Fintech unicorn TransferWise sees valuation climb to five billion US dollars

Early investors and employees of Estonian fintech start-up TransferWise have sold 319 million US dollars worth of shares in a deal that now values the money transfer company at five billion US dollars.

Matt Briers, TransferWise’s CFO, says that the sale shows “we’ve built a business that is increasingly valuable in the eyes of a broad range of investors,” adding that it had continued to grow and remain profitable during the Covid-19 pandemic.

Founded in 2011, TransferWise has become a formidable competitor to the likes of Western Union and MoneyGram by lowering fees and adding an easy to use online platform to help consumers move money across borders. It now has a total of eight million customers globally and processes more than four billion euros in cross-border payments each month. It employs more than 2,200 people, more than half of whom are based in Estonia.

This is not the first time existing investors have sold shares — the company was valued at 3.5 billion US dollars last year following a similar secondary round of 292 million US dollars.

“We’ve been funded exclusively by our customers for the last few years and we didn’t need to raise external funding for the company,” says Kristo Käärmann, TransferWise’s CEO and co-founder. “This secondary round provides an opportunity for new investors to come in, alongside rewarding the investors and employees who’ve helped us succeed so far.”

The latest secondary round was co-led by existing investor Lone Pine Capital and a new investor, D1 Capital Partners. Another new investor, Vulcan Capital, also bought shares, while Baillie Gifford, Fidelity and venture capital fund LocalGlobe increased their holdings too. Other investors in the firm include British billionaire Richard Branson and PayPal co-founders Peter Thiel and Max Levchin.

TransferWise was launched to provide cheap cross-border transfers for individuals such as Mr Käärmann, who set up the company with a friend, Taavet Hinrikus, after noting the high cost of transferring money between the UK and their native Estonia.

It has since expanded to offer a cross-border bank account, and has put an increasing focus on business customers, who have been a key driver of its recent growth. Earlier this month, the company secured approval from the UK’s Financial Conduct Authority to offer investment services to customers of its borderless bank account.

“There’s lots of talk about unicorns, but in reality we’re building something even more rare,” adds Käärmann. “Nine years in, we’re saving our customers more than one billion euros in hidden fees every year. That’s a start, but only a small dent in what banks collect. We’re still at the beginning of a long journey, and we’ve built a financially sustainable company to get there.”

Unlike many fintech start-ups, such as Revolut, Monzo and N26, TransferWise is profitable, and Mr Käärmann recently claimed that the firm expects to turn an annual profit again this year.

TransferWise has long been touted as a potential candidate for an IPO, but the company appears to be in no hurry.

“For us, it’s a decision that really depends on what the benefit is? Is it a useful time for the company, and that time hasn’t come yet,” Käärmann said last month, adding that it will only happen when it’s useful for the company and for its customers.

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