Automated foreign currency exchange operator OANDA has raised a staggering
$100 million in Series B funding, but the company said it plans only to put the
money in the bank.
“We’re profitable enough, we’re growing fast enough. We’re just going to put
(the money) on our balance sheet,” said OANDA president Michael Stumm.
But having the money on its balance sheet should allow OANDA to enter into
licensing deals with major financial institutions. An agreement with an unnamed
European bank is set to be announced Tuesday.
OANDA’s foreign currency exchange was launched in 2001 by Swiss
entrepreneurs Richard Olsen and Mr. Stumm. It allows retail investors to use
the Internet to speculate or invest in foreign currencies, a province of
financial investments previously reserved for institutional investors with
minimum trades of $2000. The minimum trade at OANDA is $1.00.
The company has since executed more than 270 million currency swaps and on
peak days it handles more than $10 billion in trades, according to Mr. Stumm.
OANDA’s latest funding was provided by late stage investor New Enterprise
Associates, as well as institutional investors Cascade Investment, Legg Mason
and T. Rowe Price. Series A investor Index Ventures also participated.
The foreign exchange market is bigger than both the Nasdaq and the NYSE
combined, said Danny Rimer, OANDA board member and partner at Geneva
and London
based Index Ventures. Between $1.5 trillion and $3 trillion is traded a day in
buying and selling currencies, he added, and unlike most markets it is truly
global and trades 24 hours, seven days a week 365 days a year.
But, he added, “the current system is incredibly inefficient,” with currency
buyers forced to agree to fixed rather than current rates and forced to pay
commissions. “There is no reason why trading currencies shouldn’t be as easy as
trading stocks,” he added
When Index led the A round two years ago, at $17 million it was the biggest
single investment the VC firm had made.
“There are half a dozen other foreign exchange trading providers out there
but we invested in these guys because we believe they are the most automated of
all of them with a quarter to a third of the employees of the others,” said Mr.
Rimer.