From grassroots to a market capitalization of 600 billion, the ten-year legendary journey of Robinhood

A friend once described Vladimir Tenev as "the Robin Hood of finance." This nickname later became the name of a company that changed the financial industry, but that's not the beginning of the story.

Tenev and Bhatt (Baiju Bhatt) are founders with backgrounds in mathematics and physics from Stanford University, where they met during a summer research project while undergraduates. Neither of them anticipated that they would become deeply connected with a generation of retail investors. They thought they chose retail investors, but in reality, it was the era that chose them.

During his studies, Tenef questioned the prospects of mathematical research. He grew tired of the academic life that could take years without any results and could not understand the obsession of his doctoral classmates who toiled away for meager incomes. This reflection on traditional paths quietly sowed the seeds of his entrepreneurial spirit.

In the fall of 2011, the "Occupy Wall Street" movement reached its peak, and public discontent with the financial industry was at an all-time high. Tenef and Bart founded Chronos Research in New York to develop high-frequency trading software for financial institutions.

They quickly realized that traditional brokers kept ordinary investors out of the financial markets with high commissions and complicated trading rules. This led them to contemplate: Can technology that serves institutions also serve retail investors?

With the emergence of new mobile internet companies like Uber and Instagram, products designed specifically for mobile devices are beginning to lead the trend. In contrast, the financial industry still struggles with low-cost brokers like E-Trade that find it difficult to adapt to mobile devices.

Tenev and Bhat decided to align with the wave of technology and consumerism, transforming Chronos into a free stock trading platform aimed at millennials, and applied for a brokerage dealer license.

Millennials, the internet, and free trading - Robinhood has brought together the three most disruptive elements of this era.

At that time, they did not anticipate that this decision would open the extraordinary decade for Robinhood.

Hunting the Millennial Generation

Robinhood set its sights on the blue ocean market that was being overlooked by traditional brokerages - the millennial generation.

A survey by Charles Schwab in 2018 showed that 31% of investors compare fees when choosing brokerage firms. Millennials are particularly sensitive to "zero fees," with more than half of respondents indicating they would switch to platforms with better pricing.

Zero-commission trading emerged against this backdrop. At that time, traditional brokers typically charged $8 to $10 per trade, while Robinhood completely eliminated this fee and did not set a minimum account funding threshold. The model that allowed trading with just one dollar quickly attracted a large number of novice investors, and with a simple, intuitive interface that even had a "game-like" feel, Robinhood successfully increased user trading activity and even cultivated a group of "addicted traders" among young users.

This reform in the charging model ultimately forced the industry to transform. In October 2019, Fidelity, Charles Schwab, and E-Trade successively announced that they would reduce commissions on each transaction to zero. Robinhood became the "first" to carry the banner of zero commissions.

Using the Material Design style launched by Google in 2014, Robinhood's gamified interface design even won an Apple Design Award, becoming the first financial technology company to receive the award.

This is part of success, but it is not the most critical aspect.

In an interview, Tenev described the company's philosophy by quoting a line from the movie "Wall Street" spoken by Gordon Gekko: The most important commodity I have is information.

This sentence reveals the core of Robinhood's business model - Payment for Order Flow (PFOF).

Like many internet platforms, Robinhood seems free but actually comes with a more expensive price.

It profits by selling the user's order flow to market makers, but users may not necessarily get the best market price and might think they benefited from zero-commission trading.

In simple terms, when users place orders on Robinhood, these orders are not sent directly to the open market for execution; instead, they are first forwarded to market makers that partner with Robinhood. These market makers profit by matching buy and sell orders at very small price differences. In return, the market makers pay Robinhood a payment for order flow.

In other words, Robinhood's free trading actually makes money in "invisible places" for the users.

Despite founder Tenev's repeated claims that PFOF is not a source of profit for Robinhood, the reality is that in 2020, 75% of Robinhood's revenue came from trading-related businesses, and by the first quarter of 2021, this figure rose to 80.5%. Even though the proportion has slightly decreased in recent years, PFOF remains an important pillar of Robinhood's income.

New York University marketing professor Adam Alter stated in an interview: "For companies like Robinhood, simply having users is not enough. You must keep them clicking the 'buy' or 'sell' button, lowering all the barriers people might face when making financial decisions."

Sometimes, this extreme experience of "lowering the threshold" brings not only convenience but also potential risks.

In March 2020, 20-year-old American college student Cairns discovered that his account showed a loss of up to $730,000 after trading options on Robinhood - far exceeding his $16,000 principal debt. The young man ultimately chose to commit suicide, leaving a note to his family that read: "If you are reading this letter, I am no longer here." How could a 20-year-old with no income access nearly $1 million in leverage?

Robinhood has precisely hit the psychology of young retail investors: low barriers to entry, gamification, and social attributes, and has also enjoyed the rewards brought by this design. As of March 2025, the average age of Robinhood users remains stable at around 35 years old.

But everything that fate bestows has a price tag, and Robinhood is no exception.

Robin Hood, robbing the poor to help the rich?

From 2015 to 2021, the number of registered users on the Robinhood platform grew by 75%.

Especially in 2020, with the COVID-19 pandemic, the stimulus policies of the U.S. government, and the nationwide investment craze, both the number of platform users and trading volume soared, with managed assets once exceeding 135 billion dollars.

The number of users has surged, and disputes have followed one after another.

At the end of 2020, the Massachusetts securities regulator accused Robinhood of attracting inexperienced users through gamification techniques while failing to provide necessary risk controls during market fluctuations. Shortly thereafter, the U.S. Securities and Exchange Commission (SEC) also launched an investigation into Robinhood, accusing it of failing to secure the best execution prices for its users.

Finally, Robinhood chose to pay $65 million to settle with the SEC. The SEC bluntly pointed out that even considering the commission-free offers, users still lost a total of $34.1 million due to price disadvantages. Robinhood denied the accusations, but this controversy is destined to be just the beginning.

What truly pulled Robinhood into the whirlpool of public opinion was the GameStop incident in early 2021.

This video game retailer, which carries the childhood memories of a generation of Americans, fell into trouble under the impact of the pandemic and became a target for institutional investors to short heavily. However, tens of thousands of retail investors were unwilling to watch GameStop being crushed by capital. They gathered on the Reddit forum WallStreetBets and collectively bought in using trading platforms like Robinhood, sparking a retail short squeeze battle.

GameStop's stock price skyrocketed from $19.95 on January 12 to $483 on January 28, an increase of over 2300%. A financial frenzy of "grassroots rebellion against Wall Street" shook the traditional financial system.

However, this seemingly retail victory quickly evolved into Robinhood's darkest hour.

The financial infrastructure that year was simply unable to withstand the sudden surge of trading frenzy. According to the settlement rules at that time, stock trades required T+2 days to complete clearing, and brokers had to reserve risk margins in advance for user transactions. The skyrocketing trading volume forced Robinhood to pay a rapidly increasing margin to clearing houses.

On the morning of January 28, Tenef was awakened by his wife and learned that Robinhood had received a notice from the National Securities Clearing Corporation (NSCC) requiring it to pay up to $3.7 billion in risk collateral, which instantly pushed Robinhood's financial chain to its limits.

He contacted venture capitalists overnight to raise funds everywhere to ensure the platform was not dragged down by systemic risks. Meanwhile, Robinhood was forced to take extreme measures: restricting the purchase of popular stocks like GameStop and AMC, allowing users to only sell.

This decision immediately sparked public outrage.

Millions of retail investors believe that Robinhood has betrayed the promise of financial democratization, criticizing it for bowing to Wall Street powers. There are even conspiracy theories accusing Robinhood of colluding with Citadel Securities to manipulate the market to protect hedge fund interests.

Online harassment, death threats, and a barrage of negative reviews followed one after another. Robinhood suddenly transformed from a friend of retail investors to a target of criticism, and the Tenev family was forced to go into hiding and hire private security.

On January 29, Robinhood announced that it had raised $1 billion in emergency funding to maintain operations, followed by several rounds of financing, ultimately accumulating $3.4 billion. Meanwhile, members of Congress, celebrities, and public opinion relentlessly pursued it.

On February 18, Tenev was summoned to attend a hearing in the U.S. Congress, and in response to questions from lawmakers, he insisted that Robinhood's decision was due to settlement pressure and had nothing to do with market manipulation.

Nevertheless, the doubts have never subsided. The Financial Industry Regulatory Authority (FINRA) launched a thorough investigation into Robinhood, ultimately imposing the largest single fine in history - $70 million, which includes a $57 million fine and $13 million in customer compensation.

The GameStop incident became a turning point in Robinhood's history.

The financial storm has severely damaged Robinhood's image as a "retail investor protector," with its brand reputation and user trust suffering heavy blows. In a short time, Robinhood has become a "survivor in the cracks," both dissatisfied by retail investors and monitored by regulators.

However, this event has also prompted U.S. regulators to reform the clearing system, pushing to shorten the settlement cycle from T+2 to T+1, bringing long-term effects to the entire financial industry.

After this crisis, Robinhood pushed forward with its long-prepared IPO.

On July 29, 2021, Robinhood went public on Nasdaq under the ticker HOOD, with an issue price set at $38, valuing the company at approximately $32 billion.

However, the IPO did not bring the expected capital feast for Robinhood. On the first day of trading, the stock price opened lower and ultimately closed at $34.82, down 8% from the issue price. Although there was a brief rebound due to a surge in retail investors and institutional buying, the overall trend remained under pressure for a long time.

The divergence between Wall Street and the market is evident - whether to be optimistic about it as the financial gateway for retail investors or to worry about its controversial business model and future regulatory risks.

Robinhood stands at the crossroads of trust and skepticism, officially stepping into the real test of the capital market.

But at that moment, few noticed a signal hidden between the lines of the prospectus - in the S-1 document submitted by Robinhood, the word Crypto was mentioned 318 times.

The frequent appearances that seem unintentional are, however, a declaration of a strategic shift.

Crypto is precisely the new narrative quietly unveiled by Robinhood.

Crash into Crypto

As early as 2018, Robinhood quietly ventured into the cryptocurrency business, being the first to launch trading services for Bitcoin and Ethereum. At that time, this move seemed more like a supplement to their product line, far from becoming a core strategy.

But the market's enthusiasm quickly changed everything.

In 2021, the media described it this way.