Farewell, WB21, we hardly knew ya

Singapore’s fintech firm WB21 Pte. has decided to move its European head office from London to Berlin, one of the first startups to quit the UK in favor of the German capital after Britain’s vote to leave the European Union.

“Brexit was decisive for us. We had initially planned to operate our European business out of London, but the decision means we lack legal certainty there,” said Chief Executive Michael Gastauer on Friday.

That’s the intro to a story the Wall Street Journal published last week about the first startups to abandon London after Brexit. The article goes on to say WB21 was launched “late last year” and that “as of mid-September, it counted 1 million customers and had sent cross-border payments totalling more than $5.2 billion”.

Newspapers can be a little sober, but thankfully here on FTAV we don’t have to be as restrained. So, wow! Talk about fast!

The most famous payments startup in Europe, Transferwise, a company backed by investors like Andreessen Horowitz, Peter Thiel’s Valar Ventures and Index Ventures, took four years to hit the $4.5bn mark. In about ten months, WB21 apparently gained a million customers and processed over $5bn in cross-border payments.

There’s growth, and then there’s growth. This. This Is Growth.

WB21 is the brainchild of Michael Gastauer, a German chap in his early 40s who resides in Monaco and who calls himself a “FinTech Entrepreneur, Investor [and] Philanthropist”.

The startup apparently provides banking services to customers in 180 different countries; it claims to have gross margins of 99 per cent on cross border payments; and “uses intense market focus to create local network effects, while fuelling word-of-mouth growth through targeting early adopting millennials”, according to a pitch document seen by FT Alphaville.

Among the company’s innovations is a “a fully automated” system for doing background checks on new customers in “real time”, with “unlimited scalability”.

It all sounds amazing, but also sort of odd at the same time.

For example, Gastauer claims to have previously run a payments company called Apax Group, which he said he sold to Malaysian banking group CIMB in 2008 for $480m. But CIMB’s 2008 annual report does not mention a $480m acquisition of a company called Apax. Perhaps it was too small to disclose, but the report does mention other acquisitions that were of a smaller size, like this one:

We completed our acquisition of an initial 42% of BankThai on 5 November 2008. A Mandatory General Offer was triggered and when completed on 6 January 2009, our stake in BankThai increased to 92% for a total investment of RM1.3 billion [$400m]. We invested a further RM506 million to recapitalise the bank in end March 2009.

There isn’t much trace of Apax online these days. There are a few press releases and the long defunct website is on the Internet Archive, but Gastauer’s LinkedIn profile links to an “experiential marketing company” called Apax Group, rather than a page for a payments business. He told us that’s “something I’m not aware of” and said the company was “dissolved” after the sale.

Companies House in the UK does list a company called Apax Global Payment & Technologies Limited, which counted WB21’s chief commercial officer Peter Arnold as a director. That company was founded in 2007 and wound up before filing accounts.

We have asked CIMB about the sale, and are waiting to hear back from them. We also asked Gastauer for more information about the transaction but haven’t received any yet.

Then there’s the question of licensing. WB21 has offices in the US, London, Zurich, Singapore and Hong Kong. The company’s pitch document claims it is “operating as Stored Value Facility (SVF) under supervision of Hong Kong Monetary Authority”. Gaustauer also told us “the Asian office in Singapore is where we are fully licensed and regulated by the central bank of Singapore”. A WB21 press release last month is a little more circumspect, noting it “received acceptance” to operate as a SVF in Singapore.

The register of SVFs in Hong Kong doesn’t include WB21. It doesn’t appear in the central bank of Singapore’s list of licensed financial institutions either. And the company’s own terms and conditions note that its operation in Singapore “does not require the approval of the Monetary Authority of Singapore” (the formal name for Singapore’s central bank).

Gastauer explained this by telling us he had decided not to apply for formal licensing in Hong Kong and instead relocated the business to Singapore “and that’s where we got the formal licensing from”.

In Singapore, businesses can operate as stored value facilities without a licence under certain conditions, like having less than $30m in total value stored. Gastauer said WB21 was operating under this system. “We are legally registered with MAS and MAS has approved the operations, so you can consider this a licence,” he said.

There are more oddities.

For example, WB21 calls itself a “digital bank”, but when you sign up for an account, you are asked to acknowledge in the terms and conditions that “WB21 is not a bank”:

You acknowledge that (i) WB21 is not a bank and the Service is a payment processing service rather than a banking service, and (ii) WB21 is not acting as a trustee, fiduciary or escrow with respect to your funds, but is acting only as an agent and custodian.

Then there’s the company’s ‘Media coverage’ page, which included a few references that either aren’t about WB21 or mislabel the publication:

wb21

The Financial Times entry, for example, links to a search for ‘cross border payments’ on FT.com; the Bloomberg citation links to a corporate information page not compiled by Bloomberg; and the apparent WSJ story about WB21’s seed round linked to a press release on a German website called ‘wallstreet:online’. (The page has now been updated, replacing the seed round press release with the WSJ’s actual coverage about WB21’s move to Berlin.)

Then you have the company’s valuation. Gastauer says he owns 75 per cent of WB21, with the remainder owned by staff and his co-founders Abygail DeSousa, Peter Arnold and Amith S Nair.

He says that he’s put €22m of his own money into the venture and that it hasn’t received any outside investment.

WB21’s purported $2.2bn valuation, after less than a year, is “the latest valuation we have discussed with JP Morgan,” according to Gastauer, who says the US bank is working on a private placement of the startup’s shares. JP Morgan declined to comment.

In any case, WB21 is now off to Berlin, where the WSJ reports Gaustauer is planning to apply for a German banking licence and invest €50m.

He’s also speaking at the payments conference Money 20/20 in Las Vegas next month.

If this Business Insider piece is anything to go by, you won’t want to miss him (emphasis as in the original):

Before our interview, saying I had nerves would be an understatement. Astonishingly, from the moment I sat down with Michael to the moment we said goodbye, I became completely comfortable with him. It was as if we had been friends for years and were just catching up.

We often see this in major politicians and actors. The ability to make anyone feel at ease with you is a skill that gives you a leg up, especially when you’re a powerful person who might make a lot of people nervous.

Two takeaways from Michael:

Ask questions. During our interview, I talked at length about my mediation, eating, and work habits. Without realizing it, I almost forgot who was being interviewed — Michael or myself.

Have relaxed body language. Whenever I was nervous, Michael was able to pick up on it and slouch a little, change to a less formal tone, or smile.

Related Link:
How This Mogul Sold A Company For $480 Million, Then Built A $2.2 Billion Dollar One Right After — Forbes

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