Robinhood’s pain is Public’s gain as VCs rush to give it more money

Public.com, a social-focused free stock trading service, is nearing the close of a Series D just two months after raising a $65 million Series C, sources familiar with the matter told TechCrunch.

The San Francisco-based fintech aims to give people the ability to invest in companies using any amount of money, with a focus on community activity over active trading. It competes with Robinhood, M1 Finance and other American fintech companies that offer consumers a way to invest in equities with low or zero fees.

Public.com apparently got a flurry of investor interest over the past couple of weeks after Robinhood found itself in hot water and essentially raised $3.4 billion in a matter of days to help get itself out of a mess. 

That new capital came at a challenging time for the unicorn, which could pursue an IPO this year. And some investors reportedly want a piece of rival Public.com’s pie.

One source told TechCrunch that many of those offering term sheets believe there could be “a mass exodus from Robinhood” and want a way to capture that value.

Public recently shook up its business model, moving from generating revenue from order flow payments, a key way that Robinhood monetizes, to collecting tips from users in exchange for executing their orders. Payment for order flow, or PFOF, has become a touchstone in the debate surrounding low-cost trading platforms, and how users may pay for their transactions if not in direct fees.

Investors betting on Public, then, would be placing a wager on not merely future user growth, but the startup’s ability to monetize effectively in the future. 

The sources for this story were granted anonymity due to the sensitivity of the discussions.

Public grew quickly in 2020, expanding its user base by a multiple of 10 since the start of the year.

Co-founder Leif Abraham told TC’s Alex Wilhelm in December that the company’s growth has been consistent instead of lumpy, expanding at around 30% each month. The co-founder also stressed that most of Public’s users find its service organically, implying that the startup’s marketing costs have not been extreme, nor its growth artificially boosted.

We don’t know yet  how much Public is raising in its Series D, or who all is investing. Public has not responded to multiple requests for comment. VC firm Accel — which led its Series A, B and C rounds — also declined to comment. But we’ll definitely report details as we get them.