Start-ups that grow to a value exceeding $1 billion are so scarce that they’ve been given a pointedly mythical epithet. But the UK is home to a handful of unicorns – and Director has tracked down the founders of three such rare beasts for a series of exclusive interviews. In this Q&A Taavet Hinrikus – co-founder and chairman of peer-to-peer money exchange service TransferWise – discusses going global and persuading Branson to invest
A peer-to-peer money-transfer service designed to undercut the foreign exchange fees typically charged by banks, Transferwise was founded in 2011 by Estonian friends Taavet Hinrikus (now chairman) and Kristo Käärmann (now CEO). With around 1,000 staff, the business is valued at $1.6 billion (£1.18 billion) and has raised more than £290 million to date from investors including Sir Richard Branson, Old Mutual Global Investors and Andreessen Horowitz. Earlier in his career, Hinrikus was the first employee of Skype, rising to the position of strategy director by the time he left the company in 2008.
TransferWise has attracted investments exceeding £290 million so far. Which qualities attract investors the most?First, you need to offer a product that is 10 times better than the competition. Second, you need to be doing this in a big market. This is true for my former company, Skype, and it’s also true for TransferWise – there’s a huge market out there. Lastly, it’s about demonstrating that you can get results. If you can show that you had 100 customers in January and 120 in February, you’re likely to find people who are happy to invest.
How did you persuade Sir Richard Branson to invest in your business?
We pitched to him at an early stage and his answer then was that it was a bit too soon and too risky. But a year later we went back to him. It’s a great fundraising tip – going to an investor and saying: “Hey, here’s what we’re doing; here’s the plan.” You can then go back later and tell them: “What we told you last year came true.” This makes it very hard for them to turn you down. It happened with Branson, it happened with Andreessen Horowitz and it even happened last year with Institutional Venture Partners.
What’s your secret to converting the investment you secure into growth?
It’s easy to become a great pitcher, but that doesn’t correlate with being successful in business. In a way, fundraising is the easy part. The hard part is building the business – and the entrepreneur is responsible for that. If you’re expecting your investor to do that, you’re in the wrong place. Your attitude and ability to learn will define whether you’re successful or not.
What have you learnt about attracting the right people to your company?
Pay is important, but you don’t want to recruit people who only want the salary. You want them to come and join a mission. I often see small businesses giving away fancy titles – you’re a 10-person company and you’ve hired a COO? What the ****?! If you hire an intern and call them a COO, you’re quickly creating trouble for yourself. We’ve designed the way we work to focus on speed, so it’s a flat structure. We are reserved in giving out job titles. It’s become quite a good test: if somebody starts asking too quickly about titles, they probably aren’t going to be successful here.
How have you coped with setbacks?