Robinhood is the latest to jump on the bandwagon of offerings opening up access to the private markets.  For years, everyday investors have been locked out of asset classes like venture capital and private equity- mostly due to regulatory and technological constraints. Given that pent-up demand, it’s no surprise that Robinhood—synonymous with democratizing access to public markets—now wants to do the same for private ones.

Their entrance sparks a broader conversation: how has retail access to private markets evolved, where does Robinhood’s announcement fit, and what does it mean for investors?

A bit of Background

Robinhood Ventures I (RVI) is part of a new wave of funds investing into private assets -  venture capital, private equity and private credit.  In Robinhood’s case, they plan to invest into pre-IPO private companies - think SpaceX or Stripe.  These funds - known as closed-end funds - are close cousins of ETFs and Mutual Funds. They have no limits on the number or types of investors and are broadly accessible to anyone trading on the NYSE or Nasdaq.  

How will Robinhood Venture I (RVI) fund work? 

Like a private company going public, closed-end funds raise a pool of capital through an initial offering and then list their shares via an IPO. After the IPO, the fund deploys the capital into companies that meet its strategy. Once listed, RVI shares will be tradable on the NYSE during market hours.

Robinhood says RVI will invest in “ best-in-class growing companies at the frontiers of their respective sectors and industries.”  It will acquire shares of these companies through initial and secondary transactions (buying from existing investors) as well as mechanisms like forward contracts.  Once capital is fully deployed, investors can still trade shares on the NYSE, but RVI won’t raise new funds unless it does a secondary offering. 

Why it matters