Robinhood's Chief Financial Officer and Venture Capital Head, Shiv Verma, is spearheading a new initiative. Venture capital firms have long sifted through Y Combinator's demo day batches, hoping to find the next Stripe, Airbnb, or DoorDash. Now, Robinhood is bringing this investment strategy to the average individual investor by launching a new closed-end fund focused on early-stage startups within this renowned accelerator.
The new fund, trading under the ticker RVII, debuted on the New York Stock Exchange on Thursday, raising $225.5 million. This marks the second startup investment fund launched by the online brokerage this year, with more similar offerings expected. The performance of these funds will test whether a viable path exists for opening up private company investments to the general public, a feat many previous institutions have attempted and failed to achieve.
Robinhood's first venture capital fund, trading under ticker RVI, began trading in March and invests in growth-stage companies, with holdings including OpenAI, Stripe, Databricks, and Ramp. The fund closed on Thursday at $28.83, representing a 15% gain from its March 6 IPO price. However, it has slightly underperformed the broader market, as the Nasdaq Composite Index has risen 20% over the same period.
At least two other similar funds have recently gone public. The Fundrise Innovation Fund closed on Thursday, up 22% from its debut price in March. Meanwhile, the Powerlaw Corporation, a spin-off from venture capital secondary fund Akkadian Ventures that holds SpaceX equity, has fallen 65% from its late May IPO price.
Like its predecessors, Robinhood's new fund allows the general public to invest in unlisted startups without needing access to professional venture capital channels or meeting the accredited investor wealth threshold. U.S. Securities and Exchange Commission regulations typically require individual investors to have a net worth exceeding $1 million or an annual income of over $200,000 for two consecutive years, among other conditions, to directly invest in private companies.
Discussing the risks of investing in early-stage private companies, Robinhood CFO and President of Robinhood Ventures, Shiv Verma, stated in an interview: "The risks are real, and we are fully aware of them. We want to provide investors with access, and they can decide how much of their portfolio to allocate to this asset class."
The fund management team aims to select the most promising companies from each Y Combinator cohort to help investors lock in the best new-generation startups. Rich Aberman, a portfolio manager at Robinhood Ventures, noted in an interview: "If you bought the entire Y Combinator batch at demo day valuations, the fund's returns would already be substantial. But if you further filter and only invest in the top 20% of quality picks in each cohort, the returns can be even higher."
Aberman himself participated in Y Combinator as a founder in 2009 when the program was still held at Paul Graham's home. His payment company, WePay, was acquired by JPMorgan Chase in 2017, and he later served as a visiting partner at Y Combinator for two years.
This early-stage fund is structured similarly to the previous growth-stage fund: Robinhood Ventures directly purchases and holds startup equity for the long term. Fund investors pay an annual management fee of 2%. This model carries a hidden risk: a large influx of money into the fund could inflate its secondary market share price, pushing it far above the true value of the underlying startup assets, thus increasing risk for new investors. This issue has been observed in Destiny Tech100, a closed-end fund with volatile holdings focused on startup equity.
According to the fund's prospectus, Robinhood's latest fund has already invested in over 80 startups. Sarah Pinto, Head of Robinhood Ventures and President of RVII, explained that the fund managers engaged with over 100 companies from the last two Y Combinator cohorts. They ultimately invested in approximately 40 companies from each cohort, with an average investment of about $250,000 per company. The fund has currently deployed a little over $20 million in total.
The fund's performance will largely depend on the stock-picking ability of its managers. While mutual funds also rely on stock selection, they differ from Robinhood's fund in a key way: individual investors in this fund will find it difficult to access detailed information about the underlying portfolio companies.
RVII's current holdings align with mainstream market trends, covering areas such as AI agents, compute and inference, small modular nuclear reactors, and robotics. Representative investments include Ornadyne, a Sunnyvale, California-based company developing "mechanical birds" for surveillance and reconnaissance, and Anoria, a San Francisco-based company creating wearable technology that can detect emotions to enhance emotional intelligence. Such technologies are expected to find a unique market demand in Silicon Valley.
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