Thursday, February 22, 2024

The problem with VC-backed founders who say they don’t care about getting rich

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In legend, Robin Hood is a beloved outlaw who steals from the rich to give to the poor.

Today, the company named after the popular tale – the decacorn stock trading app Robinhood – is at the center of an identity crisis as critics accuse the company of abandoning its populist roots in the profit from hyper-growth. While its founders may not have sought to get rich, they are still likely to become billionaires if Robinhood goes public, and the company’s investors are set to be significantly enriched by a deal expected to be announced in the coming months. .

Robinhood’s rise and struggles in recent months is the subject of my colleague Jeff John Roberts most recent magazine article, detailing the founders’ motivations and the problems inherent in them as a company evolves into an $ 11.7 billion business:

“Those who knew Tenev and Bhatt at Stanford say the couple were more bookish than boorish. Tenev says personal wealth has never been their primary motivation – though they will likely become billionaires if Robinhood goes public. “We both wanted to be physics or math teachers,” Tenev says. “You don’t do this because you want the money.” (Bhatt was on paternity leave and was not available for interviews while reporting this story.) When they started Robinhood, the duo said they were inspired by the ideals of Occupy Wall Street; their corporate namesake, of course, is a folk hero who robbed the rich.

Yet like many of their ancestors in tech startups, the founders have been criticized for abandoning populist principles in the pursuit of hyper-growth. For Robinhood, that review revolved around both its gamified, casino-like design, and its business model. And in options trading, the combination of these factors has put the startup on the defensive.

This is where the problem lies with startups who claim to be motivated by a mission rather than money. Yes, it is possible that these founders want to make the world a better place, but they also need to deliver real financial results to their venture capitalists. Hyper-growth is, after all, the name of the game.

Robinhood’s influence is hard to deny. Although the company did not become a verb similar to Google, its name made its way into the financial vernacular. Nothing made this more evident than the pandemic, when Robinhood helped fuel some strange moves in the market. Remember how the actions of the bankrupt car rental company Hertz and department store just as bankrupt JC Penney skyrocketed during the summer? I can’t help but wonder how the Robinhood name has become of a proxy for this new class of retail traders as a whole. In short? Read the full story here.

BLING LAUNCHES A NEW FUND: Bling Capital, a start-up venture capital fund founded by former Khosla Ventures general partner Ben Ling, raised $ 110 million from two funds, $ 77 million for its second seed fund and $ 36 million dollars for a fund for follow-up checks. Ling, who has personally invested in Palantir and Lyft and made bets on fintech Vise and home fitness company Tempo through Bling, plans to keep check sizes at $ 400,000 to $ 1 million per business through his second seed fund.

Ling told Term Sheet he will stick to his wheelhouse of subscription-based businesses and mobile markets. And as vaccine news sparks hope for a return to normalcy, Ling says he sees an opportunity for “a new generation of businesses” to serve what will be “younger and older small businesses. techies ”that will arise as others close in the pandemic.

The investor is also considering moving from San Francisco to Texas or Florida, largely for tax reasons. he wouldn’t be alone.

Lucinda Shen
Twitter: @shenlucinda


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