Fintech

Do you believe in unicorns?

Chris Skinner believes in unicorns, especially the fintech kind.
Written by Chris Skinner

Chris Skinner runs through the emerging fintech unicorns of London, providing a brief synopsis of each.

It’s midsummer and quiet, but there is some interesting stuff still happening, particularly when we talk about unicorns. Do you believe in unicorns? Unicorns, in technology terms, are companies with valuations of more than $1bn that have launched since 2000. There are quite a few of them out there, including Uber, Airbnb, Twitter, WhatsApp, Snapchat, Pinterest and more.

In fact, Techcrunch’s latest analysis finds 84 US-based companies belonging to what they call the ‘unicorn club’, a 115% increase in a year, and finding eight new unicorns every year. The largest fintech unicorns are Square and Lending Club, according to their analysis, but Finovate found a few others, including Lufax and Klarna.

To put this in perspective, Microsoft’s market value at IPO was $500m, while Cisco’s was $300m. Alternatively, the market capitalization of Barclays Bank is just over $60bn today, about the same as 10 Lending Clubs. The difference being that Barclays is over 300 years old, while the latter is less than 10 years old.

Now OK, market valuations are not an indication of real value, as the exit value of some of these privately funded firms may be very different to their paper value, but it does show the hype and bluster around fintech (and tech generally). Meanwhile, from a UK perspective, we have quite a few emerging fintech unicorns, including:

Algomi

  • What is it? A social network for the bond market
  • Founded: 2012
  • Founders: Stu Taylor, Usman Khan, Robert Howes, Michael Schmidt
  • Headquartered: Fenchurch Street, London
  • Funding to date: £7.7m ($11.8m)
  • Headcount: 130

Founded by former UBS bankers, Algomi has created a social network for the bond market that connects those who want to sell with those who want to buy. Prior to Algomi, this was done through speculative phone calls wasting a lot of time. Its service is currently used by nine banks, including some of the world’s biggest. The startup, founded in 2012, has offices in New York, Hong Kong, San Francisco and Chicago, and is planning a major push into the US.

Crowdcube

  • What is it? Equity crowdfunding from selling shares online
  • Founded: 2011
  • Founders: Darren Westlake, Luke Lang
  • Headquartered: University of Exeter campus, Exeter
  • Funding to date: £7m ($10.6m)
  • Headcount: 67

Crowdcube is an equity crowdfunding platform that lets businesses raise money by selling shares online. Companies including London’s Camden Town Brewery and startup JustPark have raised a combined £80m ($122.5m) on the platform since it launched in 2011. Founder Darren Westlake has said he was inspired by seeing great ideas on Dragons’ Den that were turned down.

eToro

  • What is it? Lets you follow top traders and automatically copies the trades they make
  • Founded: 2006
  • Founders: Yoni Assia, Ronen Assia, David Ring
  • Headquartered: Canary Wharf, London, and Tel Aviv, Israel
  • Funding to date: £47.5m ($72.9m)
  • Headcount: 200

This ‘social’ trading platform allows you to follow top traders and even automatically copy the trades they make on things such as currency and stocks. The company recently raised $39m (£25.5m) to break into Russia and China. It currently has offices in the UK, Israel, Russia, Cyprus and Australia, and is planning to open more overseas soon. The company just this week signed a three-year sponsorship deal with London Premier League football team West Ham.

GoCardless

  • What is it? Direct debit processing for small businesses
  • Founded: 2011
  • Founders: Matt Robinson, Hiroki Takeuchi
  • Headquartered: Islington, London
  • Funding to date: £7.7m ($11.8m)
  • Headcount: 60

This business uses smart technology to make it much easier for businesses to accept and process direct debits. As well as smart tech, the startup allows small businesses to accept direct debits by aggregating payments to make it affordable.

GoCardless started life in Silicon Valley’s legendary Y Combinator accelerator and recently passed £500m ($765m) worth of direct debits processed. The company currently has around 11,000 customers, including TripAdvisor, The Guardian, the FT and Box. GoCardless is focusing on expanding across Europe. Founders Matt Robinson and Hiroki Takeuchi are Oxford graduates who met while working as management consultants at McKinsey.

MarketInvoice

  • What is it? Lets companies borrow against unpaid invoices
  • Founded: 2011
  • Founders: Anil Stocker and Ilya Kondrashov
  • Headquartered: Holborn, London
  • Funding to date: £6.6m ($10.4m)
  • Headcount: 60

This peer-to-peer lending platform lets companies borrow against unpaid invoices online. £400m ($612m) has been lent since launch, and lending volumes are growing by an average of 30% each month. Founder Anil Stocker worked at Lehman Brothers before it collapsed, while his co-founder Ilya Kondrashov is a Goldman Sachs alumni.

Nutmeg

  • What is it? Investment management services for the rest of us
  • Founded: 2011
  • Founders: Nick Hungerford, William Todd
  • Headquartered: Vauxhall, London
  • Funding to date: £24m ($37.3m)
  • Headcount: 75

This startup makes investment management services that are usually reserved for the wealthy available online for sums as small as £1,000 ($1,530). Savers can set goals such as buying a house or paying for university, and Nutmeg’s money managers will invest their cash accordingly. Investors in the company include ICAP founder Michael Spencer, Carphone Warehouse founder Sir Charles Dunstone and FTSE 100 asset management company Schroders.

Founder Nick Hungerford is another fintech entrepreneur who has fled from the City, formerly working at stockbroker Brewin Dolphin and Barclays wealth management.

RateSetter

  • What is it? Lets people lend their savings to individual borrowers
  • Founded: 2009
  • Founders: Rhydian Lewis, Peter Behrens
  • Headquartered: Southwark, London
  • Funding to date: £30m ($10.4m)
  • Headcount: 100

RateSetter is a peer-to-peer (P2P) lender like Zopa that lets people lend their savings out to individual borrowers. RateSetter was the largest P2P lender in the UK by volume last year, lending £292m ($447m). The business is already profitable.

Prior to RateSetter, founder Rhydian Lewis worked at boutique investment bank and financial adviser Lazard, which advised the UK government on the sale of Royal Mail. Peter Behrens, the other co-founder, was a banker with Royal Bank of Scotland.

WorldRemit

  • What is it? Cash transfers to emerging markets
  • Founded: 2009
  • Founders: Ismail Ahmed
  • Headquartered: Hammersmith, London
  • Funding to date: £96m ($147.7m)
  • Headcount: 200

Like TransferWise, WorldRemit offers cheaper international money transfer services than traditional rivals. The Hammersmith-based company focuses on transfers to emerging markets such as Africa and Asia. Somali-born founder Ismail Ahmed helped the UN crack down on money laundering before setting up the business. WorldRemit was valued at $500m (£326m) in a recent funding round, in which it raised $100m (£65m).

Zopa

  • What is it? A pioneer in peer-to-peer lending
  • Founded: 2005
  • Founders: James Alexander, Richard Duvall, David Nicholson, Giles Andrews
  • Headquartered: Farringdon, London
  • Funding to date: Over £35m ($55m)
  • Headcount: 100

Zopa was a pioneer in peer-to-peer lending in the UK. Its platform lets people lend money to consumers, and more than £850m ($1.3bn) has been lent over its platform. Before Zopa, the company’s founders launched online challenger bank Egg in the UK in the late 1990s. Zopa recently partnered with challenger bank Metro Bank to offer loans to consumers over its platform.

UK list sourced from Business Insider.

This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. You can read the original article here.

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

Leave a Comment