By now you know the story. Or at least a lot of it. An army of Redditors from the wallstreetbets forum, for the briefest of moments, brought Wall Street hedge funds to their knees. They engineered a decentralized yet coordinated short squeeze of brick & mortar stocks from a bygone era like GameStop, AMC, and others.

How did they do it? What was their weapon of choice? A zero fee FinTech unicorn from the Bay Area aptly named Robinhood. Mostly. There are a variety of philosophical and technical explanations that more pointedly explain the way these amateur traders were able to apply the leverage for the “squeeze”. We’ll leave those intricacies to more skilled authors.

This was Robinhood’s moment! In their very accomplished ~8 years of life they pioneered a revolution. No other startup can lay as proportionate a claim as leaders of this new era of financial democratization. They set out to change the world and they did.

Anyone reading this blog certainly knows how hard it is to build and manage a company. To deal with the unknowns, keep the lights on, communicate amidst a tsunami of distraction and noise. As we’ve discussed before the only thing more difficult than failing is trying to hang on to a rocket ship as it catapults toward the moon.

So after all of their success navigating the pitfalls of early stage growth Robinhood was thrust into their biggest, brightest moment yet in front of the general public. Their silver screen moment.

They faltered. Externally at least.

Internally they kept their service up through a flood of new customers and volume so props are deserved there.

Before we dive into the falter itself, we have to acknowledge the trickiness of how Robinhood operates as a business. Their biggest customers are Wall Street market makers that pay them for routing their users’ order flow through those financial institutions. Basically, you buy a stock and Citadel Securities (their biggest customer) sees the order first before the exchange executes the purchase. High frequency traders love this data and the signals they provide.

There are natural tradeoffs and conflicts in any tech business that deliver “free” value to consumers. Facebook offers a free social media service because it monetizes those users via advertisers. Google too. Amazon subsidizes their retail costs partially through advertising and cloud computing. Robinhood took a similar model and applied it to finance. Give the people the right to trade for free and build a business by monetizing their data. There’s plenty of precedent!

Now, the falter. They restricted, without much warning and without any precedent, the trading of certain securities like GameStop & AMC. It turns out that the market makers, their biggest customers, raised the deposit requirements and Robinhood couldn’t meet the minimums. More plainly, they didn’t have the chips to keep playing the game.

But why? What changed? That’s where the explanation really fell apart. Vlad Tenev, their CEO, was not able to distill a clear specific reason for why. Maybe he was advised by Robinhood lawyers to keep it vague. Maybe he feels an obligation to his biggest customers not to railroad them on national television. Maybe information was still coming in?

Either way, they changed the game at a critical moment and people lost money. At worst, they deceived their users. At best, they were likely a little negligent. A lack of transparency when the spotlight shone brightest turned 8 years of brand building into a week of major PR crisis.

What’s the lesson?

Align yourself with the people that got you there, we think. Give them clear information and fight the democratization revolution as designed. You are named Robinhood after all. This nice man on Twitter should probably be in charge of their PR. His thread is worth a read:

I can’t stop thinking about it.

Robinhood’s CEO whiffed on what may have been the *biggest PR opportunity in business history*. He could have become a legend overnight, creating the Tesla of financial services by playing a different game.

Here’s how he should have handled it 👇

— Kevin Dahlstrom (@Camp4) January 31, 2021

Transparency is a challenge at fast growing startups become of fast movement, communication gaps, and fear of reprisal. But if you get your moment on the biggest of stages, you HAVE to rise to the occasion and let the people know what happened. Own it. Brands of the 20’s will need to take a stand for what they believe in. Power to the people.

Robinhood will be fine, by the way. They’ve raised more capital and they’ll learn from this stumble. Has anyone not heard of them at this point? Exactly. As the saying goes, sunlight is the best disinfectant. This week and in the weeks ahead they better shine some light on the events of last week. Or the Justice Department certainly will..

Good luck Vlad & team. Maybe get some sleep soon too?