Why a crypto exchange might want to buy Robinhood – TechCrunch

Selling your company — or not selling your company — is a complicated decision. Price, timing and pride are all factors that influence the decision. You might even enjoy running the business, whether it is a startup, unicorn or large-scale public-market company.

Sometimes, the decision is made. For a company’s leadership team. Zendesk’s work to avoid selling itself only to later acquiesce at a lower price is one such example. Twitter, which is currently in the midst of a messy sale with Elon Musk is another example.

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All of this was on our minds as Sam Bankman Fried, the CEO and founder of crypto exchange FTX circles Robinhood. After securing a material share in the business, he rejected active talks to purchase the U.S.-based zero-cost broker. Robinhood stressed that the founders of the company have voting control, which means that they can decide to sell or not. We’ll see about that.

But why would a crypto-exchange be interested in Robinhood? After bouncing the issue around my head since the news somewhat broke yesterday that Robinhood might be in play, I’ve come up with an explanation. Let’s talk about it.

The user question

Robinhood’s boom years are over, but Robinhood still has a significant user base. As its Q1 earnings showed, the U.S. consumer fintech closed the first quarter with 22.8 million “net cumulative funded accounts,” up 100,000 from Q4 2021 and 4.8 million on a year-over-year basis.

Are those a lot of people? Yes.

Although it is difficult to draw direct comparisons to other companies in consumer financial technology, we can do some directional work. Coinbase, for instance, is a good example. had 9.2 million “monthly transacting users,” or MTUs, in the first quarter. We cannot compare net-funded accounts to monthly active traders. However, it’s fair to note that we expect MTUs to work out to a fraction of net funded accounts. Because Robinhood has net funded accounts that are a multiple of the Coinbase MTU figure, it’s clear that Robinhood is large, at least in terms of active American crypto accounts.

That’s a busy way of saying that Robinhood’s funded account number would be a huge help to any crypto company looking to snag some U.S. market share.

Yes, but