September 22, 2019 Finance and Tech Publication

This Is How TransferWise Hits £1.3B Valuation

Factors that led TransferWise to a £1.3 billion unicorn startup. Subscribe to newsHookers.

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The Thesis

Over the course of three fiscal years, TransferWise is an online money transfer behemoth, has successfully closed a total number of six investment rounds, backed by Sapphire Venture, Richard Branson, LHV Ventures, Matt Whittle, JP Morgan, NatWest Bank, and other big names. While many might articulate this to the startup’s current valuation of £1.3 billion, there are more factors like annual revenue, historic and estimated earnings before interest, tax, depreciation, and amortization (EBITDA) which in this case needed some thoughts too.

The Hook

  • First of all, TransferWise, a rapid money transfer company with £1.3 billion valuation, saw its annual revenue grew by more than 1,106 percent from £9.7 million to £117 million from 2015 to 2018, respectively.
  • Secondly, notwithstanding the fact that the historic EBITDA of the Kristo Käärmann led organization had a slight climb from £11.333 million in 2015 to £13.400 million in 2018, representing a growth of 18.23 percent over the course of four years.
  • Thirdly, the London based corporation with nearly 1,000 employees, is on the move of expanding its international presence by opening a Brussel office in Belgium, which many believe might trigger its future earnings growth with the help of new product development and Series E investment of £280 million.

Annual Revenue

One of the core factors that is believed to have contributed to TransferWise’s monstrous investment rounds, which eventually led to its gigantic valuation is reported to be its colossal annual revenue. To give a quick instance, just after seven years in business, the revenue of TransferWise, the money transfer startup company that is 10 times cheaper than traditional banks, grew by more than 1,106 percent.

Kristo Käärmann, chief executive officer, TransferWise, commented on growth and revenues, in an interview with TechCrunch, “Yes, things are going very well. Tracking back to the very early days when we started, our hypothesis was that we can service customers about 10 times cheaper than banks. That was really proven out about two years ago when we reached break-even, which is an important proof point: tech that’s paying for itself. It’s not paid for with investors.”

To illustrate further, in the year 2015, TransferWise archived £9.7 million revenue, which traveled by 187 percent, an approximate of £27.8 million a year later. This escalation continued by 138 percent at revenue growth, reported being £66.3 million and 77 percent, an equal of £117 million in 2017 and 2018, respectively.

Historical Earnings

On top of that, TransferWise, the 8-year-old business, co-founded by Kristo Käärmann and Taavet Hinrikus, was able to log enormous earnings within a period of four years. For example, in the 2015 fiscal year, an EBITDA of £11.333 million was filed, this figure increased by 59.28 percent or £18.051 million after 12 months.

Kristo Käärmann continued, “Things are going in the same direction, which is consistent with the mission of the company: Grow the volume and the customer base, which gives us more scale to enable us to charge skinnier and skinnier margins.”

Despite that, the company suffered a -85.49 percent setback, an approximate of £2.619 million decline in 2017. Howbeit, it quickly recovered with an increment of more than 411 percent, representing £13.400 million towards the end of its 2018 fiscal year.

Estimated Earnings

Keep in mind, a startup company’s worth is not measured only by looking at its history, in addition to that, future growth and earnings are cores in every business valuation. Also, TransferWise, the firm, headquartered in London, United Kingdom, plans to extend its product offerings in Europe, which many believe might boost its future sales.

Kristo Käärmann also added that “The National Bank of Belgium has made a very good impression on us with their knowledge of the payment and e-money sector and their openness to innovation, and at the same time, it is a very strong and reliable supervisor. We would like to build up an equally productive relationship with the NBB, just as we have today with the British FCA.”

As a result of its Series E funding round of £280 million, totaling to £480.6 million investments, coupled with European market expansion and product development such as the introduction of borderless account and TransferWise for Business, TransferWise, the payment solutions provider with more than 4 million customers, is expected to witness a moderate rally of about 25 percent or £16.750 million by the end of this year. Further, the growth might continue by 65 percent, approximately £27.637 million in 2020 with a slight downfall of 10 percent or £24.873 million EBITDA by 2021.

TransferWise Metrics

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Keep in mind, a representative of the company wasn’t immediately available, however, the story is developing, so kindly check back for updates. In the meantime, you too can — Subscribe to newsHookers!

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