I was taking a look at the market value of your Robinhood shares. What was it like to lose a billion dollars within just months?
Gosh, kinda hard to look at that. I would say that it stung, but at the time, we had a lot of work to do. That was more of a pride hit, right? There was a lot of sort of climbing back up that we knew we had to do, and we kind of were in a position where we're like, how do we do this?
Baiju Bhatt came into billions after co-founding Robinhood Markets with his college roommate, Vlad Tenev. But now, he's starting over to chase a childhood dream in space. He recently launched Cowboy Space Corporation, which at the time of filming went by Aetherflux. Bhatt invited us to his new headquarters in San Carlos, California to talk about how he manages his money, how he enjoys it, and why a billionaire would choose to become a beginner again. I mean, I've covered individual investing for years and there have never been as many Americans invested in the stock market as there are today.
And I think that's in part because of apps like Robinhood, right? You guys really kind of started that movement. Before that, though, you had a few failed companies. Tell me about those.
I did, yeah. I was working at a high-frequency trading/hedge fund, so I did... I worked there a little less than a year, and then quickly realized that I was not much of a corporate creature. I was either gonna be an academic or I was gonna start a company. Called up Vlad, was like, 'Hey, do you want to start a company with me?' And eventually he said yes. We packed our bags and moved to New York. We had this like maroon Infiniti Q45 that we drove across the country, and that thing broke down on us big time on the way, and led to the sort of, like, fun, you know, early 20s adventures and mishaps. There were some bumps along the way. The first companies didn't do so well, but you know, we stuck with it and eventually this, like, light bulb went off in our head and we're like, there's a real gap with retail participation. And this kind of happened around the Occupy Wall Street time. I remember, like, we were around New York when that was happening, and we kind of looked around at other people of our generation that were really frustrated with the financial system, thought the whole system was broken. Not enough people were participating in kind of the financial system. But the other answer that we kind of always saw was, what if we could get more people to participate and we could have more people share in that upward economic mobility? I think it sometimes takes an outsider looking in with the perspective of, like, no, actually participating in America's financial system is not a bad thing. It's, like, actually the, you know, very directly, it's the envy of the world. And our generation of young people, we should make tools that make it straightforward for them to be a part of the system and to Robinhood.
Raising money for a new startup is hard. How many meetings did you guys take before you got any seed funding for Robinhood?
Yeah. Might've been more, might've been less, but it was failure and rejection after failure and rejection. You know, we would get the feedback, it's like, you know, 'You don't know how to build a consumer product.' You know, 'You're a math guy, you're a physics guy.' Like, 'Young people never want to invest. They don't invest now. What makes you think that's gonna be different?' You can take that stuff and really let it set you back, or you can, like, assess it with, like, a sober set of eyes and be, like, what do we need to do differently? Like, should we dig our heels in or should we, like, take into consideration some of this feedback? But the through line was just, like, not gonna give up.
I mean, like, what is the 60th meeting like?
This is the thing is you don't always hear, 'No.' Most of the in-betweens were either no reply or no.
Or my favorite one was, 'We're gonna cheer you from the sidelines.'
And you're, like... You know, it's a polite thing to say, but, like, on the 60th one, you're, like, I absolutely don't want to hear that. Just be, like, 'I don't like your idea and I'm passing because I don't like your idea.'
I'm sorry, that's really funny.
And so then, at some point, I remember there was, like, a little meme amongst our inner circles where it'd be, like, 'Are you a big fan? How big of a fan? Like, what kind of airflow is this fan producing?' These are the aspects of being an entrepreneur that most people don't see, right? Because until you're successful, frankly, nobody gives a damn.
How do you psych yourself up to, like, take the next meeting, try to get that funding?
The truth of the matter is that it gets very difficult and you kind of ask yourself, like, 'What am I doing wrong?' Like, 'Why is this not working?' Like, 'What do I need to do differently here?' For Robinhood, the big thing that made it real was when we got our first sort of brokerage application approved to actually be able to do a broker dealer, which you know, was Robinhood, and then the original wait list behind the product.
Yeah. Which really took off, right?
Which really took off. Yeah. There was a lot of, you know, very deliberate kind of, like, methodical approach to how do you figure out what people want. We would like scour things like Craigslist for people that would, if you give 'em like 30, 50 bucks, they'd come in and test your product, and we would try to line up four or five people on Friday afternoon to come in and just, like, use our product. So, say I was putting an early version of Robinhood in front of you. I'd be, like, 'Okay, like, what do you think of this?' You know, say it's like a piece of paper with, like, a description of the product on it and you read it. And a lot of the times, if you don't ask the right questions, people will be like, 'That's nice.' And you're like, 'Well, what the heck does that mean?' And I think one of the ways that you get the insights is you ask targeted questions. Like, you're like, 'Well what does this thing do?' Right?
How would you describe this to somebody that you know? If you put it in your own words, does it read or sound anything like what's on the prototype that we made, or are you just interpreting it totally differently? In that example, when you start to see the way people describe it get closer and closer to the way that you talk about it, you're like, 'Okay, at a baseline, this is understandable,' and you can kind of go deeper and say, 'Would you be likely to try something like this?' Or, like, 'Why would you try this?' Or, 'What would be reasons why you wouldn't try this?'
How did you think of doing that?
There's a word for this, like, customer research or user research, and the original push to kind of think about this came from working with Google Ventures. Google Ventures was the one very early VC that they were, like, 'Yeah, let's bet on these two guys,' and they're like, 'Well, we have this portfolio of resources to help you build your company.' And we're, like, 'Yeah, we'll use that, for sure.'
So, you learn that there is this product market fit, people want to use your product, and things really take off from there, right? It gets easier for you to raise money
once you had that initial seed funding and you guys started growing really quickly, and then you hit some growing pains, right? You run into some regulatory troubles. Was there a moment during that growth period where you were like, 'Hey, we really fumbled that. We should have known better'?
It's impossible to not feel that way, right? And we had a lot of challenges as we were growing up as a company, very publicly documented, a lot of the times. The mission of the company was to build a product that empowered a generation of Americans to be a part of the financial system. And to do that, to be honest to that mission, we had to do it in a way that earned the trust for our customers, regulators, the broader marketplace.
And I think that was the one part that was always really unifying. It's like, why do we exist? Like, why do we do this?
The COVID pandemic happens.
And that really becomes your moment.
People are stuck at home, they're turning to the financial markets. They have nothing to do, but trade stocks, options, crypto-
They turn to Robinhood, and that's really where your growth started to take off.
