TD Ameritrade, Charles Schwab and E-Trade.
Don’t chase VC too hard, says veteran adviser
John B.C Moore, founder and managing partner of Cayman-based Moore & Moore Investments, has warned that family offices may be chasing venture capital opportunities too hard.
Family offices, including their principals, are keen to invest in VC due to the lure of high returns and the possibility of funding a startup that could one day become a sector disruptor.
But Moore says they should not focus on venture capital at the expense of allocations that facilitate wealth preservation, adding that VC investments should be balanced with low-risk placements, such as fixed income.
“We are pleased to have a number of successful outcomes from our family office placements into these more high risk, high reward opportunities. But it is vital to balance exposure with more secure investments.”
Moore’s international family office clients are mostly first and second-generation wealth owners. He has found first-generation wealth is often keenest to back venture capital type investments.
Aristocratic family-backed property group in hotel JV with chocolate heir
A family property group have joined forces with a descendent of a chocolate business to open a luxury hotel in London despite the effects of Covid-19 on the hospitality sector.
Cadogan Group and its subsidiary, Cadogan Estates, make up half of the partnership that’s building the hotel. The business is run by the aristocratic Cadogan family, whose assets include over 90 acres of the wealthy west London borough of Kensington & Chelsea, equating to a real estate portfolio that Forbes values at $7.2 billion.
Joel Cadbury, a member of the chocolate dynasty, along with business partner Ollie Vigors has also invested through their hospitality business, Longshot Limited. During the early 2000s, they fought off competition from another English chocolate heir, Benjamin Fry, and purchased the iconic Soho Groucho Club for £11.6 million in 2001 before selling it to private equity company Graphite Capital for around £22 million in 2006.
Longshot has also been involved in redeveloping the Surrey-based Beaverbrook hotel. Once the home of the eponymous British-Canadian press baron, Lord Beaverbrook, the property was sold to Longshot in 2010. Following a £100 million investment, it was reopened in 2017.
The Cadogan family are also active developers. In 2019, they announced a £40 million facelift for Sloane Street, an upmarket retail area they redeveloped in 2016.
Fashion designer Ralph Lauren and his son get behind a sustainable textile startup
In a nod to sustainable investing, the new generation in charge of Ralph Lauren Corp., the lifestyle company founded by billionaire fashion designer and entrepreneur, Ralph Lauren has invested in a natural fibres company.
Natural Fiber Welding, a Peoria, Illinois startup, uses naturally occurring products such as plants to make sustainably produced and durable textile materials.
The key offering is “patented process” technology, which incorporates cotton and other plant-based waste fibres to make recycled material which is more durable than synthetic fabrics but retains the natural feel of cotton, according to a recent statement released by the startup.
Speaking on the investment, David Lauren, Ralph Lauren’s son and the corporation’s vice-chairman and chief innovation officer said the startup was a good fit with Ralph Lauren’s goal to eventually become a fully sustainable business.
Lauren says they want to reduce their reliance on non-biodegradable materials like polyester and establish renewable electricity use across their factories, stores and other premises by 2025.
He added that the investment would help Natural Fiber Welding scale its “innovative solutions”, which they hope will encourage other businesses involved in material manufacturing to become more sustainable.