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Early Spotify backer TCV in talks with $7bn Revolut

by ace
7 November 2018; Nikolay Storonsky, Revolut on MoneyConf Stage during day two of Web Summit 2018 at the Altice Arena in Lisbon, Portugal. Photo by Seb Daly/Web Summit via Sportsfile

One of the sponsors of Spotify, Airbnb and Netflix is ​​in talks to invest hundreds of millions of dollars in Revolut, the UK-based digital payments and banking group.

Sky News has learned that Technology Crossover Ventures, or TCV, proposes to commit a substantial proportion of a $ 500 million (£ 385 million) revenue being raised by Revolut.

The company, which also seeks to raise $ 1 billion in new debt, wants to secure new financing with a valuation of between $ 7 billion ($ 5.4 billion) and $ 8 billion ($ 6.2 billion), according to inside information.

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TCV was one of the first to support the Spotify music streaming service.

Doing so would make Revolut Europe's most valuable fintech business.

Sources said this weekend negotiations were ongoing and may not result in a formal agreement being reached by TCV and Revolut.

TCV, which raised a $ 3 billion (£ 2.3 billion) fund earlier this year to support fast-growing technology companies.

It has one of the most formidable investment records of any Silicon Valley institution, having supported start-ups such as Expedia, Facebook, LinkedIn and Peloton – the latest of which is among the latest crop of US technology unicorns to come. make public.

In the UK, TCV's portfolio includes World Remit, the money transfer platform.

The company says it has invested a total of more than $ 10 billion in technology companies around the world.

About half of UK households now subscribe to streaming services
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TCV also invested in Netflix

TCV is not the only venture investor to trade with Revolut, with several other funds that also claim to have provided term sheets to the UK-based company.

Its funding round is expected to be completed during the first quarter of 2020.

Sky News revealed in October that Revolut hired investment bank JP Morgan to orchestrate the two fundraising elements.

If successfully completed, it would catapult the deal to the thin ranks of tech companies that secured individual funding rounds of more than $ 1 billion (£ 770 million).

Revolut, led by founder and chief executive Nik Storonsky and just five years old, now has 9 million customers.

He has recently named city veteran Martin Gilbert as its president since early next year.

Michael Sherwood, former head of Goldman Sachs in Europe and one of the city's top banking executives, is also being cast as a non-executive director, although Revolut has not yet formally confirmed his appointment.

The fundraising plan comes just months after Revolut releases a global deal with Visa, the payment giant, that will take the company to 24 new countries.

Under its new partnership, Storonsky's company will issue Visa-branded cards in markets such as Canada, Japan, Singapore and the USA.

Revolut also struck a significant deal with Mastercard.

Mastercard credit cards on installation photo.
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Revolut struck a significant deal with Mastercard

Members said Revolut was seeking to increase its new loan based on conversion if the company received a US banking license.

Securing $ 1.5 billion from investors would bring the total amount raised by the fintech group during its five years of existence to nearly $ 2 billion – a huge sum for a British technology company.

Revolut is also churning out its executive ranks by hiring a senior executive at Metro Bank as its new chief financial officer.

Management review occurs when Revolut is forced to respond to tough challenges to its reputation, including alleged ties to the Kremlin – which it strongly denies.

The company faced research questions about the quality of its compliance functions after being bogged down in allegations made in a newspaper article that it had "shut down" an automated system designed to prevent its money transfer system from being used to violate international sanctions.

Revolut insisted that the new system was simply being tested along with existing controls.

It operates in 32 countries, with the Visa partnership totaling 55.

Revolut says it is opening 12,000 accounts every day – the equivalent of four million a year – and has received financial support from some of the biggest names in the venture capital industry, including Balderton Capital, DST Global and Index Ventures.

Visa
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Revolut also has a deal with Visa

The shift to more than $ 1 billion in new stock and debt comes amid a rush by bankers to raise capital for regulatory and expansion purposes.

Monzo, who is chaired by former Northern Rock chief Gary Hoffman, recently announced a fundraising of £ 113m, which valued him at over £ 2bn.

Zopa, another digital player, has just closed a £ 140m capital increase, but with a big discount on its previous valuation.

Earlier this year, Storonsky told the Financial News that he would like Revolut to be worth between $ 20 billion ($ 15.8 billion) and $ 40 billion ($ 31.6 billion) before contemplating a market listing. stock, which should probably be a few years away.

Despite its valuation of several billion pounds, Revolut continues to cause losses, although this is hardly an anomaly among leading technology companies.

Investors have begun to show greater skepticism about the path to profit for tech companies, with WeWork's parents recently forced to abandon their fluctuation in New York amid financial and governance concerns.

In results published in early fall, Revolut said it had made a pre-tax loss of £ 33 million in 2018, compared with £ 15 million the year before.

However, revenues have grown more than fourfold, from £ 13m to £ 58m, with the company saying it was about to triple revenues again this year.

The Bank of England Prudential Regulation Authority recently challenged the fastest-growing companies under its auspices to adopt more stringent stress tests and more challenging evidence from board members.

Revolut and TCV declined to comment.

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