Bitcoin-based payment app Circle has raised $60 million (£40.8 million) as payments over its app hit $1 billion (£680 million) a year.
Circle on Thursday also announced the launch of a Chinese venture and plans to offer euro transfers as part of European expansion.
The $60 million funding round has been led by Beijing-based venture capital company IDG Capital, which has already invested in the startup. US-based Breyer Capital also took part in the round. A source close to the process told Business Insider the investment values Circle at close to $400 million (£272.5 million).
CEO and cofounder Jeremy Allaire told BI: “It has been widely reported that a lot of companies have struggled to raise capital and you see these markdowns in unicorn valuations. That is real. I think we are very fortunate to be able to have a high-quality round with great investors. This gives us more runway for what we are trying to do.”
Circle lets people send and receive money anywhere in the world for free by harnessing bitcoin’s blockchain. US dollars or UK pounds are converted into bitcoin, transferred to the recipient’s Circle app over the internet, then converted back into the local currency.
The startup, which is backed by Goldman Sachs, began by offering mobile digital wallets for bitcoin but launched a mainstream consumer payments product in the US last year and a UK version of the app earlier this year.
CEO and cofounder Jeremy Allaire told BI: “What we’re trying to do is complex and requires a fair amount of capital. When there is market demand, it is always time to raise money.”
However, Allaire added that Circle still has “a significant majority of the capital we had raised to date” — $76 million (£51.7 million) — on its balance sheet.
‘Of our labour investment, almost half is in R&D’
Allaire says the fundraising began in January and closed around a month ago. He says the cash will go towards marketing, expansion in Europe, and R&D. Circle is today launching euro payments and opening up the service in Spain, with a wider European roll-out to follow.
Allaire says: “All of that marketing and market expansion requires capital. And then we are continuing to invest a great deal in R&D. We have got a busy product pipeline and as a company we look more like a consumer internet software company than a traditional financial institution. Of our labour investment, almost half is in R&D.”
Discussing development, Allaire says: “At a high level, we’ve been continuing to iterate on what the social payments experience looks like, something that combines messaging and your contacts graph and media with payments. There is a lot more we want to do with that.
“Conceptually, what we think we are building is a future iteration of a spending account. There are more things that consumers expect out of their spending account and we want to work on some of those ideas as well.”
Circle announced alongside its fundraising that it is now transferring payments at an annualised rate of $1 billion. Allaire says the app is now being used in over 100 countries, although 70% of usage comes from the UK, US, and Europe.
‘Zero illusions that we can compete’ with Alipay and Tencent
Circle today also publicised the existence of Circle China, a new company established in the country 6 months ago with seed funding from Circle’s initial investors. Allaire says the $60 million won’t be used to fund this venture.
“One of the critical things about building a company in China, especially in a regulated and somewhat protected sector like the financial sector, in order to operate there we really needed a separate company,” he says.
“Circle Global obviously has a very significant equity position in that company but it has got its own capital base and its own direct investment. The Chinese government wants Chinese companies with Chinese nationals and Chinese investors. That is the model we are building and pursuing. “
China’s mobile payment and money management market is dominated by local players Alipay and Tencent. Allaire says Circle won’t try and compete with the dominant brands.
He says: “We actually have zero illusions that we can compete with those companies [Alipay and Tencent] in the domestic Chinese market. That is just not feasible. But what we can bring to the table for Chinese consumers connectivity to the US and Europe, and provide a seamless experience for sharing value.
“The focus around Circle China is really cross-border payments. If I’m a parent in China and my son is studying at London Business School, I might want to send 500 RMB. I should be able to do that and have my child instantly receive it as pounds sterling, in the same way people do that with instant messages today.
“We are leveraging the fact that we are licensed across the different zones to connect to those use cases.”