As the UK
continues on its slow march to leave the European Union, a London-based
startup that enables companies to work internationally has raised a huge
round of funding from a strategic backer to expand its business. Ebury,
which provides foreign exchange, money transfer and other currency
services to small and medium businesses and their banking partners, has picked up £350 million
(about €400 million, or $452 million) led by Spanish banking giant
Santander. With the deal, Madrid-based Santander will become a majority
shareholder at 50.1% but notes that Ebury will continue to operate as an
independent entity.
Ebury and Santander said that the funding
will be used to support Ebury’s growth, and specifically to scale its
customer base in Latin America and Asia, while at the same time bolting
on more modern services to Santander’s offerings as it seeks both to
expand its revenues from existing customers and take on new ones.
Santander
said that it has 4 million SME customers globally, and currently more
than 200,000 of them do international business, while Ebury is already
operating 19 countries and covers 140 currencies, with annual revenue
growth of 40% in each of the last three years.
But putting to one
side 4 million businesses, even providing services to 200,000 customers
would be a big step up for Ebury: the company said that last year it
processed £16.7 billion in payments for just 43,000 clients.
Santander
said that its investment gives it a 50.1% stake in the company, but it
is not disclosing total valuation. On a straight percentage, it would
work out to about £700 million, or $902 million, but it sounds like the
deal includes both primary and secondary investment — “£70 million will
be new primary equity (approximately €80 million) to support Ebury’s
plans to enter new markets in Latin America and Asia,” the companies
note — and that could change the numbers. Santander is optimistic and
said it expects a return on its invested capital in Eubury of higher
than 25% in 2024.
Ebury’s existing investors and co-founders and
management will also invest in the transaction. Past backers include
83North (formerly Greylock Israel) and Vitruvian Partners, among others.
Founded in 2009, it has to date raised $134 million.
Services
that Ebury currently provides include currency transfer and exchange,
but it looks like there will be more down the line. Just last month, Ebury announced
that it had acquired another fintech called Frontierpay, which
specialises in international payroll solutions. The deal is still going
through regulatory approavals.
Many have lamented the fact that
startups out of Europe find it hard to scale and grow and need to look
to markets like the US for that kind of funding and support — often
relocating in the process. Fintech is one of the big areas that bucks
this trend.
Adyen built and still operates its successful online
payments business out of the Netherlands; Revolut, Monzo and a wave of
other so-called ‘challenger banks’ are revisiting what it means to
provide banking services to consumers and businesses; and TransferWise —
itself a major player in currency transfer services focusing both on
individuals as well as businesses — are among the many that have scaled
internationally out of Europe and have valuations in the billions.
Indeed, it’s competition from the likes of TransferWise that may have spurred Santander to invest in Ebury.
If
bringing Ebury’s technology to the Santander platform will give the
legacy bank a better way of competing in a market that’s seeing a lot of
challengers at the moment, it also gives Ebury a stronger underpinning
for those skeptical of doing business with a newer startup.
“Combining
a big bank with nimble fintech means we can offer our clients the best
of both worlds: they can benefit from our technology and high- quality
service safe in the knowledge that they are counterparty to one of the
world most important financial institutions,” said Juan Lobato and
Salvador García, co-founders of Ebury, in a joint statement. “It is an
exciting time for Ebury, we have just completed our first acquisition,
and the new capital from Santander and our existing shareholders will
allow us to invest in new ways to serve SMEs trading internationally and
continue the growth in our business while keeping our entrepreneurial
culture.”
Santander is not a stranger to making strategic
investments in financial technology startups to grow its business,
specifically by integrating or co-marketing those services alongside its
own. It made an early strategic investment in Sweden’s iZettle,
a Square competitor, that brought the startup into Latin America, and
specifically as a co-provider of services to Santander’s customers in
the region. Although it looked like iZettle could eventually get gobbled
up by Santander, in the end, it was acquired by PayPal for $2.2 billion.
As
with the iZettle investment, the focus for Santander here is on
providing more services for SMEs, a huge sector that is fragmented and
often overlooked and underserved against the bookends of mass-market
consumer services and high-touch, high-end large enterprise services.
The gap in turn becomes an opportunity.
“Small and medium-sized
businesses are a major engine of growth around the world, creating new
jobs and contributing up to 60% of total employment and up to 40% of
national GDP in emerging economies,” said Ana Botín, Group Executive
Chairman of Banco Santander, in a statement. “SMEs are becoming
increasingly global and Santander is the best positioned bank to play a
leading role to help them access global trade finance. By partnering
with Ebury, Santander will deliver faster and more efficient products
and services for SMEs, previously only accessible to larger corporates.”
Source. TechCrunch, Ingrid Lunden, November 4, 2019
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