Investors are preparing to give fintech app Revolut £50 million even though it’s bleeding money
Fast-growing fintech app Revolut is close to sealing a £50 million funding round that will value the nascent company at £300 million, Sky News reports.
London VC Index Ventures, already an investor in Revolut, is leading the round, Sky says. Silicon Valley investor Ribbit Capital is also said to be taking part in the round. CEO and founder Nikolay Storonsky told TechCrunch earlier this month that the company was close to “large equity round.”
London-based Revolut offers a pre-paid international currency card, initially offering zero-fee, zero-commission foreign exchange. Cash is pre-loaded to the card through an app.
The big round and chunky valuation are eye-catching for a number of reasons. Revolut has only just celebrated its second birthday and it’s unusual for a company to get such a huge cash injection at this early stage.
The firm’s accounts also raise eyebrows. I reported earlier this week that Revolut’s first year of full accounts show it lost £7.1 million on £2.3 million of revenue. It’s not unusual for an early stage company to lose money. But what is unsual here is that the losses were down to “cost of sales,” which were £7.8 million.
“Cost of sales” measures how much it costs for a company to provide the service or products it is selling, before any other incidental and operating expenses are taken into account. It is the most basic, fundamental measure of whether a business mankes money or not. A fintech entrepreneur chatting to me at the Money2020 conference in Copenhagen this week said it looked like Revolut is “spending $US1.00 to earn 50¢.”
Investors don’t look at it that way. What attracts venture capitalists is Revolut’s rapid growth. Storonsky told BI this week that it is on track to have 1 million customers by the end of 2017. Not bad for two years’ work.
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