Last night Robinhood, the American fintech unicorn that provides free securities trading services to consumers via an app, announced that it raised an additional $460 million in its previously known Series G. That round is now worth $660 million at an $11.7 billion post-money valuation.
A little over a month ago Robinhood announced that it had raised a $200 million Series G, bringing its valuation to $11.2 billion at the time.
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The company previously raised a two-part Series F this year, worth $600 million, bringing its total capital raised to well-north of the $1 billion mark for the year.
But Robinhood is not alone in posting such epic fundraising numbers.
American neobank Chime rode the pandemic-induced general savings-and-investing boom, raising a $485 million Series F a few days ago. That round came less than a year after Chime had raised a mammoth Series E last December.
Two different American fintech giants each raised more than $1 billion in under a year. That’s quite the feat. This morning as a refresher for us both, we’re going over what we know about recent growth from each company, as those metrics should help us understand why the two former startups are worth so damn much money.
Growth
We begin with Chime, which raised back in December of 2019. Around that time there were a grip of stories written about the company that included estimates of its revenue scale in the year:
- CNBC said Chime’s revenue would come in around $300 million in 2019. Forbes had the number at $200 million.
- Business Insider reported that Chime anticipated revenues of $200 million for the year.
The CNBC number was the last to be reported, meaning that was probably the most accurate. But each included lots of growth. The $200 million revenue figure was still a quadrupling compared to Chime’s 2018 result, according to the same Forbes story.
Then Chime raised a huge round: A reported $500 million deal that an SEC filing pegged at a few dollars under $700 million (PitchBook notes that the round came in two parts, one worth $500 million in December 2019, one worth $200 million in March 2020).
The company’s valuation, pegged at $5.1 billion pre-money, grew to around $5.8 billion. That was up about 4x from its earlier 2019 valuation of $1.5 billion set that March. So, revenue grew about 4x, as did Chime’s revenue. That seems reasonable.
Now we turn to Robinhood, which announced the first chunk of its Series F in May of 2020, a $280 million infusion at an $8 billion pre-money valuation. Behind Robinhood’s new valuation and first piece of its Series F appeared to be rapid growth in the company’s revenue base.
In the first quarter of 2020, Robinhood’s payments from order flow — revenues from routing orders through certain partners — soared. As TechCrunch reported around after the $280 million infusion:
The company’s success in driving growth has led to surging revenues. As The Block recently reported, some Robinhood filings (here and here) show that the company earned “nearly $100 million in fees for stock and options order flow” in Q1 2020. For context, the same part of Robinhood’s business was reported to have generated $69 million in revenue during all of 2018.
The second, larger part of Robinhood’s Series F was announced in July. The first part of the Series F would have been raised with visibility into Q1 results, we reckon. The second part of the same round likely would have had some visibility in Robinhood’s Q2 results.
As the round was, in fact, raised, we’d expect those Q2 numbers to be rather strong. And they were. From our reporting in August on the company’s Q2 revenue growth:
Robinhood saw its total payment for order flow revenue roughly double, rising from $90.9 million in Q1 2020 to $183.3 million in Q2 2020, a 102% increase. [ … ] A $183.3 million quarterly run rate for payment for order flow puts Robinhood on a $733.20 million yearly run rate from the single product — user trade routing — alone.
It was clear at this point that trading enthusiasm amongst Robinhood’s user base was adding up to big business. And investors were pumping money into the company as it grew, upping their ownership stake as they went.
Back to Chime. The company’s latest round, that $485 million Series F that we discussed at the start of this post, came with several data points I’ve included below:
- A new $14.5 billion valuation.
- Nearly $1 billion in cash.
- Disclosure that the company is now EBITDA profitable (unadjusted EBITDA, we confirmed).
- And per the company, news that it “grew transaction volume and top line more than 3x in 2020.”
Given that Chime quadrupled (at least!) in 2019, trebling in 2020 is very impressive. Depending on whether the $200 million or the $300 million 2019 revenue estimates were more correct, the company’s revenue result for 2020 could land between $600 million and $900 million. Those figures, at Chime’s current growth rate, make its valuation understandable. (Though, of course, we’d need a lot more data to be fully confident in the figure.)
And then, last night, Robinhood added another $460 million to its Series G, bringing that round to $660 million.
Look at the calendar: it’s nearly October, which means Robinhood’s investors probably had a bit of a look into how the company is performing in Q3 2020. And then they fired another busload of cash in its direction.
Our read? Robinhood is doing just fine in Q3.
Totting up this review, what seems clear is that the valuation gains and investment interest that Chime and Robinhood have managed lately have been predicated on quick revenue growth. So long as each company continues to grow, their valuations should be — in time — defensible.
However, if trading slows or Chime customers lower their spend due to a poor economy, their growth could stall. And at their current prices that would be quite the rough patch.
So far, it’s all systems go for the richest of American fintech.
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