London is the biggest market in the world for FX trading. In 2012, the UK’s daily FX turnover averaged nearly $2 trillion, according to data from TheCityUK.
Alex Hunn has a background in the industry. A former Credit Suisse First Boston and Deutsche Bank vice president and director respectively, in 2011, he started building a company that would make the process of exchanging currency more transparent and efficient, and cheaper for businesses.
Last November, his peer-to-peer currency exchange company freemarketFX raised its latest financing round of £575,000 to finance the launch of its online platform and start acquiring clients. With its campaign going live today, the firm is now looking to raise £500,000 in conjunction with crowdfunding platform VentureFounders. The latest round will help to expand the team and boost its marketing in order to scale faster. I spoke to Hunn to find out more.
How does freemarketFX work?
We have created a market where both companies and individuals can directly match their currency requirements with their peers for a fixed commission charge of 0.2 per cent – a rate much lower than traditional FX charges. Simply put, our new model offers significant savings (up to 75 per cent) on currency exchange.
Exchanging one currency for another is an expensive (yet often unavoidable) requirement in business. FX is regarded as a complex product and the confusion surrounding it suits the current market incumbents perfectly.
As they say, knowledge is power, which makes FX a profitable space in which to operate. FX is, however, not a market that customers are generally happy with. When it comes to the service they receive, many customers are unsatisfied with the cost, and a lack of transparency and efficiency from their providers.
Why did you decide to use crowdfunding?
Using crowdfunding is complementary solution whereby our efforts in independently finding and getting buy-in from relevant investors are enhanced by a market professional. Fintech companies require a significant cash injection to scale quickly, so growth capital investment is essential to our business. Growing a competitive fintech business organically isn’t really an option in the current market, which makes securing meaningful capital an intensive process. More often than not, it is beyond the resources and/or networks of most early stage businesses.
The ability to get in front of so many investors through VentureFounders means that we are able to get the right investment from the right sources. Some of our customers have expressed investment interest, but due to personal timing or a minimum investment threshold being in place, they have been unable to commit funds. As the crowdfunding market matures, the number of quality independent investors using platforms to find their next opportunity is also increasing, which is great news for us.
Via a platform, people can be involved with the company from both a customer and investor perspective, and really feel part of our community – and growth story. It was always our intention that, if we could do some form of capital raise via crowdfunding, we would – and I am delighted that we are now in that position.
What’s potential investor response been like so far?
We recently gave a presentation at a VentureFounders event, in front of some 60-plus investors, which was extremely well received. Afterwards, there was an open forum to allow for informal conversations between would-be investors and the management teams of each company. We had direct involvement with a number of potential investors, with some expressing investment interest there and then.
What has it been like working with a platform?
Our experience has been very positive. VentureFounders is selective with the potential opportunities it is prepared to promote to its investor community. Many in its investor base come from financial backgrounds, so it felt like freemarketFX is a business that will quickly resonate. This gave us an immediate sense of confidence that we would raise meaningful capital on the platform.
Does turning to a fellow fintech company to raise capital feel like a natural alignment in some respects?
Yes. In many respects, freemarketFX and VentureFounders have similar business models. We aggregate currency and VentureFounders aggregate investors – both of us drive efficiency and scale via an online platform, which benefits all parties.