Robinhood’s startup fund stumbles in its NYSE debut.

Retail investors are notoriously inaccessible to the startup world. Robinhood is attempting to change that by allowing the general public to invest in a portfolio of “the most exciting private companies operating today.”

To this end, the company that pioneered the commission-free brokerage model has secured access to eight startups, including Databricks, Stripe, Mercor, and Oura, grouping them into a vehicle called Robinhood Ventures Fund I. The fund, which also includes Ramp, Airwallex, Revolut and Boom, set an ambitious $1 billion target last month, but demand for this new way of investing in private companies has been lower than expected.

On Thursday, Robinhood announced that it had raised funds. $$658.4 million – could reach $757 million if insurers exercise their full quota. The stock, which had an initial public offering price of $25, began trading on Friday and closed at $21, down 16%.

RVI’s response on Wall Street stands in stark contrast to another attempt to give individual investors exposure to hot startups. When Destiny Tech100, a publicly traded closed-end fund holding stakes in 100 venture-backed companies, including SpaceX, OpenAI, and Discord, listed directly on the NYSE in March 2024, its shares soared from a base price of $4.84 to an opening trading price of $8.25, eventually closing at $9.00 on the first day.

Destiny Tech100 continues to rise since its public debut. The fund closed Friday at $26.61, a 33% premium to its net asset value of $19.97. This means that the stock is trading much higher than the actual value of the underlying holdings.

So why aren’t retail investors as interested in Robinhood’s funds as they are in the Destiny Tech 100? The most likely explanation is RVI’s lack of exposure to companies widely expected to go public at enormous valuations, such as OpenAI, Anthropic, and SpaceX.

Robinhood is trying to solve this problem. RVI plans to add more startups to the fund, ultimately aiming to own what Sarah Pinto, president of Robinhood Ventures, described to TechCrunch as “15 to 20 of the best late-stage growth companies.” CFO of the companyShiv Verma told Axios Pro on Friday: Robinhood is eyeing its exposure to OpenAI.

However, gaining access to these renowned companies is not at all simple. Robinhood aims to enter the cap directly through a primary capital raise or secondary share sale. This is a challenge even for companies with roots in Silicon Valley.

Cap tables, the official record of who owns shares in a company, are closely guarded at most high-profile startups, and to get a spot you have to be invited by the company or get the company’s approval to buy shares from existing investors.

“It is very difficult to get into these companies and the investments are very expensive,” Pinto acknowledged.

This is just one of the reasons why democratizing private markets is easier said than done, and why the companies most individual investors actually want to own are currently out of reach.