 |
"From the outset one of our most important goals was to democratize the forex market"
Richard Olsen, Oanda |
Unlike many of its rivals, Oanda rarely seeks publicity. Despite this, the company has secured a relatively solid reputation and, more important, a loyal client base, since it was founded in 1996. It has now also secured a hefty slice of fresh funding that Michael Stumm, its founder and joint chief executive, says will enable it to expand up and out of its retail client base.
Oanda has received a fresh investment of $100 million from a consortium of four venture capitalists led by California-based New Enterprise Associates. The other investors are Legg Mason, T Rowe Price and Cascade Investments, which is Microsoft founder Bill Gates’s private investment vehicle. They join Index Ventures, which led Oanda’s $17 million Series A funding in September 2005.
Oanda declined to reveal what percentage of the company it had sold off but industry sources suggest it was about 20%, suggesting that the company’s valuation is about $500 million. Oanda does not publish its financial results but it is recognized as a lean and efficient company. It is said to be very profitable and its global employee level is believed to have only recently gone over 100. Sources say the deal was not overly rich.
There is a lot of talk that Oanda is poised to announce another white-label deal (see ABN Amro enters UK retail market). However, according to Stumm, the funding will be used primarily to bolster the company’s balance sheet. "This investment is important to Oanda, not only as a vote of confidence in the way we do business, but because the additional capital solidifies our ability to serve corporate and institutional clients," he says.
Since its inception, Oanda has pioneered many innovations that are now taken for granted. It was an early adopter of programmed risk management, and it has consistently delivered narrow interbank spreads to its clients. This year it started to offer streaming prices on emerging market currencies, such as the Chinese renminbi, Indian rupees and Turkish lira, even before many of its large bank liquidity providers were doing so. Oanda also pays real-time interest on any positions that its clients take. Although this is regarded by many in the market as quirky, it has proved popular as it avoids any issues about the cost of rolling positions forward.
"From the outset one of our most important goals was to democratize the forex market," says Richard Olsen, Oanda’s other co-founder and chief executive. "We will use our new capital to continue that pursuit as we develop new products and services in this emerging marketplace."
As a result of the deal, Krishna Kolluri, a general partner at New Enterprise Associates, will join Oanda’s board. Kolluri said: "Oanda is leading its peers in a $3 trillion industry. The company owns the forex trading technology platform widely held as the most sophisticated in the industry, and is run by an aggressive team with great foresight, who are now prepared to escalate partnerships and develop new platforms for this burgeoning market. We believe Oanda has a great future and are excited to be part of it."