Fast-growing foreign exchange startup Revolut has raised £6.75 million ($8.69 million) from venture capital firms including London blue-chips Balderton Capital and Index Ventures, and is raising a further £1 million ($1.29 million) through crowdfunding.
London-based Revolut is an app linked to a pre-paid MasterCard. It lets people load money from their domestic bank account and then spend in abroad in over 90 currencies around the world at the so-called interbank rate, the best exchange rate available with no fees.
Usually, FX (foreign exchange) brokers sell customers money below the interbank rate, making their money through fees and the difference they buy and sell at.
Revolut is only around a year hold but has over 180,000 users who have spent or transferred $500 million (£388.5 million) on its cards. 1,500 new customers are signing up on average each day.
The startup’s £6.75 million Series A round values it at £42 million ($US55 million) after the cash it has raised is taken into account. It is one of the first major London funding deals since last month’s surprise Brexit vote. Balderton Capital, Ribbit Capital, Index Ventures, Point Nine Capital, Seedcamp, and Venrex all took part in the investment.
Founder and CEO Nikolay Storonsky told BI back in April his startup was hoping to raise £10 million ($12.8 million) in its Series A round, so has there been a Brexit discount?
“To be honest with you, we were just optimising on the valuation and dilution,” Storonsky tells BI. “We took the plan for the next 18 months and, relatively, we don’t need that much. We can raise £20 million or £50 million in a year’s time.”
The funding round closed last week and while the shock Brexit didn’t impact negotiations Storonsky says: “Generally what I hear from many people is that for new companies it’s more difficult to raise money.”
Revolut is doing its crowdfunding round on Crowdcube, where investors can buy in from as little as £10. Investors will buy in at the same rate as institutions who have backed the startup. Pre-registration opens today for a week before the round actually opens.
Why should ordinary savers invest their money into a foreign exchange startup at a time of such uncertainty? Storonsky doesn’t think convincing them will be an issue, saying: “We have so many emails from customers saying can I invest, we really like the product. It’s a bit unfair that we open it up to all these VCs and professional funds while our customers don’t have access.”
Many fintech startups are worried about the impact Brexit will have on their businesses but Storonsky is relaxed: “In our case, nothing changed. We’re still on track implementing all the new things we have in the pipeline. I don’t think Brexit changed anything in this case.”
Revolut recently gained an e-money licence from the UK’s Financial Conduct Authority and this can be “passported” — used in other countries — under EU laws. Is Storonsky worried about losing that right post-Brexit?
“I think it will be all OK,” he says. “If you think about it the decision will only be made in 2 years time. If for some reason, which I think is highly unlikely, we don’t get passporting rights, we’ll just set up like an office in Berlin and get licensed there.”
Revolut plans to make money by cross-selling products and services to its users through the app. Storonsky says it plans to introduce insurance, credit, and VAT rebate features towards the second half of the year.
Introducing a Revolut for businesses product is also a top priority. “Companies are simply begging us to allow them to have this product,” Storonsky says. “We have a waiting list for companies, there’s more than 50 companies on there. Some of them are quite big. For example, we’ve got one medium-sized airline that wants to do payroll through us.”
Russian-born Storonsky worked as a derivatives trader prior to setting up Revolut, first at Lehman Brothers then at Credit Suisse. He had the idea for the business after running up huge foreign exchange fees when travelling for work.
While Revolut has been hugely successful to date, it faces competition from Travelex, a giant in the holiday money industry. Travelex recently launched SuperCard, a rival card-linked-to-app that re-routes purchases made abroad to domestic bank accounts to avoid fees.