Hot foreign exchange app Revolut burned through £7 million fuelling its growth last year

Nikolay Storonsky, RevolutRevolutNikolay Storonsky, cofounder and CEO of Revolut.

Hot fintech startup Revolut’s eye-catching growth has seen it burn through millions of pounds in investment, new accounts show.

London-based Revolut, which offers a pre-paid international currency card, made a pre-tax loss of £7.1 million in 2016, its first full year of operations. Revenue was £2.3 million in the year to December 31, accounts filed with Companies House show.

The loss was largely down to “card scheme costs, acquiring costs, and user acquisition costs,” the company’s directors write in the accounts. In plain English, that means the cost of processing payments done on its cards, and the cost of getting people to sign up for the cards in the first place. The cost of sales jumped from £1.5 million to £7.8 million.

CEO and founder Nikolay Storonsky told Business Insider in an emailed statement: “In just two years, we have experienced phenomenal customer growth and are well on target to sign up 1 million customers by the end of the year.

“Looking ahead, we are on track to break-even by November as we continue to optimise our costs and infrastructure, and add further lines of revenue to the product.”

Revolut, founded in 2013, has garnered attention for its rapid growth, attracting half a million users worldwide in around 18 months. It has also raised millions from some of London’s best-known venture capitalists and a host of big name bankers.

The startup began by offering a zero-fee, zero-commission currency card tied to an app that worked in most markets around the world. Revolut has since cut back on this offer, introducing fair usage caps. The accounts suggest that its initial offering lost the business money.

Directors write in the account that Revolut has “made additional effort to monetise the business model by introducing delivery fees and affiliate programmes.”

The company has rapidly expanded its business in the last year, turning into a fintech marketplace that offers quasi-current account services and investment tie-ups. Storonsky told Business Insider in March: “Our goal is to get beyond banking.”

Revolut also “made a considerable investment in the technology infrastructure to support the expansion of [its] core business,” accounts say, and it enjoyed an R&D tax credit of close to £128,000.

Staff numbers jumped from 7 in 2015 to 32, with staffing costs climbing from just under £300,000 to £1.5 million.

The startup has raised £12.1 million in equity capital to date. Backers include well-known London venture capital firms Index Ventures and Balderton Capital.

Business Insider revealed in March that City grandees including a former star dealmaker known as the “King of Mining” and a key advisor behind Royal Bank of Scotland’s $US100 billion (£67 billion) takeover of ABN Amro are also investors. Accounts show that CEO and founder Nikolay Storonsky is still the majority owner of the business.

Revolut had £3.3 million in equity capital remaining at the end of 2016. The startup recently took on an undisclosed debt facility ahead of an “impending large equity round,” a spokesperson told TechCrunch. Storonsky has also announced plans to raise £4 million through crowdfunding at some point later this year, following a £1 million crowdfunding last year.

Learn more:

NOW WATCH: Barclays strategist: You can expect a major department store to fail in the next 18 months

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.