London’s next $1bn firm? TransferWise raises $58m in funding round
London-based peer-to-peer foreign exchange service TransferWise has become the latest company to join Silicon Valley super-venture-capitalists Andreessen Horowitz’s portfolio.
The company raised $58m in a fundraising round led by A16Z, in which the company’s existing investors such as Richard Branson, Index Ventures and Seedcamp also participated. The Series C funding round is thought to value the company at almost $1bn, although it refused to confirm or deny the figure.
TransferWise operates a foreign exchange service which uses an element of peer-to-peer funding to cut costs for users. The company directly pairs up users wanting to buy a currency with those wanting to sell it, avoiding the need to actually convert money – and saving on expensive foreign exchange fees.
TransferWise cofounder Taavet Hinrikus said Andreessen Horowitz’s interest showed how ripe financial services are for disruption. “For too long legacy providers’ dominance of the market has allowed consumers to be hoodwinked into paying huge hidden charges for services as basic as currency exchange.”
Ben Horowitz, one of A16Z’s co-founders along with former Netscape founder Marc Andreessen, will be joining TransferWise’s board following the investment, and Hinrikus said the company was “excited” to have him. “His experience will help us take our revolution in financial services across the globe, starting with the US offices we’re launching,” he added.
It plans to use the investment to boost its global expansion, opening an US office in February and offices in Germany and Australia after that. But as it grows, its unique business model could find it difficult to scale up.
Its business model relies on a relatively even flow of money to and from countries in which it operates, although it smooths out temporary imbalances by buying supply from conventional financial markets.
Some worry that as the company grows, and it introduces more currency pairs, the imbalance of money flows may become difficult to manage. If that happened, “TransferWise would have to resort to financial markets to fill the gap and lose the cost-advantage of the P2P model, or keep fund flows balanced but limit market growth,” suggests analyst Wayne Wong.
“The latter option does not sound too bad considering how the pie for international money transfer is huge and there are existing inefficiencies in remittances that TransferWise could iron out.”
The fundraising follows the success of London’s Shazam, which became the latest British startup to hit a $1bn valuation in mid-January. It raised $30m from unnamed parties, despite having not turned a profit for at least eight years.