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Steve's ITK: Revolunicorn


Steve's ITK

April 29 · Issue #42 · 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.

Me talking to the founders of Spatialize, the augmented reality input solution
Me talking to the founders of Spatialize, the augmented reality input solution
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Opening thought: Revolunicorn
I can’t quite believe it has already been nearly a month since the last edition of ‘Steve’s ITK’ (this newsletter is fast becoming monthly). Once again the last four weeks has seen my usual mix of funding announcements and early-stage startup profiles, a few product launches, one very significant venture capital move, and a couple of pretty decent scoops. 
The biggest news – at least by cheque size and valuation – was Revolut’s whopping $250 million Series C round, which sees private investors value the less than three year old digital banking startup at a staggering $1.7 billion. That’s a five-fold increase in under a year – super fast growth by anyone’s definition.
Leading the round is Hong Kong-based DST Global, the fund founded by Russian Yuri Milner (of Group fame), along with a group of new and existing investors that includes Index Ventures, and Ribbit Capital. It brings the total amount raised by Revolut to $340 million in less than 36 months.
Here’s what I wrote in my analysis for TechCrunch:
To put this into context, TransferWise — London’s undisputed fintech darling and on some features a direct competitor to Revolut — recently announced $280 million in Series D investment, giving the company a reported post-money valuation of $1.6 billion. The difference? It took TransferWise seven years compared to Revolut’s three.
As I also noted in my TC piece, Revolut’s huge valuation is testament to how much value investors are now placing on bank-disrupting fintech or perhaps signs of a fintech bubble. Or both. And of course this is almost all happening in London, even though Revolut has some of its engineering team in Russia, and (if I understand correctly) customer support in Poland.
I’ve been in the game of covering early-stage European startups for a very long time now and I can’t remember seeing a tech startup this side of the pond have quite the same meteoric rise in valuation without subsequently imploding. Or at least not one that I’ve been able to witness fairly close up and where there are a plethora of worthy competitors.
The broader digital banking space is seriously crowded but I believe has a long way to go yet. This really is startup Darwinism at its most efficient (and potentially ruthless), and it just got a little more skewed by such a large injection of VC cash into a single early-stage company.
To that end, Revolut says it is now processing $1.8 billion through the platform each month and signing up between 6,000 and 8,000 new customers every day. It claims nearly 2 million customers in total, of which 250,000 are daily active users, roughly 400,000 are weekly active users and 900,000 are monthly active users.
For a little more context, TransferWise has 3 million customers. I’m also told U.K. challenger bank Monzo now has 630,000 current account customers, of which 200,000 are daily active users, 360,000 are weekly active users and 500,000 are monthly active users. (In both Revolut and Monzo’s case, active users are defined as making at least one financial transaction.)
So what exactly is driving Revolut’s growth? That’s a question that can only be partially answered from the outside – I’ve only had second-hand accounts of what might be inside some of the company’s more recent decks – but it is clear that its original “attack vector” (to borrow Monzo founder Tom Blomfield’s phrase) of low exchange fees when spending in a foreign currency undoubtedly fuelled much of the startup’s early growth and mindshare.
I’m also told the recent, albeit limited, support for cryptocurrency has been a more recent driver. Revolut has also been hiring country managers at a rapid pace as it ramps up international expansion. 
That’s not to say there hasn’t been some collateral damage along the way. Question marks have been raised over Revolut’s tough company culture – which co-founder Nikolay Storonsky has spoken about publicly – and quite a few early employees have since left. It is also one of those kind of companies that seems to attract unsolicited tip-offs to a journalist like me, which is perhaps a sign that competitive feathers have been well and truly ruffled.
I’m planning on doing an in-depth interview with Storonsky in the next few weeks. As always, watch this space.
Mixcloud finally raises
At the absolute opposite end of the spectrum, this month saw me scoop Mixcloud’s $11.5 million raise, the ten year-old company’s first-ever funding round. Totally serendipitously I’d stumbled across a recent regulatory filing (actually digging for info on a different company with a similar name) and was able to glean the amount and names of the investors.
Armed with this info, I bagged the exclusive:
That Mixcloud has raised a decent sized funding round isn’t surprising in itself. The music streaming site, which originally wanted to be something akin to ‘YouTube for long-form audio’, has carved out a decent following as a place to house archived radio shows and DJ mixes, and counts more than 1 million “curators” uploading content to the platform. However, aside from a couple of U.K. government grants in its formative years, the fact that the company hasn’t taken any outside funding since being founded in 2008 is no-less than remarkable. As is, perhaps, its survival. The history of consumer-facing music startups is littered with companies that raise significant venture capital, before ultimately crashing and burning or being litigated out of existence.
Read the rest of my TechCrunch piece for a little reminiscing about the early days of Silicon Roundabout and how the London startup scene has changed a lot since then.
Stefan Glaenzer quits Passion Capital
At the start of the month I broke news that Stefan Glaenzer has quit his role as Partner at Passion Capital, the London early-stage VC firm he co-founded seven years ago with partners Eileen Burbidge and Robert Dighero.
As I wrote for TechCrunch, the decision to resign is linked to Glaenzer’s arrest and subsequent conviction in 2012 when he pleaded guilty to sexually assaulting a woman on the London Underground Tube network. 
The article includes an extensive interview with Glaenzer (I spent over two hours interviewing him on the Easter Friday), and is the first time he’s ever spoken publicly about his conviction and the events that followed.
If I’m honest I was quite hesitant to agree to the assignment until I could be sure there was a legitimate new news angle (his resignation from Passion Capital and the events behind it) and because I didn’t know what the resulting piece might look like.
I also found it pretty stressful to write after I put a lot of pressure on myself to get the tone and balance right without shying away from asking (and hopefully getting answers to) many questions that had persisted over the years within the London investment and technology startup community. People sometimes don’t understand or appreciate how much journalists care about their work. For what looks like quite a simple piece, this article was all-consuming (just ask the people close to me).
Bonus: A lot of ITK subscribers failed to open last month’s newsletter (more fool me for sending it on a bank holiday). If that was you, check out the interview I did with James Cook, who resigned last month as tech editor at Business Insider UK. During our phone conversation, we waxed lyrical about our professional rivalry, the current state of the industry, and why good journalism matters.
Things I wrote
Digital banking startup Revolut raises $250M at a valuation of $1.7B
Challenger bank Starling adds investment service Wealthify to its in-app marketplace
Fat Lama, the online marketplace for renting out things you own, raises $10M
Real-time developer tool startup Pusher pulls in $8M in Series A funding
German insurance ‘robo-advisor’ Clark scores $29 million Series B
Belgium’s Cowboy raises $3M led by Index to launch a smarter e-bike
From Ferraris to flying taxis: Q&A with Lilium’s new head of Product Design
Personably, software that helps on-board new hires at fast-growing companies, gets backing from GFC
LawGeex raises $12M for its AI-powered contract review technology
Edtech startup Lingumi scores £1.2M seed funding to teach pre-school kids English
Mixcloud, the audio streaming platform for long-form content, raises $11.5M from WndrCo
Sword Health raises $4.6M for its digital physiotherapy solution
Revue, the newsletter publishing tool, now lets you charge subscribers
Cluno, the Munich-based ‘car subscription’ service, raises €7M Series A
Tandem adds fixed savings accounts
Laundry service Zipjet picks up backing from Henkel and BSH
Instabridge, the Wi-Fi sharing community, scores $3M more funding for Asia expansion
Liberis raises £57.5M to offer finance for small businesses paid back via customer card transactions
A well-fed workforce is a happy workforce — City Pantry raises £4M for its catering marketplace
Bitmovin scores $30M Series B for ‘next-gen’ online video software
Careship, the German marketplace for in-home care, scores further €6M funding
Botanalytics offers analytics for conversational interfaces and chatbots
‘The end of my VC career’ — Stefan Glaenzer quits Passion Capital to clear way for third fund
Closing thought: Pitch@Palace
This week I finally made it back to Pitch@Palace, the pitching shindig and networking event hosted by Prince Andrew, Duke of York, at St. James’s Palace. It was the first event I’ve been to since I injured my neck and shoulder and thanks to some special company and being well looked after, I had a really fun time. 
TechCrunch’s Mike Butcher emceed the event, and afterwards I got to spend time with a number of the pitching startups and the Duke of York himself.
However, the most surreal moment of the night came when I was stopped for a chat on the way out by Sarah Ferguson, Duchess of York, who I think may have recognised me from the one and only other time I attended Pitch@Palace, even if I wasn’t wearing my trademark hat.
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Till next time,
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