The asset management giant Old Mutual Global Investors (OMGI) is in talks to take a stake in TransferWise, the British technology “unicorn”, providing a further signal of its long-term plans to become a public company.
Sky News has learnt that OMGI, which is headed by the prominent City fund manager Richard Buxton, is close to striking a deal to pump tens of millions of pounds into the payments app.
OMGI’s investment in TransferWise will come alongside that of IVP, the Silicon Valley firm which has backed technology behemoths including Netflix and Snapchat, and is expected to be announced by the end of the month, insiders said.
The deal will value TransferWise at $1.6bn (£1.2bn) before the new funds are invested, with the precise amount being raised from IVP, OMGi and others unclear on Tuesday.
It will come just weeks after OMGI signed its first such private company investment, with a £125m stake in The Hut Group, a digital health and beauty retailer.
The investments in TransferWise by OMGI and IVP will underline the currency transfer company’s long-term ambition to float on a stock exchange in the coming years.
Last month, Sky News revealed that the entrepreneurs who founded TransferWise were poised to land windfalls worth millions of pounds by selling their first shares in the company they founded six years ago.
Image: Taavet Hinrikus’s move to chairman at TransferWise means a less hands-on role
Taavet Hinrikus and Kristo Kaarmann are expected to offload a small chunk of their stakes in the payments app as part of the Series-E funding round.
Mr Hinrikus and Mr Kaarmann, who recently swapped roles to become chairman and chief executive respectively, are thought to own roughly 40% of TransferWise between them – meaning that on paper they are likely to be worth more than $300m (£227m) each.
Substantial demand from new investors for TransferWise’s shares meant early investors, the founders and employees of more than three years were being allowed to sell up to 20% of their shareholdings.
An insider said the company was happy to provide liquidity to early employees, many of whom had taken pay cuts when they began working for it.
TransferWise has previously raised a total of about $117m (£90m) – a significant sum for a British technology start-up.
Its latest deal will establish it as a “unicorn” – a tech start-up worth at least $1bn – reflecting a frenzy of international interest in the global payments industry as new technology drives down costs and improves speed and efficiency for customers.
TransferWise provides exchange rates to users which are more competitive than most traditional competitors by using an element of peer-to-peer funding to cut costs.
Instead of actually converting money, it pairs users wanting to buy a currency with those wanting to sell it, enabling them to save on often costly fees.
TransferWise is used by more than one million people to move money internationally, ?which it claims saves them more than £1.5m each day.
It is now profitable on an annualised basis – an important milestone for any tech start-up.
The company boasts a 10% market share in the UK, and expects to? reach $100m (£77m) in revenue this year.
TransferWise’s existing investors include some of the biggest names in Silicon Valley, including Andreessen Horowitz, one of the early backers of Facebook.
Sir Richard Branson, the Virgin Group founder, is also a shareholder.
The company last raised money in May 2016, when the Edinburgh-based fund manager Baillie Gifford led a $26m funding round.
Since then, Andreessen Horowitz has increased its stake in the company by acquiring shares held by TransferWise’s initial “angel” investors.
Mr Hinrikus, whose move to the chairmanship of TransferWise will lead to him taking a less hands-on role, recently raised the prospect of following the route pursued by companies such as Facebook and Snap Inc.
In a blog post earlier this summer, he wrote: “What was an idea seven years ago is now a company that will do $100m in annual revenue. Next up $1bn in revenue?
“In a few years it will be time to think seriously about becoming a public company like the strongest and most trusted financial institutions are.
“But when we do that we will explore that through our own lens – how will it help our customers? How will it help us achieve our mission faster?”
TransferWise’s expansion has seen it launch into markets including China and Sri Lanka, while it has also signed a partnership with Number26, a start-up which enables users to open a bank account within eight minutes.
Its growth has not, however, been untroubled.
The company was fined by US authorities for operating without the correct licence, and it was forced to modify its advertising claims in the UK.
A TransferWise spokeswoman declined to comment.