The backlash against Robinhood's handling of the GameStop stock revolt was still raging when its starstruck CEO Vlad Tenev appeared on CNN for an interview with Chris Cuomo.
"Chris, thank you for having me," Tenev said after Cuomo introduced him in the Jan. 28 interview. "This is surreal for me, I've been watching your show a lot, especially through this past year."
It was hardly a confidence-inspiring start from the CEO of a company that could be valued at as much as $40 billion. And the interview only went downhill from there.
Cuomo grilled Tenev on what the anchor described as "a move by an outfit called Robinhood, which is supposed to be taking from the rich and giving to the poor and doing exactly the opposite."
"That's not what it is at all," Tenev began. His following response has been widely panned as tone-deaf and arrogant.
"He was defensive [and] didn't take step one in any crisis management context: define the problem, acknowledge the company's role, tell how you're going to suss out next steps," Jef Loeb, creative director of Bay Area branding agency Brainchild Creative, told Protocol. "You don't put the Robinhood CEO on CNN unless he's prepared to deliver clarity — including the essential acknowledgment of the problem — instead of a hot mess."
A veteran Silicon Valley communications exec was even more acerbic in a LinkedIn post: "This Silicon Valley bred dipshit has no idea how to handle an interview, or really any interaction, when people aren't kissing his ass as some sort of 'disruptor.' My god, what hubris."
Tenev's "surreal" CNN appearance became a low point in what's now considered a major PR disaster for Robinhood. The fiasco itself, in which it was accused of shutting down trading to stem the losses of Wall Street hedge funds, underscores the serious PR and communications challenges fintechs face in an industry that deals with a highly sensitive issue — money — and all the hot-button issues surrounding it, including regulations, privacy, social inequality and economic insecurity.
"With fintech companies, you're almost always dealing with somebody's money and in many cases, a lot of their money," Jason Alderman, chief communications officer of the online checkout startup Fast, told Protocol. "It's not like a pair of socks that you ordered that didn't show up. In many cases, you may have thousands of dollars of somebody's money, their entire life savings, the money that they were hoping to buy a house with or save for college with. … That raises the stakes dramatically. The emotional component of customers goes up."
But Robinhood's recent problems stretch beyond just a failure in crisis communications. The company has been sued by Massachusetts Secretary of the Commonwealth William Galvin, who has accused Robinhood of turning stock trading into a risky game. Robinhood has rejected those claims. It has also been sued by the family of a 20-year-old college student who killed himself after he mistakenly thought that he was down $730,000.
Robinhood declined to comment for this story.
Lessons for an industry
In many ways, what Robinhood is going through underscores how fintechs need to take a step back to reassess — and broaden — their communication strategies. Fintechs tend to focus on a key stakeholder — their investors, said Konrad Alt, partner and co-founder of Klaros Group, an advisory investment firm. Companies typically get started by drafting business plans that "include a lot of stuff that is intended to get investors excited," he told Protocol.
"This is baked into the DNA of most fintechs from an early age," he said. "We're going to talk about growth. How can we scale this thing fast? All of which is really exciting. But if you're a regulator, some of those same metrics look really scary … Those kinds of really ambitious growth targets look to regulatory eyes often like a failure to be appropriately prudent."
The reality is that fintechs serve different stakeholders with conflicting interests, said Matt House, principal at PR firm Clyde Group. "It's important for disruptive fintech companies to play the long game," he told Protocol. "Investors, customers and regulators will all continue to be important down the line. It's tempting to sell out one or more of those groups to solve a short-term messaging problem, but you're likely creating a bigger headache for yourself down the road."
Speed was initially the main focus at Earnest, the student loan refinancing company, as it strived to "innovate and move fast," Chief Marketing Officer Craig Battin said. "During the early days of Earnest, we definitely moved fast and took risks and that inevitably made some people uncomfortable," he told Protocol. "The stakes are higher now — we can't just ask forgiveness later. … One poor decision could have a devastating consequence on consumers."
R.A. Farrokhnia, Columbia Business School professor and executive director of the Advanced Projects and Applied Research in Fintech, echoed this point, saying fintechs simply cannot afford to make mistakes.
"If you're a messaging app startup and the system fails, the impact is going to be fairly minimal," he told Protocol. "If you're transferring money, converting currency, processing payments, those are deemed mission-critical tasks. You can't afford to go wrong. The damage would be irreparable. ... Trust was always a major component of success for any company dealing with people's money. If you lose trust, then, in essence, you're losing your business."
For the greater good?
It may also be in the broader interest of the sector that each company gets its messaging right.
For many fintechs, a major challenge is that they tend to be lumped together as a group even though they offer different products or are even in different verticals, said Joe Ziemer, vice president of communications at Betterment. He said that after Robinhood halted trading in GameStop and related stocks, Betterment had to field calls on whether they had done the same. Betterment, unlike Robinhood, focuses on longer-term and less risky investing strategies.
"We were getting pounded with inquiries," he said. "It is a good reminder that we do get lumped into these [broader categories]. I don't want to see anybody in our space have these sorts of issues because it does tend to reflect poorly on the entire category. The space is so confusing externally for most people that it is easy just to categorize everybody as a fintech. People will lump Venmo and Betterment and Robinhood into a category, fairly or unfairly."
Beyond a lack of humility, one of the reasons Tenev's fumbled CNN performance drew significant attention was because it also showed a lack of foresight. "I'm not surprised that that was a tough interview for a young leader who probably hasn't had a ton of time getting grilled by Chris Cuomo," Robert Siegel, a Silicon Valley investor and management lecturer at the Stanford Graduate School of Business, told Protocol.
Alderman said it's important for fintechs to prepare for crises, which are bound to happen as a company grows. At Fast, they do this by holding tabletop role-play scenarios with senior leaders so "we all have some muscle memory as an organization, around what to do," he said. The best PR strategy, he said, is one that stresses the principles of transparency, accountability and humility.
"One of the challenges that a lot of companies face is a degree of hubris that doesn't allow them to say that they're sorry, and that they screwed up, and to admit a mistake," he said. "There are a lot of situations where companies breathe their own recycled air and start to believe their own fantasies and can genuinely convince themselves that whatever operational problem led them to the crisis really wasn't that big of a deal — and anybody who doesn't get it just isn't smart enough. That's a recipe for reputational disaster."