Flywire, a Boston-based fintech company that helps universities, hospitals and businesses accept foreign-currency payments, has raised $100 million in new funding. Temasek, a Singapore investment company with a $235 billion portfolio, led the Series D round. Bain Capital Ventures and Fidelity’s F-Prime Capital also contributed.
The 300-person company expects to reach annualized revenue of $100 million later this year, and it closed the new investment round at a significantly higher valuation than its 2015 level of about $100 million. The new valuation falls short of $1 billion, but Flywire declined to disclose further details.
Founded in 2009 by Spanish entrepreneur Iker Marcaide, Flywire (formerly called peerTransfer) started by solving a problem that international college students often faced. Let’s say a Chinese student attending Boston University needed to pay her $50,000 annual tuition. She’d have to pay in dollars and likely use a bank transfer wire, incurring exorbitant foreign-exchange-rate fees of 3% to 5%. And the transaction might not settle for up to 10 days.
Flywire built software that connects banks to universities. Now the Chinese student can pay her tuition in yuan and can use payment methods she’s familiar with, like Alipay or WeChat. Likewise, a U.S. student at a foreign school can use a Visa card or PayPal to pay tuition in dollars. “Flywire becomes the pay button,” Massaro says.
It facilitates lower foreign exchange rates for students of about 1% to 2%, because it processes high volumes—it will process $5 billion this year—and it owns the end-to-end process, cutting out some middlemen. On the university-side, instead of receiving thousands of payments like they used to, schools receive daily settlements that are aggregated. They don’t have to hold various foreign currencies, and they receive more transparency into and customer support for the payments.
Mike Massaro joined Flywire as vice president of business development in 2013, after a six-year stint in sales at a big data analytics company. He became Flywire’s CEO in 2013, when the company had 45 employees and about $2 million in revenue. “He is a really fiduciary guy,” says Flywire investor and Bain Capital Ventures managing director Matt Harris. “He’s very thoughtful, genuine and careful. You can’t have a radically transgressive CEO when you’re moving a billion dollars out of China.”
Flywire built early traction with schools like Boston University, Carnegie Mellon and Cornell. In the U.S., it eventually reached a 65% market share among software providers that handle cross-border payments, Massaro says. It also expanded beyond U.S. universities to work with global schools. Today, academic clients make up 80% of Flywire’s revenue.
Two years ago, Flywire started pursuing clients in health care. It was low-hanging fruit, because it involved a similar transaction to a tuition payment and some of the same clients. For instance, UCLA and the University of Miami run hospitals.
How big is the opportunity in health care? “Probably incrementally smaller than education,” Harris says. “The international patient phenomena in terms of numbers is smaller.” The bigger opportunity is in recruiting businesses as clients, a universe Flywire started pursuing last year, resulting in Segway and Hilton becoming clients.
The healthcare and business segments remain a small portion of Flywire’s sales at about 20%. “That’s the downside of our ongoing growth in education—we continue to look like an education company,” Harris says. “In our business, you can build an interesting vertical company that focuses on one industry, but the truly disruptive, scalable businesses are horizontal in nature.”
The other risk is that, if education continues to dominate its business, the company will be tempted to invest most of its resources there, which could limit growth in other areas. “It would have been easy for Amazon to say, ‘We’re going to become a huge global retailer,’ instead of building Amazon Web Services, which was losing tons of money, was expensive and a different business. It took a lot of discipline and courage to do both.”
With its newly secured $100 million, Flywire is planning to invest in areas like geographic expansion, cross-selling current educational clients to manage domestic payments and advancing their technology.