One of Silicon Valley’s top investment firms is in talks to buy a stake in TransferWise, the digital payments app, cementing its status as one of Britain’s most promising technology start-ups.
Sky News has learnt that IVP, whose roll-call of deals includes Snapchat parent Snap, Twitter and Netflix, is close to a deal to invest tens of millions of pounds in TransferWise.
An agreement is said by sources close to the talks to be imminent, and will form part of a fundraising by the UK-based payments platform that was revealed by Sky News a month ago.
The exact sum being raised by TransferWise was unclear this weekend, although one insider said it was likely to be in the region of $60m, a smaller sum than had been expected several weeks ago.
TransferWise is said to have held talks with a number of other investors about adding to the $117m (£90m) it has previously raised during its six-year history.
Bringing IVP on board as a shareholder would be an undoubted coup for the British company.
Specialising in investments in fast-growing, late-stage technology companies, its portfolio includes startups which have gone on to become some of the world’s best-known and most valuable tech brands.
IVP was set up in 1980, making it one of the first venture firms in Silicon Valley, and it now has more than $5bn of capital committed across dozens of companies.
Among the other businesses it has backed are The Honest Company, the baby products group founded by Hollywood actress Jessica Alba, and Dropbox, the digital documents management company.
Significantly, more than 100 of the 300-plus companies that IVP has invested in have been taken public, an ambition that has been expressed publicly by TransferWise’s co-founder and chairman, Taavet Hinrikus.
TransferWise’s latest fundraising is expected to see its valuation – including the new money – reaching close to $1.5bn (£1.15bn).
If completed, that would establish it as a ‘unicorn’ – a tech start-up worth at least $1bn – and make it one of relatively few British companies to achieve that prized status.
IVP’s backing would also represent a big vote of confidence in one of the UK’s most prominent financial technology – or fintech – businesses at a time when the funding of such companies is being closely watched to discern international investors’ views about Brexit.
A frenzy of deals has gripped the global payments industry in recent months as new technology drives down costs and improves speed and efficiency for customers.
Worldpay has agreed a £7.4bn sale to Vantiv of the US, while Paysafe, another London-listed company, has struck a deal to be bought by Blackstone and CVC Capital Partners, the buyout firms.
IVP is an investor in Klarna, a Swedish Fon tech company in which Visa has just bought a big stake.
TransferWise provides exchange rates to users which are more competitive than most traditional competitors by using an element of peer-to-peer funding to cut costs.
Instead of actually converting money, it pairs users wanting to buy a currency with those wanting to sell it, enabling them to save on often-costly fees.
TransferWise is used by more than one million people to move money internationally, which it claims saves them more than £1.5m each day.
It is now profitable on an annualised basis – an important milestone for any tech start-up.
The company boasts a 10% market share in the UK, and expects to reach $100m (£77m) in revenue this year.
TransferWise’s existing investors include some of the biggest names in Silicon Valley, including Andreessen Horowitz, one of the early backers of Facebook.
Sir Richard Branson, the Virgin Group founder, is also a shareholder.
The company last raised money in May 2016, when the Edinburgh-based fund manager Baillie Gifford led a $26m funding round.
Since then, Andreessen Horowitz has increased its stake in the company by acquiring shares held by TransferWise’s initial ‘angel’ investors.
Founded by a pair of Estonian former Skype employees, they announced this month that they were swapping roles, with Mr Hinrikus becoming chairman and Kristo Kaarmann taking over as chief executive.
In a blog-post explaining the move, Mr Hinrikus said he and his co-founder decided to set up the company “because of our own frustration – banks were overcharging and under-serving for a simple service, and lying about it”.
He also raised the prospect of following the route pursued by companies such as Facebook and Snap Inc, adding: “What was an idea seven years ago is now a company that will do $100m in annual revenue. Next up $1bn in revenue?
“In a few years it will be time to think seriously about becoming a public company like the strongest and most trusted financial institutions are.
”But when we do that we will explore that through our own lens – how will it help our customers? How will it help us achieve our mission faster?”
TransferWise’s expansion has seen it launch into markets including China and Sri Lanka, while it has also signed a partnership with Number26, a start-up which enables users to open a bank account within eight minutes.
Its growth has not, however, been untroubled.
The company was fined by US authorities for operating without the correct licence, and it was forced to modify its advertising claims in the UK.
Nevertheless, it is one of relatively few British technology companies to have achieved so-called unicorn status, meaning it is valued at more than $1bn (£800m).
The latest fundraising comes amid efforts by rival European start-up hubs such as Berlin to poach business from the UK amid uncertainty about visa restrictions in the wake of the Brexit vote.
A TransferWise spokeswoman declined to comment while IVP did not respond to several requests for comment.
Source: Sky