Robinhood-backed startup fund struggles during NYSE debut

Retail investors have long been shut out of the startup investing world. Robinhood is trying to change that by giving everyday investors a chance to put money into a portfolio made up of what it describes as "some of the most exciting private companies operating today."

To make that possible, the commission-free brokerage pioneer secured access to eight startups — including Databricks, Stripe, Mercor, and Oura — and bundled them into an investment vehicle known as Robinhood Ventures Fund I. The fund also includes Ramp, Airwallex, Revolut, and Boom. When it launched last month, it aimed to raise $1 billion, but demand for this new way to invest in private companies proved weaker than anticipated.

On Thursday, Robinhood said the fund had raised $658.4 million, which could rise to $705.7 million if underwriters take up their full allotments. The shares were priced at $25 in the offering, started trading on Friday, and ended the day at $21, marking a 16% drop.

The reception to RVI on Wall Street looks very different from another effort designed to give individual investors exposure to high-profile startups. When Destiny Tech100 — a publicly traded closed-end fund with stakes in 100 venture-backed companies, including SpaceX, OpenAI, and Discord — went direct-listed on the NYSE in March 2024, its shares jumped from a reference price of $4.84 to an opening trade of $8.25, eventually finishing the first day at $9.00.

Since its stock market debut, Destiny Tech100 has continued to rise. The fund closed Friday at $26.61, a 33% premium over its net asset value of $19.97,  indicating the shares are trading well above the assets' actual values.

So why are retail investors not nearly as enthusiastic about Robinhood's fund as they are about Destiny Tech100? The most likely reason is that RVI has not yet had exposure to the private companies many expect to go public at high valuations, including OpenAI, Anthropic, and SpaceX.

Robinhood is trying to change that. RVI plans to add more startups over time, aiming to eventually hold that Robinhood Ventures President Sarah Pinto described as "15 to 20 of the best late-stage growth companies out there." Robinhood CFO Shiv Verma told Axios Pro on Friday that the company is pursuing exposure to OpenAI.

But getting access to these high-profile startups is far from simple. Robinhood is trying to secure a place on its cap table through primary fundraising rounds or secondary share sales, but this remains difficult, even for a company with strong Silicon Valley ties.

A cap table, the official list of who owns equity in a company, is usually tightly controlled at top private startups. Gaining entry typically requires either an invitation from the company itself or approval to buy shares from existing investors.

"It's very difficult to get into any of these companies, and the investment rounds are very expensive," Pinto said.

That is one of the main reasons why opening private markets to ordinary investors is much easier in theory than in practice, and why the startups most retail investors really want exposure to remain, for now, out of reach.