Thiel Brings Money and Some Credibility to Europe

LONDON - Peter Thiel is coming to Europe.

Valar Ventures, Mr. Thiel’s venture fund, led a $6 million investment round for TransferWise, a London-based financial services start-up.

The deal marks the first foray for the co-founder of PayPal into Europe, where start-up clusters in cities like London and Berlin are starting to make waves.

The British capital has become the center for a growing number of financial technology companies - dubbed FinTech - because of the city’s deep-rooted connections to the global financial industry and a large talent pool of international programmers, designers and financial professionals.

TransferWise, which was founded in 2011 by Taavet Hinrikus, a 31-year-old Estonian who was Skype’ s first employee, allows people to make international money transfers between currencies at a fraction of the cost compared with fees charged by big banks.

Mr. Hinrikus and his co-founder, Kristo Kaarmann, a former management consultant, started the company after growing frustrated after losing around 5 percent of their salaries to bank charges when they moved money from Estonia to Britain.

The London start-up has now helped its customers to make foreign exchange transfers totaling a combined $160 million, and there are plans to almost double the number of currencies it supports to 20, including the Russian ruble and the Hong Kong dollar. Including the new investment round, the company has raised a total of $7.35 million.

“TransferWise demonstrates true innovation in banking by enabling its users to retain their wealth across borders,” Mr. Thiel said in a statement on Tuesday.

By attracting Mr. Thiel, an early backer of Facebook, TransferWise has helped to give London’s burgeoning, but still relatively small, start-up community gain some credibility, Mr. Hinrikus said.

London is eager to win recognition for its start-up community.
The British government has focused on entrepreneurship as a means to jump-start the country’s lackluster economy and has offered both investment and support to help young companies gain a foothold in sectors like fashion, financial service, and technology.

Internet giants like Google also have set up campuses in trendy East London, where old warehouses have been converted into design studios and twentysomething hipsters work on their new business ideas in low-lit coffee houses.

Mr. Thiel’s investment “is a great achievement for the whole London ecosystem,” Mr. Hinrikus said in an interview with DealBook. “It shows that London remains the Europe start-up leader.”