TransferWise, the London-headquartered international money transfer service, is disclosing that it is now valued at $5 billion by private investors, confirming an earlier Sky News report. The new valuation represents an increase of 43% since May 2019, and has been triggered by a further $319 million in secondary share sales.
Leading the "secondary" share round -- which sees existing shareholders, including employees, permitted to sell a portion of their holdings to other new and existing investors, and therefore means no money has entered TransferWise's balance sheet -- is new investor D1 Capital Partners and existing shareholder Lone Pine Capital.
Vulcan Capital also came on board as a new investor, with Baillie Gifford, Fidelity Investments and LocalGlobe adding to their existing holdings.
Noteworthy, the new $5 billion valuation doesn't quite make TransferWise the most valued privately-owned fintech in Europe. Klarna was first out of the gate in August last year with a disclosed $5.5 billion valuation, and Revolut followed in February this year, right before the coronavirus crisis took hold.
Each instance also seemingly represents contrasting ways to value and grow a fintech company, with each scale-up balancing equity-financed growth versus profitability differently.
Both Klarna and Revolut reached their latest valuation via significant new primary funding -- $460 million and $500 million, respectively. TransferWise achieved this latest uplift off the back of secondary private markets only, and did the same in May 2019 after a $292 million secondary round that saw investors value the company at $3.5 billion. That was more than double the valuation TransferWise achieved in late 2017 at the time of its $280 million Series E round.
In addition, 2010-founded TransferWise has been profitable since sometime in 2017, and 2005-founded Klarna has been profitable pretty much from day one, but posted its first loss last year as it invested into global expansion. The much younger Revolut continues to be loss-making, prioritising growth above all else -- but is reportedly aiming for profitability by the end of this year.
Meanwhile, TransferWise now serves 8 million customers worldwide, processing around £4 billion in cross-border payments each month, across 2,500 currency routes and 54 currencies. The company also recently announced new regulator permissions to offer savings and investments options in the U.K. via the TransferWise borderless account, with the new product set to launch "in the next 12 months."
"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 co-founder and current CEO Kristo Käärmann in a statement. "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."
Of course, a significant new funding round -- secondary or primary -- always invites the hackneyed question of if or when TransferWise plans to go public. On one hand, it's a moot question, since early and long-standing investors continue to be able to get liquidity on the private markets. On the other hand, large late-stage secondary investors typically have an IPO in mind sooner or (perhaps) later.
"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 told me on a call late last month, adding that it will only happen when it's useful for the company and for its customers.
However, for anyone who has been keeping up, you wouldn't expect the TransferWise CEO to say otherwise.