Finance

Revolut valued at $33bn to become UK’s biggest-ever private tech group

Revolut, the London-based digital banking start-up, has raised $800m in a funding round that makes it the UK’s most valuable private tech company of all time.

The deal, led by SoftBank’s Vision Fund 2 and Tiger Global Management, values the six-year-old company at $33bn (£23.9bn), six times more than at its last fundraising in early 2020. The company is now worth more than NatWest, one of the UK’s Big Four retail banks.

The rapid increase highlights insatiable demand from investors for fast-growing companies, which has renewed concerns about overheating in private tech markets. Investors poured almost as much money into private start-ups in the first half of this year as they did in the whole of 2020.

Mikko Salovaara, Revolut’s chief financial officer, said the company did not need to raise money but added that “the environment for raising is very strong and we had a lot of investor interest”, so it decided to take advantage.

The company had denied it was actively fundraising as recently as last month but Salovaara said the deal was turned round in a matter of weeks after the company approached potential investors.

Nikolay Storonsky, chief executive, said the investment and high valuation illustrated “investors’ confidence that we can deliver products that raise the bar for customers’ expectations across the whole financial services industry”.

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Storonsky, a Russian-born former investment banker, founded Revolut in 2015 alongside chief technology officer Vlad Yatsenko. The 2020 fundraising made him Britain’s youngest self-made billionaire and Thursday’s investment lifts the value of his stake to more than $6bn, based on Companies House filings.

Revolut said it would use the new cash to ramp up spending on marketing, particularly in the US and India, and on new product development. The company initially offered a pre-paid debit card for travellers but has expanded into areas from stock and cryptocurrency trading to consumer credit and business banking.

Net losses widened from £107m to £168m last year but it began to break even in the final two months of the year. Salovaara said it had been “strongly profitable” in the first quarter of 2021.

Interchange fees generated when a customer uses their card are still Revolut’s largest source of revenue but the company has diversified its income over the past year. Fees from monthly subscriptions — which offer perks such as metal cards and cashback — rose 92 per cent in 2020, and account for 29 per cent of revenue, while revenue from foreign exchange and trading activities rose 150 per cent, with a 31 per cent share of the total.

Revolut has a banking licence in the eurozone but is still in the process of applying for one in the UK. Salovaara said he believed the company was about halfway through the process.

The investment was welcomed as a vote of confidence in the UK as a hub for financial technology companies, following last week’s successful direct listing of Revolut’s rival Wise.

Rishi Sunak, UK chancellor, said Revolut’s fundraising was “great news”, adding that “we want to see even more great British fintech success stories”.

Revolut would be one of the most valuable companies ever to join the London Stock Exchange if it chose to follow Wise on to the UK market.

Salovaara said the company expected to go public “eventually”, but added that “we have no immediate plans to list, [and] the new capital we’ve taken on does give us some cushion so we can be quite flexible about the timing”.

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