Source: Bloomberg

Cross-Border Payments Startup Payoneer Raises $180 Million

  • Clients include Amazon, Google, Airbnb, Getty Images
  • Company had more than $100 million in revenue in 2015

Payoneer Inc. has raised $180 million from investors betting that the company will capitalize on the explosion of businesses globalizing their operations.

Eleven-year-old Payoneer provides digital cross-border payments and transaction-related services. While the New York-based company has been profitable for three years, Payoneer raised cash to give it more flexibility to spend on expanding its workforce and global presence and build a bigger acquisition arsenal, said Chief Executive Officer Scott Galit.

“As much as we’ve grown, we think we’re in really early days,” he said. “If you’re a small business trading internationally, you need financial services and other services that warp around payments -- those are the things we’re thinking about.”

Growth-equity firm TCV led the round, with participation from existing investor Susquehanna Growth Equity, bringing Payoneer’s total funding to $275 million. TCV invested in large part because Galit and his team have prioritized improving and adding new technology, a necessary trait to take advantage of companies increasingly digitizing operations, said general partner Woody Marshall. TCV mostly invests in companies that are growing at least 40 percent a year, he said.

“Where they’re going to be in 12 months, 18 months, is going to be significantly different,” he said. “The goal is to become a global platform for people to deal with international trade, so there’s lots of things to work on on the product side, and there’s also the regulatory and compliance side.”

In 2014, $155 trillion in business-to-business payments moved across borders, but these transactions are still very expensive and therefore provide opportunities for innovation, according to a McKinsey & Co. report last year. Small- and medium-sized companies represent about three-quarters of revenue for cross-border payments services and are expected to do more international business, according to the report.

“This is one of the businesses that we’ve not worried about TAM,” referring to Payoneer’s total addressable market, Marshall said.

Payoneer’s technology moves money for businesses in one country working with those in other countries and handles the regulatory and currency issues that come with international transactions. While many payments startups rely on the existing credit card infrastructure, Payoneer has built its own connectors directly into banks, allowing recipients to get money deposited in their accounts and avoiding the transaction fees that come with plastic.

Payoneer’s technology allows small- and medium-sized companies to pay and manage invoices over the internet rather than using checks and paper. Inc., Google, Airbnb Inc. and Getty Images use Payoneer to pay en mass the businesses, proprietors and freelancers using their platforms. About half of Payoneer’s revenue comes from bulk payout.

When a consumer buys products on Amazon’s marketplace from independent merchants or retailers, the e-commerce giant receives the payment. Using Payoneer’s software, Amazon can then at once send the sellers the money they’re due in their local currency. In any given month, Amazon pays merchants from more than 100 countries through Payoneer, Galit said. This is an important part of Amazon’s e-commerce business, with marketplace sales making up about half of all orders.

Many other payments tech companies that offer cross-border services focus on business-to- consumer or consumer to-consumer transactions. Most of PayPal Holdings Inc.’s revenue comes from helping merchants manage sales payments, and the company has prioritized growing its peer-to-peer operations. Payments startup Stripe has focused on serving the business-to-consumer market, providing easy-to-use payments processing services.

A portion of the cash Payoneer raised in the most recent round was used to buy some shares of previous investors to help them get liquidity, Marshall said. Payoneer booked more than $100 million in revenue in 2015 and declined to discuss valuation. Research firm Pitchbook Inc. estimates Payoneer is valued at about $880 million after the most recent funding.

Payoneer raised private capital to take advantage of a flush investment environment and because it’s not yet ready to go public, said Galit, who worked at Mastercard Inc. during its initial public offering.

“We want to make sure we’re in control of our own destiny,” he said. “If we go public, it’ll be because it’s the right step for the company, not because we need capital.”

— With assistance by Spencer Soper

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