A visual representation of Bitcoin.
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LONDON – Bitpanda, a European cryptocurrency trading platform, has raised $ 263 million in a new funding round and valued the company at $ 4.1 billion.
That's more than three times the $ 1.2 billion Bitpanda was worth in its last private round of funding five months ago. The latest cash injection brings the company's total to nearly $ 500 million.
The investment was led by Valar Ventures, the venture capital company co-founded by US tech billionaire Peter Thiel. It is the third time that Valar has supported Bitpanda since its first major funding round, which was announced in September.
"I don't like doing fundraising," Eric Demuth, CEO and co-founder of Bitpanda, told CNBC. "It's very time consuming."
"If you have partners with whom you have a close connection and who have deep pockets, you don't have to do the whole roadshow," said Demuth. Valar "wanted to double up and we wanted to stay with them," he added. "It was a very simple process."
From left to right the Bitpanda co-founders Christian Trummer, Paul Klanschek and Eric Demuth.
British billionaire hedge fund manager Alan Howard and REDO Ventures, along with existing investors LeadBlock Partners and Jump Capital, also invested in Bitpanda's latest round.
What is Bitpanda?
Founded in 2014, Bitpanda is a Vienna-based brokerage company that enables people to buy and sell cryptocurrencies and precious metals. The company also began testing a service earlier this year that would allow users to trade stocks 24/7.
"By the end of the year, you'll have a really good offer on stocks," said Demuth.
Bitpanda is one of many online brokers in Europe that is attracting growing interest from investors, thanks in part to the trading turf of "meme stocks". Retailers bought unloved stocks like GameStop and AMC, drawing inspiration from a popular Reddit forum. This increased the trading volume on digital platforms like Robinhood.
Bitpanda's competitors include Revolut, Trade Republic, and eToro.
One way to differentiate yourself from competitors is to license your technology to banks and fintech companies. It declined to name any customers, but said several large companies are already implementing the system and will be able to offer crypto and stock trading in a few 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, said Demuth.
Profitability is a rarity in the fintech industry as many venture capital funded companies make heavy losses in this area. Revolut, which was last valued at $ 33 billion, lost £ 167.8 million ($ 232.3 million) in 2020, up 57% year over year.
Demuth said a number of fintech companies are raising money at high ratings out of “hype” and “fear of missing out”.
"I'm very skeptical about that," he said. "A lot of companies, especially in the fintech space, are based purely on a combination of hype and growth. But the growth is mostly paid for, so you have a product that is free and your customers can just buy it."
Bitpanda didn't break down how much money it makes each year, but it said that revenue would increase seven times in 2021. The platform now has more than 3 million users.
The law firm operates exclusively in Europe and has offices in Vienna, Berlin, London, Paris, Barcelona, Milan and Krakow. The money will be used to expand into key markets such as France, Spain, Italy and Portugal.
The rise in Bitpanda's valuation comes at a time of great momentum for the emerging cryptocurrency industry.
Digital currency investors have been on a wild ride this year, with Bitcoin and other major cryptocurrency prices hitting record highs in April and May before plummeting sharply in the weeks that followed.
More recently, bitcoin and smaller digital coin ethers have made a strong comeback, pushing the entire crypto market above 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 investments in digital assets, while the recently passed U.S. infrastructure bill contains a provision that crypto advocates say could harm the industry.
Europe regulated the crypto industry more slowly than its global competitors, said Demuth. But he is being encouraged by new EU rules aimed at bringing the sector under regulatory oversight.
"From the designs I've seen so far, it looks like it won't have any ill effects," he said. "Of course you can always screw it up at the last minute."
Initial public offering? Anything but SPAC
Read more about cryptocurrencies from CNBC Pro
While Bitpanda has no immediate plans to go public, Demuth said he "liked it very much," as Wise has listed. Instead of hiring investment banks to subscribe to his offer, Wise listed directly on the London market without raising any money.
Bitpanda's CEO insisted that nothing had been decided yet, but firmly ruled out a merger with a special purpose vehicle (SPAC). SPACs are blank check companies that list with the aim of getting another company public.
"Bad examples of IPOs are the SPAC mania," said Demuth.
Last month, US digital currency company Circle announced it was going public on a $ 4.5 billion SPAC deal.