One of the hottest IPOs of 2021 will undoubtedly be TransferWise, and the hype has only escalated with the recent announcement that the fintech unicorn has tapped two of Wall Street’s biggest banks to take the lead on its listing. Last week, the company announced that Goldman Sachs and Morgan Stanley were hired as joint global coordinators for its London IPO. From its founding in 2011 to its spectacular closing of 2020 with a $5 billion valuation, there are many lessons to be learned in the success story of TransferWise. Perhaps most valuable of all is how to create value by identifying and solving a universal problem.
Founders Kristo Käärmann and Taavet Hinrikus quickly bonded over a unified issue. Both originally from Estonia, the co-founders met each other working in London with separate savings accounts tied in their home country. Without realizing, Käärmann and Hinrikus were losing hundreds of dollars transferring their salary in pounds to their euro-driven bank accounts in Estonia. At the time, Hinrikus was working as a director at Skype, and Käärmann was a consultant at Deloitte.
The wakeup call came when Käärmann realized that, instead of paying the advertised 15 euros for each salary transfer, he was actually paying an extra 500 euro for a transfer of 10,000 pounds. Failing to read the fine print led him to paying extra fees. From that grew a pain point for the tech and mathematics savvy, big-business-trained Käärmann. Having experienced very much the same problem with unexpectedly large fees taxing Hinrikus, meeting Käärmann lit the fuse of what would become multi-billion-dollar collaboration.
TransferWise was founded shortly after, in 2011. Offering a set mid-market rate for a fee of 0.5% to transfer money overseas, the duo immediately solved a problem they shared with millions in Europe. Focusing first on European regions and Estonia specifically, they hit the ground running. The firm’s first capital raise garnered $1.3 million from IA ventures. The rest, as they say is history. In September of 2020, TransferWise reported a 70% revenue jump, with its profits doubling. As digital adoption soars as a result of the pandemic, this trajectory is likely to grow exponentially. All from finding and seizing an underrepresented area of fintech.
In what will be a busy year of IPOs for London, TransferWise is one that many will keenly watch. With investors like IVP, and Sir Richard Branson, as well as its unicorn valuation, the success story of this fintech is one for the books.