It’s been a huge week in the GameStop & AMC saga. Aside from regulatory threats and crazy stocks, trading platforms have failed to keep up with demand. In particular Robinhood.
It got me thinking. How much value is created by being able to keep up with demand? Or lost by not. And how can Private Equity influence their portcos to get a handle on the basics?
Who are Robinhood?
Robinhood is an app-based investing platform. They let you invest in Tech companies, ETFs & Crypto without paying commission. The app is designed to be as easy to use as playing Candy Crush.
If you want to learn about how Robinhood make money then this article from investopedia is a good start.
https://www.investopedia.com/articles/active-trading/020515/how-robinhood-makes-money.asp
In 2021 Robinhood has had 15 separate outages limiting users ability to trade.
Some users reporting losing up to $100k due to the outrages. The impact of these outrages on Robinhood is forecast to be ~$50-100m in lost revenue.
https://downdetector.com/status/robinhood/archive/
What do users expect?
There are three basic things outside general look and feel that users expect. From the users’ perspective…
- I expect that when I submit a trade that trade goes through and that I get instant feedback.
- I expect that the platform doesn’t slow down as I do more trading.
- I expect that just because more people are using the app that this shouldn’t affect my experience.
How can I make sure my portfolio companies have a handle on this?
Here are 5 questions you should be asking your portfolio companies.
- Is your platform a fast as users expect it to be?
- How long does it take to service each user?
- Can you service all the people who want to use your platform?
- What is the max number of users you can service?
- Can you back all that up with data?
What will you do next?
What does your gut tell you about how prepared your portfolio companies are? How can you challenge them to be better? What else can you learn from Robinhood’s successes and failures?
Thomas
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