Crypto derivatives, private banking and a points-based credit card to rival American Express.
The breakneck speed at which Revolut operates has expanded into new product verticals such as these helped win the UK fintech millions of users, billions in revenue and a towering $45bn valuation.
Industry watchers admire Revolut’s ability to accelerate its conveyor belt of product launches even in the heavily regulated industry of financial services. Alongside its hardworking culture, industry insiders credit Revolut’s new bets strategy as a pivotal force behind its entrepreneurial culture.
“For Revolut, the new bets strategy makes a ton of sense,” says HV Capital partner Barbod Namini, who’s invested in the fintech space for the past decade.
And other startups are taking notes. From AI-powered fintech Cleo to wealthtech platform Vega, entrepreneurs tell Sifted how they’ve been inspired by Revolut’s commitment to moonshot projects.
But how does Revolut build a “new bet”? And what can other companies learn from its experimental approach?
The new bets formula
Revolut’s rigorous work culture is well-documented. According to current employees who spoke with Sifted on the condition of anonymity, expectations are high with employees subject to ambitious quarterly KPIs that increase every quarter.
But a demanding environment alone isn’t enough to foster innovation at scale. Since former Credit Suisse employees Storonsky and Vlad Yatsenko founded Revolut in 2015, the company has accrued over 50m customers by offering everything from stocks and shares trading to pet insurance and phone plans.
Some of those initiatives started as new bets: independent teams of around ten people tasked with building products on the more experimental side of financial services. Each “bet” team is allocated roughly £2-3m, given an 18-month development timeline and headed up by employees with entrepreneurial backgrounds.
And while execution is prioritised, that doesn’t mean there aren’t any checks in place. Before initial work on a product is approved, a new bets committee, typically made up of former founders and entrepreneurial employees, will review the future of the product.
Bets that are successful in generating revenue are scaled up, while those that aren’t can be scaled down or completely abandoned. Teams are also in charge of both product development and profit and loss.
A Revolut spokesperson described the program as operating “on a venture capital-inspired model” which enables the company to “explore multiple promising initiatives with limited upfront investment, allowing us to rapidly test, iterate, and scale the most promising opportunities.”
And since 2021, Revolut has rolled out 27 “new bets” according to a pitch deck obtained by Sifted dated Q3 2024. Speaking on the 20VC podcast, Storonsky has said out of the 27, five have worked out great, five haven’t worked out at all and the remainder are “somewhere in the middle”. New leadership might be recruited to revive any of those underperforming new bets.
“To date, over 45 new bets have been approved,” a Revolut spokesperson told Sifted. “Not all of these have been launched yet and several products remain in development.”
As of Q1 2024, Revolut’s premium subscription plan, Revolut Ultra, generates the most revenue among the fintech’s new bets, according to the document. Some of the other notable revenue contributors include Revolut’s crypto withdrawal product, which allows the transfer of crypto to an external wallet for a fee, its API products and its money market funds.
Revolut declined to comment on the financial performance of individual products.
Rob Sargsian, a former Revolut employee who was part of the new bets division of the fintech’s crypto department in 2022, tells Sifted it’s common for some new bets not to work, saying they typically fall into three camps.
The first group is made up of experiments which are eventually deprioritised, such as the Ethereum-based blockchain wallet the fintech was working on at the time; the second consists of those which take longer to launch, such as Revolut X, the fintech’s crypto exchange for professional traders.
“I think it was clear it was a business but it just took more time and resources,” Sargsian says of the exchange.
The third category is filled with products which are easier to pull off and already have a clear product market fit, such as Revolut’s “on/off ramp”, a feature which allows you to exchange fiat currencies for crypto.
“If there’s a business you know you have resources, distribution and the opportunity to get to a significant market share within three years, it’s a good opportunity to go for it,” he says.
Other products that have gone through Revolut’s new bets framework include its proprietary loyalty system, RevPoints, eSims and Revolut’s branded ATMs.
Replicating the success
According to the investor document, Revolut’s new bets contributed a total of $34m in revenue in the first quarter of last year — and the fintech’s success with the model is convincing other fintechs to adopt similar strategies.
Vega, a London-based wealthtech building enterprise software for alternative asset managers, is among the earlier-stage startups co-opting the framework. Instead of hiring entrepreneurs, Vega focuses on recruiting “future founders”, talented graduates from top global universities, founder and CEO Alexis Augier tells Sifted.
“We call it Vega Labs,” Augier says. ”They’re very small, standalone autonomous teams that work with me and the leadership team to really drive new initiatives both on the business and product side so we can continuously innovate.”
AI fintech Cleo has also run its own new bets initiative since 2023, founder and CEO Barney Hussey-Yeo tells Sifted.
Like Revolut’s programme, multiple new ventures run simultaneously, focused on a variety of user problems. Some of the areas they’re currently working on include an AI Pro subscription model, a product in stablecoins and managing user recurring payments.
Hussey-Yeo says even though Revolut’s new bets program didn’t provide direct inspiration for Cleo’s initiative, he’s hired staff who aligned the initiatives. At the tail end of last year, Cleo hired Revolut’s former chief people officer Matt Maher who has since implemented a performance framework similar to Revolut’s new bets program.
Still, there are some limitations with the model. Both Sargsian and Hussey-Yeo believe it’s only suited towards mid-sized companies rather than earlier stage companies.
“I don’t really believe in small startups doing this,” says Sargsian, who left Revolut in 2022 to found stablecoin payments company Due. “You need to be focused when you’re small.”
Earlier-stage companies would also want to avoid the initiative morphing into an expensive experiment on new products that never see the light of day.
Vega’s Augier say they only focus on products relevant to its customer demographic — AI agents and co-investment syndication (a way of selling down equity post-close), for instance, are two of the products that have gone through the framework.
Maintaining pace
The opportunity offered by Revolut’s new bets scheme wasn’t enough to keep Sargsian at the company, as there’s a threshold for what you can build at such a large company, he tells Sifted.
“New bets need to come from existing products and solutions or be something already in the market that you know users would love,” he says.
It remains an open question as to whether Revolut can maintain the pace of innovation as it scales and seeks licences globally, says HV’s Namini.
As a result, Revolut’s new product bets might look different in every country they operate in, as they’d have to ensure it aligns with local regulatory requirements.
“What will obviously become harder is if you’re a fully licensed bank in all these different geographies, product testing becomes very difficult — each country might have its own restrictions,” he says.
That could create bottlenecks as Revolut rolls out as many products as it can to capture 100m customers. The fintech’s swift approach to product development is something that’s made it attractive to investors.
In the pitch deck, for instance, Revolut promised potential investors that its “growth will be augmented by [its] ability to launch and scale new initiatives” as part of its new bets strategy. A Revolut spokesperson told Sifted it sees the internal program as “a critical driver of [its] long-term growth”.
Anything that could threaten this proposition is likely to impede its ability to raise funding. Revolut is reportedly in talks to raise $1bn from investors at a valuation of $65bn, according to reports last month.
HV’s Namini says Revolut’s new bets model shows far more promise than other scaleups and he’s confident it can scale as the company grows to reach 100m users, citing the company’s track record so far.
“It’s not unheard of for scaleups to start implementing concepts like this to try new things,” he says. “But Revolut is doing it in a very systematic, data-driven way which most scaleups haven’t been able to do at a similar level of quality.”
Read the orginal article: https://sifted.eu/articles/revolut-new-bets/
