Boku, the startup that partners with Apple in its rollout of carrier billing for the App Store, expects to raise £45 million ($60 million) on a post-money valuation of £125 million ($164 million) when it goes public on November 20, a week from today.
The company — which also works with Google, Microsoft, Facebook, Spotify and some 173 carriers to allow users to pay for digital goods like apps and subscriptions via their mobile bills — first announced its intention to float on the London Stock Exchange’s Alternative Investment Market, on November 3, without detailing the amount it wanted to raise. Since then, we have picked up more details from reliable sources, who also say that the IPO has been oversubscribed.
Of that £45 million, £30 million will be passed back to existing investors, with £15 million going to the company to help it invest in growth, TechCrunch understands, particularly in ramping up operations in India, as well as linking up more carriers with app stores. The company says it is currently Ebitda positive, with revenues in the last nine months totalling $16.7 million, with Q3 up 44 percent on the same period a year ago.
Those sums may sound relatively modest compared to what you might usually hear when a company debuts on the NYSE or Nasdaq in the U.S.. That is intentional: the aim of AIM is to help smaller startups go public that might fail to catch enough attention on the other side of the pond.
London’s AIM also happens to be where one of Boku’s competitors, Bango, is also listed.
Boku, which was founded in San Francisco in 2008, has raised roughly the same amount in VC funding as it will be valued heading into its IPO, pre-float, although different sources conflict on the total amount. According to CrunchBase, it has raised $87 million; PitchBook notes the total funding at $105 million. Boku’s CEO Jon Prideaux says the number is “around $90 million.” As of its last round last year, Boku was valued at $172 million, according to Funderbeam estimates.
Boku has had an impressive list of investors in its time as a startup, including Andreessen Horowitz, Benchmark, Index Ventures, Khosla, NEA and Telefonica. Sources tell us that most of the company’s existing investors plan to remain invested in the startup as it clears the decks to move on as a publicly-traded company.
“There comes a time in every company’s cap table where successive private rounds lead to more complication and it is just easier to get to a situation where all shares are changed to single class and the balance sheet becomes clean again,” said Prideaux in an interview.
The amount raised and the investors involved speak to early hope and interest in the general area of mobile payments, as have rumors from years back that both Apple and Google were apparently interested in acquiring Boku, or at the least inking a large partnership with it.
The decision to float comes at an interesting time for Boku and carrier billing.
Carrier billing as a concept — the idea of using your phone’s pre-pay credit and/or carrier contract as a way to pay for goods that you’re consuming on the phone, like apps or ringtones — has been around for years, and was originally developed as a way to help people pay for things more quickly and securely without having to enter their card details regularly over their phones.
In developed markets where people use credit cards, however, carrier billing has been somewhat sidelined, as its function was largely replaced by app store operators themselves operating wallet-style services, where they hold a user’s card details securely themselves.
But the same does not go for emerging markets. There app store operators have doubled down on carrier billing as a route to expanding their apps businesses in countries where credit /payment card penetration is not as high, and people are already using carrier billing services.
For app store operators, carriers and handset makers, developing economies represent the biggest growth opportunity in general because smartphone adoption has reached saturation point in more mature markets and people are buying new devices less often.
So carrier billing companies have jumped to seize the opportunity on the payments front. On the carrier end, Boku currently integrates with 173 operators in 51 countries, covering some 3.2 billion users in all, and on the content end, it has integrated with the likes of Facebook, Google, Microsoft, Spotify and Riot Games to enable users of these companies’ apps, who are also customers of their integrated carriers, to link up the two to pay for things using their phone accounts.
Perhaps most notably, Boku is the company that Apple — whose iPhone is known as one of the highest-grossing devices when it comes to generating revenues through apps — chose when it finally started to roll out carrier billing. (So maybe, as those rumors in 2010 implied, there was a wide-ranging partnership inked after all.)
Apple was relatively late to the market — with the first rollout, in Germany, starting only in 2015. But since then, Boku has worked with Apple to expand this to some 25 markets and 50 carriers, with an emphasis in developing economies.
Apple has indirectly credited expansions like this as part of what is fuelling its growth in its apps business today — which may have originally started out as a way of bringing more attractive services to its devices to fuel handset purchases but has developed into a business line in its own right.
Services — which includes paid apps and in-app purchases and other purchases for iTunes and other virtual goods consumed on the device (Apple doesn’t break out by categories) — generated $8.5 billion in the last quarter.
“On the App Store, which is very important to us, the number of paying accounts has grown a lot,” said Luca Maestri, Apple’s CFO, in the last earnings call. “It’s grown a lot because, as you said, the installed base has grown, but also because we have made a number of changes that have made it easier for our customers around the world to participate on the App Store and be able to transact on the App Store. We are accepting, for example, more forms of payment today than we were 12 months ago or even 6 months ago. So that’s been very important.”
And to be clear, Apple and Boku are not the only ones capitalising on a new interest in carrier billing. Just today Bango announced that it is expanding its Amazon carrier billing expansion in Japan, which now can also be used to pay for Prime subscriptions, representing a large jump on average transaction sizes.