It's IPO Time for iZettle, Europe's Answer to Square

(Bloomberg) -- Swedish fintech company iZettle AB announced its intention to file for an initial public offering on the Nasdaq Stockholm stock exchange.

The company, which competes with Square Inc. and Canada’s Shopify Inc., is seeking to raise 2 billion kronor ($226.6 million) and in a statement Tuesday said it expected its IPO to be completed this year.

Carnegie Investment Bank AB and J.P. Morgan Securities Plc will act as joint global coordinators and bookrunners, with Barclays Bank Plc also assisting as bookrunner.

“The IPO will provide us with improved access to capital markets to facilitate our continued growth and help us strengthen our profile with merchants, key business partners and in the fierce competition for talent,” iZettle Chief Executive Officer and co-founder Jacob de Geer said in the statement.

IZettle’s share listing, which is expected to consist of the issuance of new and secondary shares, would come as regulators across Europe develop policies to drive technological innovation and digital development in financial services to spur competition with incumbent banks.

Bloomberg in December reported that the company had been open to a sale as an alternative to an IPO, in a so-called dual-track process, according to a person familiar with the company’s plans at the time. De Geer confirmed Tuesday this is not a strategy it will be taking.

No Dual Track

“We’re not pursuing a dual-track listing and we’re fully focused on the plan we announced today,” the CEO said Tuesday via email.

Founded in 2010 by De Geer and Magnus Nilsson, Stockholm-based iZettle began helping small businesses accept credit card payments using a gadget that attached to a smartphone, similar to that offered by Square, and has since expanded into software and financing services to support small business.

Armed with 40 million euros ($47.7 million) in recent funding, iZettle now offers tools to manage inventory, product data and analytics for users to improve their businesses as well as lending to help them grow in physical stores and online. It recently launched an e-commerce platform for merchants in Sweden and the U.K. The company operates in 12 markets in Europe and Latin America and it was reportedly valued at about $500 million in January 2017.

“One of the themes that initially led us to invest in iZettle in the first place is the concept of the stack of software and services that small businesses now need in order to compete with Amazon,” said Ben Holmes, a partner at Index Ventures, an investor in iZettle since 2011.

One-Stop Shop

It’s this one-stop-shop approach that e-commerce competitors globally have been developing too. Holmes likened the strategy to that of Squarespace Inc., another Index investment, which started off as an easy-to-use website-making platform for individuals and small businesses, but is now focused on helping customers sell products through their websites.

Square has maneuvered similarly, now offering invoicing, appointment-booking, third-party e-commerce integration and peer-to-peer cash transfers. It puts Square, Squarespace and iZettle in the same broad basket as Shopify, Etsy Inc., and even PayPal Holdings Inc.

“Starting with enabling small businesses to accept payments in Sweden to a complete small business offering in over 10 countries, iZettle has just scratched the surface of this opportunity,” said Johan Brenner, general partner at Creandum, a venture capital fund that backs iZettle and also was an early investor in music streamer Spotify Technology SA.

But while Shopify and Square are the go-to names in the U.S., for Europe it’s a different story.

“IZettle is definitely the market leader,” said Phil Sealy, principal analyst at ABI Research. “They’re quite often referred to as ’the Square of Europe’ and they’ve done a really good job of infiltrating that small and medium-sized business market for card-reader capabilities.”

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