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Why Robinhood became the Robinhood of early stage investors.

The proliferation of mobile, internet, cloud, social media, big data, low code and brilliant UI is enabling D2C companies achieve Unicorn status.

Over the past decade, with the constant evolution and adoption of mobile technology (e.g. iOS, Android), internet penetration (e.g. country specific and global ISP / Telecommunication companies), cloud computing (e.g. Amazon Web Services), plug & play e-commerce solutions (e.g. Shoppify), GPS (e.g. Google Maps), Low-code (e.g. Mendix) and Programmatic Marketing (e.g. Google, Facebook), the way businesses operate and serve their customers has been radically redefined.

To help fathom the disruption, consider how your day to day tasks have been fulfilled by the apps on the home screen of your mobile phone:

  • Groceries shopping: from heading to a Walmart or Target store, to ordering the same via BigBasket

  • Watching movies: from heading to the cinema to watching the same via Netflix

  • Eating out: is gradually transitioning to eating in as more an more restaurants on-boarding on to Swiggy

  • Travel planning: from visiting your agent to planning via TripAdvisor

  • Shopping across categories: from heading to the mall to ordering via Flipkart

  • Creative production: from heading to the agency to DIY design and print via Canva

  • And the list goes on…

As per Luma, an investment bank focused on digital media and marketing, this new phenomenon that is radically disrupting the way businesses operate is known as Direct to Consumer (D2C). The aforementioned ecosystem has reduced time to build D2C products so rapidly that over 400 brands and counting have already evolved in this space, disrupting the way traditional companies operate.

D2C Brand Proliferation Across Industries: A LUMAscape view

The impact of D2C can be substantiated by the fact that over 50% of Fortune 500 companies declined in revenue, while revenues of D2C focussed leaders have been rapidly on the rise. Despite market headwinds in the last quarter of 2018, FinTech companies outperformed the S&P 500 consistently.

Matrix U.S FinTech Index performance vs Incumbents and S&P 500

In 2019, per a recent article by Dana Stalder and Jake Jolis on TechCrunch, On a return basis, the public Matrix FinTech Index continued to crush every major equity index as well as the financial services incumbents. Nicely matching our forecasts, our Index delivered 213% returns over the last three years. The Index outperformed the financial services incumbents by 151 percentage points and the S&P 500 by 170 percentage points.

It’s also no surprise that D2C companies commanded the lion’s share of venture capital funding and exit valuations given the superior cost efficiencies, global reach, and fast track adoption that D2C firms operate with. While venture capital firms are buying into the D2C story rapidly, it’s worth noting that exit valuations have been significantly driven by traditional brands looking to expand their market share e.g. Walmart acquisition of Flipkart or looking to fundamentally reshape their business models to keep current with the times e.g. Unilever acquisition of Dollar shave club.

With it’s IPO expected soon, and with a customer base larger than E-Trade, Robinhood an online commission free trading platform, could set new records on it’s listing day. Robinhood raised raised a $323 million Series E round, moving the startup’s valuation to $7.6 billion. Before this round, Robinhood had been valued at $5.6 billion, after a $363 million raise in May 2018. With ~4 million customers as of 2019, Robinhood saw it’s valuation quadruple within a year owing to the friction-less D2C approach the platform provided — individuals / millennial