Peter Thiel-backed crypto broker Bitpanda triples valuation in five months to $4.1 billion

Peter Thiel-backed crypto broker Bitpanda triples valuation in five months to $4.1 billion

Via CNBC.com:

Bitpanda, a European cryptocurrency trading platform, has raised $263 million in a fresh round of funding valuing the company at $4.1 billion.

That’s more than three times the $1.2 billion Bitpanda was worth in its last private financing round five months ago. The latest cash injection brings the company’s total raised to nearly $500 million.

The investment was led by Valar Ventures, the venture capital firm co-founded by U.S. tech billionaire Peter Thiel. It’s the third time Valar has backed Bitpanda since its first major funding round, announced in September.

“I don’t like to do fundraising,” Eric Demuth, Bitpanda’s CEO and co-founder, told CNBC. “It’s very time-consuming.”

“When you have partners you have a close connection with, and they have deep pockets, you don’t have to do the whole roadshow,” Demuth said. Valar “wanted to double down and we wanted to stay with them,” he added. “It was quite an easy process.”

British billionaire hedge fund manager Alan Howard and REDO Ventures also invested in Bitpanda’s latest round, along with existing investors LeadBlock Partners and Jump Capital.

What is Bitpanda?

Founded in 2014, Bitpanda is a Vienna-based brokerage firm that lets people buy and sell cryptocurrencies and precious metals. The company also began testing a service this year that lets users trade stocks around the clock.

“By the end of the year, I think you’ll have a really good offering for stocks,” Demuth said.

Bitpanda is one of many online brokers in Europe attracting growing interest from investors, thanks in part to the “meme stock” trading frenzy. Retail traders piled into unloved stocks like GameStop and AMC, taking inspiration from a popular Reddit forum. That boosted trading volumes at digital platforms such as Robinhood.

Bitpanda’s competitors include Revolut, Trade Republic and eToro.

One way the company hopes to differentiate from rivals is by licensing its technology to banks and fintech companies. It declined to name any clients but said several big firms were already implementing the system and will be able offer crypto and stock trading in a matter of months.

Bitpanda makes its money from the spread between what someone is willing to pay for an asset and the price at which that asset is sold. The start-up has been profitable for five years, Demuth said.

Profitability is a rarity in fintech, with many venture-backed companies in the space racking up heavy losses. Revolut, which was last valued at $33 billion, lost £167.8 million ($232.3 million) in 2020, up 57% from a year earlier.

Demuth said a number of fintech companies are raising money at lofty valuations out of “hype” and a “fear of missing out.”

“I’m very skeptical about this,” he said. “Many companies, especially in the fintech area, are purely based on a combination of hype and growth. But the growth is mostly paid, so you have a product that is for free and you are simply buying your customers.”

Bitpanda didn’t provide a breakdown of how much money it makes each year, but said revenues were on track to rise sevenfold in 2021. The platform now has more than 3 million users.

The firm only operates in Europe, with offices in Vienna, Berlin, London, Paris, Barcelona, Milan and Krakow. It plans to use the money to expand in key markets like France, Spain, Italy and Portugal.

Crypto mania

The boost in Bitpanda’s valuation comes at a time of great momentum for the nascent cryptocurrency industry.

Digital currency investors have been on a wild ride this year, with the prices of bitcoin and other major cryptocurrencies hitting record highs in April and May before tumbling sharply in the weeks that followed.

More recently, bitcoin and smaller digital coin ether have made a strong comeback, pushing the entire crypto market across the $2 trillion mark for the first time in three months.

The main headwind for crypto lately has been the threat of regulation. China has cracked down on speculative investing in digital assets, while the recently approved U.S. infrastructure bill includes a provision that crypto advocates say may harm the industry.

Europe has been slower to regulate the crypto industry than its global peers, Demuth said. But he is encouraged by new EU rules aimed at bringing the sector under regulatory supervision.

“From the drafts I’ve seen so far, it looks like it will not have a bad impact,” he said. “Of course, they can always mess it up at the last minute.”

IPO? Anything but a SPAC

Fintech has birthed a number of multibillion-dollar public companies lately, with the likes of Coinbase, Robinhood and Affirm all listing this year. In Europe, Wise — the British fintech formerly known as TransferWise — went public in a rare direct listing in London.

While Bitpanda has no immediate plans to go public, Demuth said he “really liked” how Wise listed. Instead of hiring investment banks to underwrite its offering, Wise listed directly on the London market without raising any money.

Bitpanda’s CEO insisted nothing has been decided yet, but firmly ruled out merging with a special-purpose acquisition company, or SPAC. SPACs are blank-check companies that list with the aim of taking another company public.

“Bad examples of IPO are the SPAC mania,” Demuth said.

Last month, U.S. digital currency company Circle said it planned to go public in a $4.5 billion SPAC deal.