A closer look at Mirror

A closer look at Mirror
At Disrupt SF, CEO Brynn Putnam demoed and launched Mirror, a smart gadget that sits on your wall and offers virtual fitness classes.
The $1500 device can be paired with a monthly subscription to let the user browse fitness classes, mark their progress, and follow along with other Mirror users. The idea here is that people spend thousands of dollars on gym memberships and/or huge fitness machines like the Peloton, but that Mirror offers a way to get a similar experience at home without taking up all that space.
We caught up with Putnam at the Mirror offices in NYC to check out the product and get more info.
Enjoy the video!

Source: Gadgets – techcrunch

Subscription management startup RevenueCat raises $1.5M

Subscription management startup RevenueCat raises .5M

RevenueCat, a startup that helps developers manage their in-app subscriptions, has raised $1.5 million in new funding.

The company was part of the most recent batch at Y Combinator, and CEO Jacob Eiting said growth has been “a rocket ship” for the past few months. As of this week, RevenueCat is working with 100 live apps, and it’s crossing $1 million in tracked revenue.

The startup offers an API to address what sounds like a straightforward task, supporting in-app subscriptions in iOS and Android. As Eiting put it when I first interviewed him a few months ago, it’s “boring work” solving a “boring problem” — but that’s one of the reasons why developers don’t want to deal with it. It also means they don’t have to spend time dealing with bugs and updates on the subscription side of either platform.

And RevenueCat continues to add new features, like allowing developers to bring their revenue data into analytics and attribution services. That, in turn, makes it easier for them to see which ads are driving real revenue.

The long-term goal is to build what Eiting (who’s pictured above with his co-founder Miguel Carranza) calls a “revenue management platform.”

“Our mission as a company is to help developers make more money,” he said. “I think we do become this one-stop shop, a service that you integrate with all the payment touch points in your app to help you track your revenue and help you understand how customers are spending.”

The new funding (which is on top of the $120,000 RevenueCat received from YC) was led by Jason Lemkin of SaaStr. Eiting said it’s “an obvious fit,” since the software-as-a-service entrepreneurs who read SaaStr articles, listen to its podcasts and attend its events form “this huge community of companies that are potential customers for us.”

FundersClub, Oakhouse Partners, Buckley Endeavours, Josh Buckley and OneSignal CEO George Deglin also invested.

Source: Mobile – Techcruch

Naya Health, once a promising breast pump startup, now leaving customers in the dark

Naya Health, once a promising breast pump startup, now leaving customers in the dark
With their loud noises and hard plastic flanges, breast pumps are the bane of many a new mother’s existence. Founded in 2013, Naya Health is one of the most notable tech startups working on a better pump. But the company’s support site is now shutdown and it’s stopped updating its social media accounts. In a report today, CNBC spoke to several customers who said their pumps, which cost $1,000 and aren’t covered by insurance, had stopped working, and Naya Health had not provided them with adequate support or replacement parts.
While the Naya Health breast pump’s price tag is significantly more than most competing devices, customers were willing to give it a chance because of its unique flange design, which used silicone and water instead of plastic cups to recreate a nursing baby’s mouth.
Users have left a series of complaints on Naya Health’s Facebook page since May about performance issues, poor customer service, and long shipping times or non-delivery of pumps they ordered months ago. A Kickstarter campaign created for Naya Health’s smart baby bottle, which raised more than $100,000, is also filled with complaints about orders not being fulfilled (the last response from co-founder and CEO Janica Alvarez was posted six months ago).
Naya Health’s Facebook and Instagram accounts haven’t been updated since summer, even though users are still using them to post complaints, while its Twitter account has been set to protected mode. As CNBC noted, many customers have begun turning to the Better Business Bureau’s site to post complaints after saying their messages and calls to Naya Health went unanswered.
An email sent to Alvarez, who co-founded the company with her husband Jeffery Alvarez, Naya Health’s CTO, received an auto-reply. TechCrunch has also contacted Naya Health investors Tandem Capital and Bojiang Capital, the co-leads of its seed round, for comment. The company has raised $4.6 million in angel and seed funding, according to Crunchbase.

Source: Gadgets – techcrunch

TC Sessions: AR/VR surveys an industry in transition

TC Sessions: AR/VR surveys an industry in transition
Industry vets and students alike crammed into UCLA’s historic Royce Hall last week for TC Sessions: AR/VR, our one-day event on the fast-moving (and hype-plagued) industry and the people in it. Disney, Snap, Oculus and more stopped by to chat and show off their latest; if you didn’t happen to be in LA that day, read on and find out what we learned — and follow the links to watch the interviews and panels yourself.

To kick off the day we had Jon Snoddy from Walt Disney Imagineering. As you can imagine, this is a company deeply invested in “experiences.” But he warned that VR and AR storytelling isn’t ready for prime time: “I don’t feel like we’re there yet. We know it’s extraordinary, we know it’s really interesting, but it’s not yet speaking to us deeply the way it will.”

Next came Snap’s Eitan Pilipski. Snapchat wants to leave augmented reality creativity up to the creators rather than prescribing what they should build. AR headsets people want to wear in real life might take years to arrive, but nevertheless Snap confirmed that it’s prototyping new AI-powered face filters and VR experiences in the meantime.
I was onstage next with a collection of startups which, while very different from each other, collectively embody a willingness to pursue alternative display methods — holography and projection — as businesses. Ashley Crowder from VNTANA and Shawn Frayne from Looking Glass explained how they essentially built the technology they saw demand for: holographic display tech that makes 3D visualization simple and real. And Lightform’s Brett Jones talked about embracing and extending the real world and creating shared experiences rather than isolated ones.

Frayne’s holographic desktop display was there in the lobby, I should add, and very impressive it was. People were crowding three or four deep to try to understand how the giant block of acrylic could hold 3D characters and landscapes.
Maureen Fan from BaoBab Studios touched on the importance of conserving cash for entertainment-focused virtual reality companies. Previewing her new film, Crow, Fan noted that new modes of storytelling need to be explored for the medium, such as the creative merging of gaming and cinematic experiences.
Up next was a large panel of investors: Niko Bonatsos (General Catalyst), Jacob Mullins (Shasta Ventures), Catherine Ulrich (FirstMark Capital) and Stephanie Zhan (Sequoia). The consensus of this lively discussion was that (as Fan noted earlier) this is a time for startups to go lean. Competition has been thinned out by companies burning VC cash and a bootstrapped, efficient company stands out from the crowd.

Oculus is getting serious about non-gaming experiences in virtual reality. In our chat with Oculus Executive Producer Yelena Rachitsky, we heard more details about how the company is looking to new hardware to deepen the interactions users can have in VR and that new hardware like the Oculus Quest will allow users to go far beyond the capabilities of 360-degree VR video.
Of course if Oculus is around, its parent company can’t be far away. Facebook’s Ficus Kirkpatrick believes it must build exemplary “lighthouse” AR experiences to guide independent developers toward use cases they could enhance. Beyond creative expression, AR is progressing slowly because no one wants to hold a phone in the air for too long. But that’s also why Facebook is already investing in efforts to build its own AR headset.
Matt Miesnieks, from 6d.ai, announced the opening of his company’s augmented reality development platform to the public and made a case of the creation of an open mapping platform and toolkit for opening augmented reality to collaborative experiences and the masses.
Augmented reality headsets like Magic Leap and HoloLens tend to hog the spotlight, but phones are where most people will have their first taste. Parham Aarabi (ModiFace), Kirin Sinha (Illumix) and Allison Wood (Camera IQ) agreed that mainstreaming the tech is about three to five years away, with a successful standalone device like a headset somewhere beyond that. They also agreed that while there are countless tech demos and novelties, there’s still no killer app for AR.

Derek Belch (STRIVR), Clorama Dorvilias (DebiasVR) and Morgan Mercer (Vantage Point) took on the potential of VR in commercial and industrial applications. They concluded that making consumer technology enterprise-grade remains one of the most significant adoptions to virtual reality applications in business. (Companies like StarVR are specifically targeting businesses, but it remains to be seen whether that play will succeed.)
With Facebook running the VR show, how are small VR startups making a dent in social? The CEOs of TheWaveVR, Mindshow and SVRF all say that part of the key is finding the best ways for users to interact and making experiences that bring people together in different ways.
After a break, we were treated to a live demo of the VR versus boxing game Creed: Rise to Glory, by developer Survios co-founders Alex Silkin and James Iliff. They then joined me for a discussion of the difficulties and possibilities of social and multiplayer VR, both in how they can create intimate experiences and how developers can inoculate against isolation or abuse in the player base.
Early-stage investments are key to the success of any emerging industry, and the VR space is seeing a slowdown in that area. Peter Rojas of Betaworks and Greg Castle from Anorak offered more details on their investment strategies and how they see success in the AR space coming along as the tech industry’s biggest companies continue to pump money into the technologies.

UCLA contributed a moderator with Anderson’s Jay Tucker, who talked with Mariana Acuna (Opaque Studios) and Guy Primus (Virtual Reality Company) about how storytelling in VR may be in very early days, but that this period of exploration and experimentation is something to be encouraged and experienced. Movies didn’t begin with Netflix and Marvel — they started with picture palaces and one-reel silent shorts. VR is following the same path.
And what would an AR/VR conference be without the creators of the most popular AR game ever created? Niantic already has some big plans as it expands its success beyond Pokémon GO. The company, which is deep in development of Harry Potter: Wizards Unite, is building out a developer platform based on their cutting-edge AR technologies. In our chat, AR research head Ross Finman talks about privacy in the upcoming AR age and just how much of a challenger Apple is to them in the space.
That wrapped the show; you can see more images (perhaps of yourself) at our Flickr page. Thanks to our sponsors, our generous hosts at UCLA, the motivated and interesting speakers and most of all the attendees. See you again soon!

Source: Gadgets – techcrunch

iPharmacy Roman fights stigmas with premature ejaculation meds

iPharmacy Roman fights stigmas with premature ejaculation meds

There’s a war brewing to become the cloud pharmacy for men’s health. Roman, which launched last year offering erectile dysfunctional medication and recently added a ‘quit smoking’ kit, is taking on $97 million-funded Hims for the hair loss market. Today, Roman launched four new products it hopes to cross-sell to users through a unified telemedicine subscription and pill delivery app. It now sells meds for premature ejaculation, oral herpes, genital herpes, and hair loss at what’s often a deep discount versus your local drug store. And for those who are too far gone, it’s launching a “Bald Is Beautiful, Too” microsite for finding the best razors, lotions, and head shaving tips.

Roman CEO Zachariah Reitano

“It’s unlikely that you’ll buy razors from Bonobos or pants from Dollar Shave Club. But with a doctor, it’s actually the exact opposite” Roman CEO Zachariah Reitano tells me. “As a customer you’re frustrated if they send you somewhere else.” And so what started as a single product startup is blossoming into a powerful product mix that can keep users loyal.

Roman starts with a telemedicine doctor’s visit where patients can talk about their health troubles without the embarrassment of going to their general practitioner. When appropriate, the doc can then prescribe medications customers can then instantly buy through Roman.

“If you have something that’s truly consuming your day-to-day, it makes it really hard or nearly impossible to think about the long-term. If you’re 30 pounds overweight and experiencing erectile dysfunction, [it’s the latter symptom] that’s dominating your head space” Reitano explains. The doctor might focus on the underlying health issue, but most humans aren’t so logical, and want the urgent issue fixed first. Reitano’s theory is that if it can treat someone’s erectile dysfunction or hair loss first, they’ll have the resolve to tackle bigger lifelong health challenges. “We’re hoping to work on this so you can take a deep breath and get the monkey off your back” the CEO tells me.

But one thing Roman won’t do is prescribe homeopathic remedies or spurious remedies. “We will only ever offer products that are backed by science and proven to work” Reitano declares. Taking a shot at Roman’s competitor, he says “Hims sells gummies. Roman does not.  No doctor would say Biotin would help you regrow hair”, plus the vitamin can distort blood pressure readings that make it tough to tell if someone is having a heart attack.

“Roman will never slap sugar on vitamins, sell them on Snapchat, and say they’ll regrow your hair” Reitano jabs. Roman also benefits from the fact that Reitano’s father and one of the company’s advisors Dr. Michael Reitano was a lead author on a groundbreaking study about how Valacyclovir could be used to suppress transmission of genital herpes.

So what is Roman selling?

With Roman, Hims, Amazon acquisition PillPack, and more, there’s a powerful trend in direct-to-consumer medication emerging. Reitano sees it as the outcome of five intersecting facts.

  1. The evolution of telemedicine regulation allowing physicians to have a national presence by seeing patients online
  2. Physicians are being reimbursed less by Medicare, Medicaid, and private insurers for the same activity, pushing them towards telemedicine
  3. A patent cliff is making many medications suddenly affordable under generic names.
  4. Insurance deductibles are increasing, turning patients into consumers
  5. Technology is making it easier and cheaper to start medical startups

Roman’s $88 million Series A it announced last month is proof of this growing trend. Investors see the traditional pharmacy structure as highly vulnerable to disruption.

Roman will have to defeat not just security threats and competitors, but also the status quo of keeping a stiff upper lip. A lot of men silently suffer these conditions rather than speak up. By speaking candidly about his own erectile dysfunction as a side-effect of heart medication, Reitano is trying to break the stigma and get more patients seeking help wherever feels right to them.

Source: Mobile – Techcruch

Cowboy, the Belgian e-bike startup, raises €10M Series A

Cowboy, the Belgian e-bike startup, raises €10M Series A
Cowboy, the Belgian startup that designed and sells a smarter electronic bicycle, has raised €10 million in Series A funding.
Leading the round is Tiger Global Management, with participation from previous backers Index Ventures and Hardware Club. The new capital will be used to scale operations and expand beyond Belgium into Germany, U.K., Netherlands and France.
Founded in January 2017 by Adrien Roose and Karim Slaoui, who both previously co-founded Take Eat Easy (an early Deliveroo competitor), and Tanguy Goretti, who previously co-founded ridesharing startup Djump, Cowboy set out to build and sell direct a better designed e-bike.
This included making the Cowboy bike lighter in weight and more stylish than models from incumbents, and adding automatic motor assistance. The latter utilizes built-in sensor technology that measures speed and torque, and adjusts to pedaling style and force to deliver an added boost of motor-assisted speed at key moments, e.g. when you start pedaling, accelerate or go uphill.
In addition, Cowboy’s “smart” features powered by the Cowboy app enables the device to be switched on and off, track location, provide “ride stats” and support remote troubleshooting and software updates. A theft detection feature is also promised soon.
“We designed the Cowboy bike to appeal specifically to people who are yet to be convinced that electric bikes are a practical and mainstream mode of transport,” says Adrien Roose, Cowboy’s CEO, in a statement.
“We focused our attention on the three main reasons people are reluctant to purchase electric bikes: high cost, poor design and redundant technology — or a combination of the above — and we set about fixing them all.”

Source: Gadgets – techcrunch

Embracing multimodality, Uber pioneers ride recommendations

Embracing multimodality, Uber pioneers ride recommendations

For the first time, Uber will make contextual, personalized suggestions about the best way to get from point A to point B. The startup offers more than just cars now, and it’s starting to understand the trade-offs between price, speed, convenience and comfort amidst its multi-modal fleet. Most noticeably, you’ll soon see JUMP bikes get premier billing right alongside Uber’s other vehicles. Going a short distance and there’s a charged up bike nearby? Uber will suggest you pedal. Might need extra room for luggage on your way to the airport? UberXL and SUV will appear. Always take cheap Pools? It won’t show you a pricier Black car.

Uber is finally getting smart. It has to if it’s going to make sense of its growing patchwork of ride types without overwhelming passengers with too many options. Uber’s algorithm can help them choose. “We think there’s a lot to be gained by being a one-stop shop to get somewhere,” says Uber director of product Nundu Janakiram.

Uber now dynamically recommends different ride types

In particular, Uber could block disruption by scooter-specific startups like Spin, Bird or Skip. If those apps have no vehicles nearby or you’re going too far, they’ve got nothing to offer. But Uber can provide a competitively priced Express Pool when there’s no open-air ride available, while convincing its existing UberX riders to try a bike or scooter for quick trips when congestion is thick, thanks to its new in-house traffic estimates.

Uber Director of Product Nundu Janakiram

Previously, you’d get a static set of three ride options from the price class you booked from last, regardless of your destination. Meanwhile, bikes and scooters were buried in Uber’s hamburger menu sidebar or an awkward toggle at the top of the screen. The company hasn’t done a good job of communicating the definition of Select (nicer normal-sized cars) or Express Pool (walk and wait for a discount) either.

Now Uber’s homescreen can cherry pick the most relevant ride suggestions from across all price classes and vehicle types based on your trip length, destination type and personal ride history. Along with better explanations of the different options, this could get users experimenting with modes they’d never tried before. In the coming weeks, you’ll start to see bikes in these recommendations.

To make room for more suggestions, the Uber Pool option will unfold to offer both Pools and Express Pools. Uber will even point you to nicer vehicles like Black cars or XLs if UberX is surging to the point that their prices are similar. If you want to compare all the options manually, you can tap to see a list with all the specs and prices lined up.

Beyond ride recommendations, Uber is moving the address bar to the bottom of the screen so it’s closer to your thumbs (which is great as phones keep getting bigger). Finally, in the coming weeks Uber will add a dynamic message bar to the center of the homescreen. Here, depending on your pickup and drop off, it could show instructions for hailing from an airport, a discount offer, a birthday message or just a friendly “Good Morning.” 

Eventually, Uber hopes to integrate public transportation ticketing like through its partner Masabi, car rentals and even multi-leg trips into its recommendations. Maybe a JUMP bike to the train, then an UberPool that’s waiting to take you to your final destination is quicker and cheaper than any one mode alone. If you’re looking at an hour-plus Uber, it might cost less to just rent a car through its partner GetAround and drive yourself. And if a scooter is by far the best ride for you but all of Uber’s are rented, it could recommend one from its partner Lime.

A new communication box is coming to the center of Uber’s homescreen

Uber’s data shows users are rapidly embracing the multi-modal future. A study found the introduction of JUMP bikes to one city led to a 15 percent increase in total Uber + JUMP trips, even though Uber use dropped 10 to 15 percent.

Even if Uber sometimes cannibalizes itself by recommending cheaper options, it’s a smart long-term strategy. Janakiram laughs that “If we wanted to optimize for revenue, we wouldn’t have shown UberX, Pool and Express Pool first for every user for the last few years.” The lifetime value of ridesharing users is so high that it’s worth losing a couple of bucks here or there to keep users from straying to multi-modal competitors like Lyft. Retention will be a key metric under scrutiny as it eyes a 2019 IPO at a potential $120 billion valuation.

“The big picture is that we want your phone to replace your personal car,” Janakiram concludes. “If we want to be a true transportation platform, we need to be everywhere our riders need to be, as well. The right ride for the right context, and what’s the right ride for you.”

[Disclosure: Uber’s Janakiram and I briefly lived in the same three-bedroom apartment five years ago, though I’d already agreed to write about the redesign when I found out he was involved.]

Source: Mobile – Techcruch

N26 faces criticism regarding its identification processes

N26 faces criticism regarding its identification processes

Fintech startup N26 is growing quite rapidly. Building a startup is hard, but building a startup that manages your bank account is even harder given the increased scrutiny. German weekly magazine Wirtschaftswoche published an article that questioned N26’s identification processes. According to Wirtschaftswoche, it’s quite easy to create an account with a fake ID document.

“One or two people got through with a fake ID document. And we detected that afterward. Unfortunately, we didn't detect it in real time,” co-founder and CEO Valentin Stalf told me. “Unfortunately, it can happen.”

But Stalf also insisted that it’s not a widespread problem and that all banks face the same issue. According to him, N26 complies with all regulations when it comes to onboarding.

Currently, N26 has three different procedures depending on the country and works with a third-party company called SafeNed for some of the verification procedures.

In many countries, you can initiate a video call with someone so that they can check your ID and compare it with your face. In Germany, you can also print a document, go to the post office with an ID document and make a post employee check that you are actually you.

In some countries, you can open an N26 account by uploading a photo of your ID document and a selfie. Other banks also take advantage of this procedure. For instance, it’s a common process in the U.K.

More generally, other banks also have to deal with fake ID documents. But security is never perfect. That’s why you can’t simply eradicate the issue. You can try to keep the fake ID rate as low as possible.

“Security is our top priority at N26, which is why secure identification processes and constant review of our security and monitoring mechanisms to prevent identity theft are of great importance to the company,” the company told me in a statement.

In other words, N26 monitors this fake ID rate. And N26 also has ongoing transaction monitoring for those who have already opened a bank account. The company tries to detect fraudulent activity as quickly as possible.

You might think that uploading a photo of your ID document leads to more fraudulent activity. But N26 has noticed that there’s a higher fraud rate for customers who go to the post office to check their ID document.

So fraud is nothing new in the banking industry. Nobody has eradicated fraud, and nobody will. In fact, many startups (such as DreamQuark) are working on improving fraud detection using machine learning and more sophisticated processes. But even artificial intelligence won’t solve this problem altogether.

All eyes are on N26 because it’s the hot new thing. But if you look at what’s happening, it’s a pretty boring story. “In one of the articles they said we used weaker method to grow faster. This is complete bullshit,” Stalf told me.

This story is a great example that it can be tough to manage your startup’s reputation. Building trust takes a long time. But it can go away much more quickly. That might be why N26 debunked the issue so intensely.

Here’s N26’s full statement:

Security is our top priority at N26, which is why secure identification processes and constant review of our security and monitoring mechanisms to prevent identity theft are of great importance to the company.

After the customer’s identity is verified, we carry out ongoing transaction monitoring along with numerous other security measures, in a bid to prevent criminal activity such as money laundering and terrorist financing.

We therefore take the findings put forward by Wirtschaftswoche very seriously, will analyse the facts and take appropriate measures if necessary.

Contrary to the statement in Wirtschaftswoche, the use of photo verification by N26 is legally compliant. N26 works with a regulated payment service provider, SafeNed, in this regard. SafeNed is a UK business which is authorised and regulated by the UK Financial Conduct Authority (FCA) with regards to the prevention of money laundering and terrorist financing. SafeNed verifies its customers using the Photo Ident process, which is compliant with UK law.

According to the German Money Laundering Act, N26 is allowed to use a third party regulated in the EU, in this case a payment service provider in the UK, for the verification of customers (Section 17 (1) GwG). The respective verification procedure is then determined by the law applicable to the third party (in the above example, therefore, by UK law). This understanding is also confirmed by BaFin in its interpretation and application notes on the German Money Laundering Act (p. 67 et seq.) for customers not resident in Germany.

Source: Mobile – Techcruch

Memory raises $5M to bring AI to time tracking

Memory raises M to bring AI to time tracking

Memory, a startup out of Norway and maker of time tracking app Timely, has raised $5 million in further funding. Leading the round is Concentric, and Investinor, with participation from existing investor SNÖ Ventures. The company had previously raised $1 million in 2016 from 500 Startups, and SNÖ.

Founded by Mathias Mikkelsen, a designer by background and who I understand turned down a job offer at Facebook to try his hand at startup life, Memory is applying what it describes as AI and digital technology to create various tools to help solve “the abuses of time” that workers typically face in the modern workplace. The first of those abuses being tackled is the monotonous and time-consuming task of time tracking and filing time sheets — a meta problem if there ever was one.

“The problem we’re trying to solve is with time tracking, the most common currency of work that exists,” Mikkelsen tells me. “The problem is that people find it extremely painful to do and thus do it incorrectly. For example, what did you do last Friday? How long did it take? Humans are not built to remember that kind of detail and we shouldn’t be doing it. Harvard Business Review estimates that U.S. companies loose billions of dollars per day because of incorrect time tracking, so we think the potential is massive”.

The resulting product, dubbed Timely, is billed as a fully automatic time tracking tool. Powered by “AI”, it automatically records everything employees work on and then claims to create accurate time sheets on their behalf.

“We solve it with tons of data and machine learning,” says Mikkelsen. “We have built an ML model (recurring neural net) that literally tracks, completely privately and securely, everything you do in life. Files you work on, locations, websites, calendar, email, etc. Then we analyse all of that, make sense of it and automatically create a timesheet for you. We round up the time, choose projects, tags, all of it. It matches your individual pattern and the only thing our customers have to do is to hit an Accept button and you’re done with your timesheet”.

Mikkelsen says that Timely is currently used by more than 4,000 paying businesses across 160 countries, and that having created a complete “virtual memory” of time data, the Oslo startup is developing new tools to improve the “quality of time” and help businesses use time more effectively. As part of this effort, Memory will use the new funding to double its current 30-person team. It also plans on refining Timely’s AI model and to accelerate international growth.

Source: Mobile – Techcruch

Robinhood cuts trading fees, grows profits with in-house clearing

Robinhood cuts trading fees, grows profits with in-house clearing

As zero-commission stock trading app Robinhood starts preparing to IPO, an engineering investment two years in the making could accelerate its quest for profitability. Most stock broker services have to pay an external clearing house to reconcile trades between buyers and sellers. Now with 6 million accounts up from 4 million just 5 months ago, that added up to a huge cost for Robinhood since it doesn’t demand a trading fee like the $7 to $10 that incumbent competitors E*Trade and Scottrade charge. Relying on outside clearing also introduced bottlenecks around its innovation and user sign ups, limiting onboarding to business hours.

But today Robinhood will start migrating accounts to its new in-house clearing service over the next few months. That will save it from paying clearing fees on stock, option, ETF, and cryptocurrency trades. In turn, Robinhood is eliminating or reducing some of its edge case fees. $10 broker assisted trades, $10 restricted accounts, $50 voluntary corporate actions, and $30 worthless securities processing will all now be free. Robinhood is meanwhile cutting its margin on fees passed on by banks or FedEx, so ACH reversal fees will drop from $30 to $9, overnight check delivery from $35 to $20 and overnight mail from $35 to $20.

“What’s really interesting is that this is the only clearing system built from scratch on modern technology in at least the last decade” Robinhood co-founder and co-CEO Vlad Tenev tells me. Most clearing services ran mainframes and Terminal-based UIs  that aren’t built for the pace of startup innovation. Going in-house “allows us to vertically integrate our business so we won’t have to depend on third-parties for foundational aspects. It’s a huge investment in the future of Robinhood that will massively impact our customers and their experience, but also help us out on building the kind of business we want to build.”

There’s a ton of pressure on Robinhood right now since it’s raised $539 million to date, including a $363 million Series D in May at a jaw-dropping $5.6 billion valuation just a year after raising at $1.3 billion. Currently Robinhood earns revenue from interest on money kept in Robinhood accounts, selling order flow to exchanges that want more liquidity, and its Robinhood Gold subscriptions where users pay $10 to $200 per month to borrow $2,000 to $50,000 in credit to trade on margin. Last month at TechCrunch Disrupt, Robinhood’s other co-CEO Baiju Bhatt told me the startup is now actively working to hire a CFO to get its business ready to IPO.

Whoever that CFO is will have an easier job thanks to Christine Hall, Robinhood’s Product Lead for Clearing. After stints at Google and Udacity, she was hired two years to navigate the regulatory and engineering challenges or spinning up Robinhood Clearing. She explains that “Clearing is just a fancy word for making sure that when the user places a trade, the price and number of shares matches what the other side wants to give away. In the less than 1 percent chance of error, the clearing firm makes sure everyone is on the same page prior to settlement.

Robinhood Clearing Product Lead Christine Hall

Forming the Robinhood Securities entity, Hall scored the startup the greenlight from FINRA, the DTCC, and the OCC. She also recruited Chuck Tennant, who’d previously run clearing firms and would grow a 70-person team for the project at Robinhood’s Orlando office. They allow Robinhood to clear, settle (exchanging the dollars and shares), and ensure custody (keeping records of asset movements) of trades. 

“It gives us massive cost savings, but since we’re no longer depending on a third-party, we basically control our destiny” Tenev says. No more waiting for clearing houses to adapt to its new products. And no more waiting the whole weekend for account approval as Robinhood can now approve accounts 24/7. These little improvements are critical to Robinhood staying ahead of the pack of big banks like Charles Schwab that are lowering their fees to compete as well as other startups offering mobile trading. The launch could also blossom into a whole new business for Robinhood if it’s willing to take on clearing for other brokers, including fintech apps like Titan.

Clearing comes with additional risk. Regulatory scrutiny is high, and the more Robinhood brings in-house, the more security work it must do. A breach could break the brand of user trust it’s been building. Yet if successful, the launch equips Robinhood for an ambitious future beyond playing the markets. “The mission of the company has expanded a lot. It used to be all about stock trading. But if you look at Robinhood 5 years from now, it’s about being best-in-class for all of our customers’ financial needs” Tenev concludes. “You should be able to get everything from Robinhood that you could get from walking into your local bank.” That’s a vision worthy of the startup’s epic valuation.

Source: Mobile – Techcruch