Trading platform Robinhood is preparing to open up access to private artificial intelligence companies to small investors, according to Vlad Tenev in an interview with the Financial Times.
Vlad said he wants to give “ordinary people” the opportunity to invest in private AI companies whose valuations are skyrocketing.
He said AI would cause “massive disruption” and that retail traders should be able to participate in everything that comes from that change, rather than being shut out while big institutions collect the profits.
The plan includes a new fund managed by Robinhood Ventures, a subsidiary of Robinhood, that will invest in a focused group of at least five private AI startups deemed “best-in-class.”
Vlad said the fund may use borrowed funds to increase its income. This comes at a time when traditional public markets are steadily shrinking while private markets are attracting more interest from small investors.
Access to funds shifts to small investors
Asset managers across the country are aggressively targeting individuals, as they are no longer the only major source of capital desired by institutional investors.
A recent executive order signed by President Donald Trump in August made it easier for employers to include private equity and private credit in their retirement savings plans.
This has led companies like Blue Owl, Blackstone, and Apollo to expand beyond their typical large customers and reach out to regular investors.
The public market has been shrinking for decades. At the same time, the private market expanded. In 2016, only 20 privately held companies in the United States were valued at more than $1 billion.
By 2024, that number has grown to more than 1,000. Large AI developers like OpenAI and Anthropic have driven much of this growth.
Over the past year, 10 unprofitable AI startups have seen their combined valuations increase by nearly $1 trillion through private funding rounds.
Robinhood’s new fund is closed-end, meaning investors cannot freely redeem their shares at any time. If too many people try to exit at once, you may not be able to get your money.
“Managing such a complex private equity strategy can be seriously detrimental to a rapidly changing user base,” said Brian Armor, director of passive strategies research at Morningstar.
His concern is that many users of the platform tend to trade quickly and may not adapt well to having their funds locked up.
High risk appetite and enhanced capabilities
Vlad said retail traders are already accustomed to taking risks, and many realize that their investments in early-stage private companies could end up being zero.
He said users are making “huge investments” in AI-related topics and doesn’t think big tech companies’ valuations are overly inflated.
Vlad gained widespread recognition during the 2021 meme stock cycle as Robinhood gained popularity among traders willing to make bold bets.
Robinhood’s stock price has risen about 255% this year, making it one of the best-performing companies in the S&P 500.
Despite the strong performance, shares fell nearly 11% on Thursday after the company announced third-quarter sales of $1.27 billion, double the same period last year. Revenue from cryptocurrency trading increased significantly, increasing by 300% to $268 million.
Earlier this year, Robinhood partnered with Kalsi to offer a prediction market that allows users to trade binary outcomes related to sports, politics, and entertainment.
The company reported that the number of event contracts traded on its platform increased to 2.3 billion between July and September, and to 2.5 billion in October. Vlad said this type of market could grow even further and become more personalized.
He said the ability for traders to price the risk of damage to homes from floods and fires could lead to products that function differently than traditional insurance and appeal to a wider audience.
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