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Join The Information for AI Agenda Live on Wednesday, September 23, at SFMOMA. We’re bringing together the industry’s most influential researchers, founders, and investors to preview the next wave of innovation—from breakthroughs in continual learning models to the latest bleeding-edge applications.Learn more here. Welcome back! For years, venture investors have scouted potential investments in the graduating classes of Y Combinator in the hope of backing the next Stripe, Airbnb and DoorDash. Robinhood is now pitching this playbook to individual investors, with a new fund to invest in early-stage startups that participate in the accelerator. On Thursday, Robinhood’s closed-end fund, which trades under the ticker RVII, went public on the New York Stock Exchange after raising $225.5 million. It’s the second startup-backing fund that the financial app has launched this year—and it won’t be the last of its kind. These funds’ performance will shed light on whether efforts to give individual investors access to private companies will succeed where others stumbled. Robinhood’s first publicly-traded venture fund, which listed under the ticker RVI in March, invests in growth-stage companies including OpenAI, Stripe, Databricks and Ramp. That stock closed today at $28.83, up 15% from its listing price March 6. That’s slightly lower than the Nasdaq Composite’s 20% rise over the same time. At least two other similar funds have recently gone public as well: Fundrise Innovation Fund, which closed Thursday up 22% from its debut in March, and Powerlaw Corporation, an offshoot of venture secondary fund Akkadian Ventures that owns SpaceX, is down 65% from its listing price in late May. Like all its predecessors, the new Robinhood fund allows individual investors to get in on private startups without a venture investor’s access or the wealth to become an accredited investor. The Securities and Exchange Commission requires net worth over $1 million or an income over $200,000 for at least the past two years, among other stipulations, to invest in private companies. “It has risk, and we totally get that,” Shiv Verma, Robinhood CFO and president of Robinhood Ventures, said of backing early-stage, private companies, in an interview. “We want to give people the ability to do it, and they can decide how much of their portfolio should be.” (Watch Akash’s interview with Verma from this morning on today’s episode of TITV.) The partners behind the fund are also hoping that cherry-picking from each Y Combinator batch will give investors access to the best of the best young companies. “If you invest in YC broadly, with Demo Day valuations as your entry price, you end up with a pretty good fund; if you can curate that to the top 20% of the batch, the returns are going to be even better,” Rich Aberman, a portfolio manager at Robinhood Ventures, said in an interview. (At Demo Day, which occurs at the end of each Y Combinator batch, participating founders pitch their startup to prospective investors.) Aberman went through Y Combinator as a founder in 2009—back when it was in Paul Graham’s living room, he added—and sold his startup, WePay, to JP Morgan Chase in 2017. Aberman also served as a visiting partner at Y Combinator for two years. This early-stage fund will be structurally similar to its growth counterpart: Robinhood Ventures will buy and hold onto shares of the startups. Investors in the fund pay a 2% management fee. There may be complications with this approach: investors flocking to the fund could drive up the value of its shares beyond the underlying value of the startups, exacerbating the risk to investors who buy shares. That’s been the case with Destiny Tech100, a volatile closed-end fund that owns startup shares. Robinhood’s latest fund has already invested in over 80 startups, according to its prospectus. Its portfolio managers met with over a hundred companies from each of the past two Y Combinator batches, ultimately writing an average check size of about $250,000 into about 40 startups from each cohort, Sarah Pinto, head of Robinhood Ventures and president of RVII, said. The fund has already deployed a little over $20 million. The performance will largely come down to whether the managers pick aptly. That’s the case with mutual funds, but unlike ones that back public companies, individual investors in the Robinhood fund won’t be able to find out much about the companies that make up the fund’s portfolio. Companies currently in RVII’s portfolio reflect some of the biggest trends among investors I talk to—from AI agents and inference to small nuclear reactors and robotics plays. Some other highlights: Ornadyne, a Sun Valley, Calif.-based company making “robotic birds for surveillance.” And San Francisco-based Anoria, another investment, is developing an “emotion-reading wearable for improving EQ”—tech that might find distinct product-market-fit in Silicon Valley.
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