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Steve's ITK

November 5 · Issue #35 · View online
Steve's In The Know: Everything I published recently, commentary you won't find elsewhere, write-ups of events I attended or spoke at, and industry rumours.

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TransferWise: Bitcoin is missing in action
Opening thought: What business are you in?
The big - no, whopping - news this week was London-based international money transfer company TransferWise’s new $280 million investment round. The valuation? 1.6 unicorns, according to a source with knowledge of the deal.
One caveat: not all of the cash will enter the nearly seven year old startup’s balance sheet. That’s because the funding includes a secondary share dealing, with a number of early shareholders (including TransferWise’s two founders) permitted to share a portion of their holding.
As I noted in my report for TechCrunch, the exact split between primary and secondary investment isn’t being disclosed, which is perhaps ironic for a company that has made a virtue of its transparent pricing.
The fact that early employees were given some liquidity – coupled with Seedcamp disposing of the rest its shares in TransferWise in a deal that saw it sell its first two funds to Draper Esprit – also suggests a potential public offering is a way off yet. The company has previously gone on record saying that an IPO is something it will consider in the long term, but there is no doubt that following this new round TransferWise looks well-capitalised enough for the foreseeable.
In a call with TransferWise co-founder and chairman Taavet Hinrikus, who was in Peru on a rare vacation, he explained that the additional capital will be used for global expansion (with a particular focus on the APAC region) and further development of its Borderless account.
The latter launched in May and is aimed at businesses, sole traders and freelancers who need to conduct business across borders and in multiple currencies, and who want to take advantage of TransferWise’s low exchange rate when doing so. A consumer version, including a TransferWise debit card, is set to launch early next year, putting the fintech startup - on the surface at least - in ‘neobank’ territory.
That’s me getting a little overexcited, says Hinrikus, with whom I go way back (see ITK: 11). Instead, he argues that TransferWise’s Borderless account provides very light banking features compared to any of the challenger banks, and is designed for a very specific market.
‘Focus is key,’ he told me - in what probably wasn’t but could have been a dig at Revolut - before underlining that TransferWise’s core business is moving money around the world i.e. international money transfer.
The point here is that Hinrikus is very clear about what business TransferWise is in – making it easy to move money around the world – and is entirely agnostic on how that happens: the more money moving via the startup’s infrastructure, the better.
This can be done directly via the TransferWise app and service for both consumers and SMEs, via third-party integrations, or via the company’s own Borderless account. In all three cases, Hinrikus says TransferWise generates revenue, regardless.
In the context of the challenger bank comparison, I suggest that one way to think about TransferWise’s Borderless account is that a multi-currency account is a feature of its core international money transfer business, whereas for challenger banks, money transfer and currency exchange is a feature of its bank accounts. Hinrikus doesn’t disagree, noting that TransferWise is already partnering with banks, including challenger N26 and soon Starling.
For now that is quite a compelling argument, but it doesn’t disguise the fact that the Borderless account, especially once it launches for consumers, is going to have increasing feature parity and will compete with both incumbent and challenger banks. That’s something Hinrikus is bound to downplay since TransferWise (as a platform) wants to be a partner to the banks, too.
On the topic of TransferWise’s core business of international money transfer, Dan Primack makes an interesting point in his latest newsletter regarding the company’s lack of support for Bitcoin, which it withdrew back in 2013:
TransferWise is among a burgeoning group of unicorns that are facing serious competitive challenges from newer startups, while still trying to disrupt the established order. Consider it the downside of early success, as TransferWise says its 2 million monthly users collectively transfer more than £1 billion. It’s also notable for being a VC-backed money transfer company that no longer allows users to transact via Bitcoin.
A little known (or forgotten) fact: Hinrikus actually invested personally in a Bitcoin exchange called Coinfloor, but has since seemingly cooled on the crypto currency.
Bonus: Which challenger bank announced a partnership with TransferWise, originally scheduled to go live in summer 2017? Unrelated: it’s pretty cold outside.
Things I wrote
Unubo makes it easy to track what you or your startup spends on subscription services
Pusher launches Chatkit to make it easy for developers to add chat functionality
TransferWise announces whopping $280M investment as early shareholders cash in
Sunlight raises £500K seed for its employee learning and development platform
Europe’s Brighteye Ventures closes €50M fund to invest in edtech startups
Workey launches ‘Tinder for recruitment’
Medication management app Echo raises £7M Series A led by White Star Capital
Healthtech startup Doctorlink picks up backing from Eight Roads for its digital triage and advice tool
Blickfeld scores $4.25M seed round to let autonomous vehicles ‘see’
Nested raises another £36M to help you buy a new house before you sell your old one
Countingup, a startup from founder of Clear Books, raises ​$750K to merge banking and accounting
Winnow raises further $7.4M for its smart kitchen tech that reduces commercial food waste
London-based on-demand delivery startup Jinn shutters
European house removals platform Movinga raises up to another €22M
BuddyGuard raises €3.4M for its home security camera powered by AI
Spotahome raises €13.6M to let you view and book mid to long-term accommodation online
Draper Esprit invests in early-stage VCs Seedcamp and Episode 1
LocalGlobe-backed BuffaloGrid lets people charge their smartphone in off-grid locations
Used car buying site Carspring goes quiet after Rocket Internet pulls investment
Closing thought: A fintech friendzy
Later this month – November 15th, to be precise – Startup Grind in London is putting on a fintech special, moderated by yours truly. The evening will kick off with a 30 minute fireside chat with Monzo’s Tom Blomfield (with whom I have form).
He’ll be talking about why he started a bank and how new challengers fit into a wider landscape of fintech disruption powered by new technology, business models and regulation.
We will then further pick these topics apart with a panel discussion where Blomfield is to be joined by Chief Platform Officer of Starling Bank, Megan Caywood, and CEO and co-founder of Cleo, Barnaby Hussey-Yeo.
Putting all three competitors on the same stage is either a stroke of genius on my part or a very bad idea. Not long till we find out.
Get in touch
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Till next time,
Steve
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