Robinhood Markets deepened its push into private markets with the launch on Thursday of its second venture fund, Robinhood Ventures Fund II, which provides investors with access to private companies.

Shares of RVII made its debut on the New York Stock Exchange at $22.50 on Thursday and were up 4.6% midday Friday at $23.83. Its initial public offering price was $25.00 a share on Thursday. With eight million shares, the fund's size is $225.5 million. The fund's underwriters have the option to purchase an additional 1.2 million common shares within 30 days. More than 133,000 Robinhood customers invested in the IPO.

Robinhood's first venture capital fund, RVI, launched in March; shares of RVI were down 1% on Friday and changing hands at $28.60. That is above its 52-week low of $21.00 but below its 52-week high of $77.39.

The company's RVII aims to invest in young private companies that have what the fund's advisor deems to be significant growth potential. The fund has a particular focus on companies that are current or previous participants in the Y Combinator start-up accelerator program. Y Combinator's program attracts ambitious start-up founders and has made thousands of investments in companies such as artificial-intelligence pioneer OpenAI, payments company Stripe, and food delivery app DoorDash.

RVII's portfolio includes about 80 private companies. According to the fund's website, 64% of its investments are in technology companies. The fund prospectus describes many of its portfolio companies as providing AI-related services, including Shortwave Communications (AI email automation), SharedGenes (AI health assistant), Samora AI (multilingual AI voice agents), and Speedtrain (AI systems that run AI infrastructure). Beyond AI-specific companies, the fund also holds stakes in Asimov Robotics (a robotics start-up), DroneTector (drone tracking and detection), and Ornadyne, which specializes in robotic birds for surveillance, according to the fund prospectus.

Robinhood got its start by offering customers a commission-free stock trading app in a bid to "democratize" access to investing. In recent years, CEO Vlad Tenev has said he wants to make it easier for everyday investors to access private markets, which have historically been limited to institutional and wealthy investors. Because more companies are choosing to stay private for longer, more wealth creation is happening outside public markets. The number of publicly traded companies is about half of what it was after the dot-com bubble burst 25 years ago.

"The next generation of promising start-ups is being built today," Sarah Pinto, head of Robinhood Ventures, said in an Aug. 3 blog post. "With Robinhood Ventures Fund II, retail investors no longer have to wait until a company's IPO to be part of an early growth journey."

RVII is structured as a business development company, or BDC, and is a type of closed-end fund, meaning that the fund isn't required to redeem investors' shares. A fund shareholder can sell shares to other prospective investors, but if there aren't interested buyers, then the fund shareholder may not be able to liquidate the investment.

RVII's total annual expenses are 4.08%, according to the fund's prospectus, which provides an example of what a fund shareholder would have paid at the IPO. Assuming a $1,000 investment in shares, total annual expenses of 4.08%, a sales load of 4.50%, and a 5% annual return, then the shareholder's estimated expenses would amount to $84 for the first year, $164 for the first three years, $245 for five years, and $453 for 10 years. The prospectus cautions that actual expenses can be higher or lower than those amounts.

Funds that invest in private markets typically have much higher fees than passive exchange-traded funds that track a benchmark such as the S&P 500 index. For example, the Vanguard S&P 500 ETF has a 0.03% expense ratio. Private market funds are often illiquid or semi-liquid, meaning that fund investors don't necessarily have ready access to liquidity. ETFs provide daily liquidity.

Robinhood has indicated that it wants to launch more venture capital funds, seeing an opportunity to meet investor demand for access to private markets.

For RVII's IPO, Goldman Sachs served as the lead bookrunner. Citigroup, J.P. Morgan, UBS Investment Bank, and Wells Fargo Securities served as joint bookrunners.