News Fix: TransferWise Takes Care of Early Investors, Employees

Transferring money across borders is a painful experience. Wire transfers can be slow and expensive. And the paperwork is extensive.

Western Union and MoneyGram are no picnic either. From the time it takes to transfer money, to the inconvenience of doing so, it’s not a pleasant experience.

And that’s the reason so many people are hopeful cryptocurrency will provide a long-term solution.

But fintech startup TransferWise isn’t waiting to see if crypto proves to be the ultimate solution. It’s disrupting the money transfer business right now. And with a valuation of $3.5 billion, it just became Europe’s most valuable fintech startup (CNBC).

TransferWise is lowering fees and making it easy and convenient to transfer money across borders for consumers. And because TransferWise could stay private for several more years, it’s also making it easier for early investors and employees to get some early returns on their investment.

TransferWise just completed a secondary share sale for $292 million. Vitruvian Partners, Lone Pine Capital and Lead Edge Capital bought stakes in TransferWise in a secondary share sale. The money raised by the secondary sale will go directly to TransferWise employees and early investors who wanted to sell some of their shares.

Hopefully, these secondary share sales will become a trend. Startups are staying private longer than they ever have. From 1976 to 1996, the median age of companies going public was 7.8 years old. That rose to 10.7 years for companies going public between 1997 and 2016 (Credit Suisse).

The reason startups can stay private longer now is that venture capitalists are willing to invest large amounts of money during a startup’s growth stage. And with all the money sloshing around private markets, this trend is just going to continue. TransferWise co-founder Taavet Hinrikus told CNBC he’s not planning on taking his 8-year-old company public soon.

“While we believe we’ll be a public company eventually, that doesn’t help us do what we want to do in the next couple of years,” he said.

Organized secondary share sales are a nice way to reward early investors and employees who invested in a vision before the proof was there. Hopefully, other companies will follow their lead.

Now to the News Fix.

Cannabis

Square looks to fill payments void: The marijuana industry sits in a weird legal place. Medical marijuana is legal in 33 states and Washington, D.C. Recreational marijuana is legal in 10 states and D.C. But because marijuana is illegal at the federal level, perfectly legal pot companies have difficulty accessing the banking system. Banks don’t want to violate their federal charters by doing business with pot companies. Some banks are so conservative that they even refuse business from hemp and hemp-based CBD companies. And hemp-based CBD is legal at the federal level!

If you don’t have access to the banking system, it’s tough to process credit and debit card payments. That really limits the industry.

Square is trying to change that. The popular payments company has rolled out a solution for companies selling CBD products. It’s an invitation-only beta program right now (Forbes).

We don’t know how many companies are participating in this trial. But if it takes off, it could be a game changer for the CBD space.

Massachusetts dispensaries get acquired: Canadian marijuana company Cannabis Strategies Acquisition Corp. has bought Sira Naturals, which operates three Boston-area medical marijuana dispensaries. Sira Naturals also has licenses to manufacture and transport recreational marijuana. The sale was approved by Massachusetts regulators this week (MassLive).

Startups

AI taking over sales: People.ai has figured out how to use artificial intelligence to give sales people the exact information they need to convince you to buy more stuff. Scary? Yep. But customers are lining up to use its service. Its clients have already closed $100 billion in sales using the platform. The startup just raised $60 million at a $500 million valuation (TechCrunch).

Arya Stark launches startup: The Fix is going to binge-watch the final season of Game of Thrones at some point this summer. But this story was too juicy to resist. Maisie Williams, who played Arya Stark in the series, has started a social networking and collaboration platform for content creators and talent (actors, actresses, etc.). The goal is to create new ways for talent to get discovered and projects to be made. The social network, named Daisie, already has 100,000 members. And the startup has raised about $3 million in funds from investors like Founders Fund, 8VC, Kleiner Perkins and Shrug Capital (TechCrunch).

Crypto

Facebook’s “GlobalCoin” may launch next year: More leaks from the Facebook crypto project! Facebook is calling its new cryptocurrency “GlobalCoin” internally. And it hopes to begin testing it at the end of 2019 and release it for use in the first quarter of 2020 (BBC).

GlobalCoin lacks originality. But the scheduled release dates are interesting. By pushing to test the coin later this year, Facebook is showing an extraordinary level of commitment to this project. The social media giant isn’t just dabbling here. It’s going big on crypto.

Binance adding margin trading: Binance, the world’s largest crypto exchange by volume, is adding margin trading to its offerings (Cointelegraph). Margin trading, which involves using borrowed funds to trade an asset, appeals to wealthier investors and institutional investors.

And that’s your News Fix!

Have a great Memorial Day weekend.

Vin Narayanan

Senior Managing Editor, Early Investing