David McDonough, founder and CEO of Commonstek
A new social network is betting that enthusiastic retailers are here to stay and they want more transparency than what is being offered on Reddit.
Commonstock is a social media platform for talking about business and financial markets. It’s a Twitter-like news feed, with comments about users’ ranking rankings and investment strategies. But unlike Reddit’s popular WallStreetBets forum, it’s not anonymous. Traders need to link to a brokerage account to verify the authenticity of their investments.
“Anyone can prove their ownership of Tesla or Peloton, and show their skin in the game, harassing many grafters who can say they had a 100% return,” David McDonough, CEO and founder of Commonst, told CNBC. In an interview. “There’s no lying about it – you can watch someone’s performance in real time.”
The San Francisco-based start-up announced a রা 25 million series of funding rounds on Tuesday, led by Quatu, QWID, Floodgate, Upside Ventures and others. It did not publish an assessment. Hedge fund managers Bill Ackman, Dan Loeb and Stanley Drakenmiller are also among Commonstock’s primary, strategic investors.
Traders use software known as an API to link to Fidelity, Robinhood, e-Trade and other brokerage accounts. The profile contains user stock picks and performance. Instead of total followers, the feed shows the total amount of dollars of people following someone.
The platform was officially launched in August 2020, a few months before it went viral on the stock market. Towards the end of January 2021, a group of retailers rallied on social media to buy Gamestop and hurt the hedge fund to bet against it. McDonough, who left Google in 2017 to start Commonstock, said there has been an immediate increase in users from the meme-stock story. He said the number of customers is doubling every month without marketing.
Roar kitty effect
Gamestop aside, the last few years have brought a renaissance in retail stock trading. According to JMP Securities, an estimated 10 million new traders have entered the market this year, in line with last year’s record. The ubiquity of zero-commissions, the availability of partial business and stimulus checks, has helped to generate new interest in investing with people looking for new entertainment during the epidemic.
“It sounds counterintuitive, but Roring Kitty, AMC and GME have probably done a lot more to educate generations of people than financial textbooks and classes,” McDonough said. “Investment is attractive now, and it’s part of the social discussion.”
Some of that frenzy has already faded, with the volume of retail trade peaking in January. Still, McDonough said the platform is seeing high levels of engagement and “stickiness”. According to McDonough, Commonstock users may be tempted by the entertainment of the gamestop, they have put their money in the market. For the most part, he said, young traders aren’t betting on “YOLO” or “you only live once”. Their investments follow Fidelity Fund manager Peter Lynch’s “invest what you know” proverb.
It’s often Internet culture and meme stock, or brand names like Peloton or Nike and Tesla.
“They know that when Elon Musk tweets, it will draw a lot more attention to Tesla, or they will like their Peloton bike so they will buy a piece of Peloton – when 10 million more of you do it, it will create a new market purchase. Power that can change prices, ”McDonough said.
Commonstock’s social media interface
Frank Rottman, co-founder and partner of QED Investors, was one of the early supporters of Commonstock. “All signals, no sound” social media outlets could double their series A, he said.
“On Reddit, everyone is willing to raise their hand to show you what business you need to do, but you don’t know who these people are and why they’re giving you their information,” Rottman said. “It’s become a high-five to each other and memes and it’s not about stocks or companies.”
The Commonwealth has not yet begun monetizing. McDonough said he plans to monetize Facebook, Twitter, Snapchat’s network and playbooks to increase user engagement and make money on the street.
Finally, McDonough said Commonstock would consider a subscription service, advanced features and aggregate and anonymous data. But he said they would never sell the data to hedge funds, or other third parties, and instead plan to give that data as an asset to retailers.