Fintech firm Circle runs up $18m loss as staff costs rise

Circle, a Dublin-headquartered former bitcoin start-up that has shifted focus towards social payments, expects to be cashflow positive this year after recording a $18.2 million (€15.5m) pretax loss in 2016.

Newly filed accounts for Circle Internet Financial Limited show losses before tax rose from $4.9 million to $18.2 million in 2016 as turnover surged from $1.3 million to $4 million.

The prextax loss, which is largely related to a big jump in staff and product development costs, coincided with the company rolling out its product in a number of countries across Europe as it seeks to become the default platform globally for sharing money digitally.

Circle was established by Jeremy Allaire, who previously founded online video platform Brightcove, which went public in 2012.

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The company’s platform, which handled more than $1 billion in transactions last year, enable users to easily make domestic and cross-border payments using blockchain, the technology that underpins bitcoin. The company claims that sending funds via its platform is as easy as sharing a photograph, text message or email.

The start-up does not charge fees or foreign exchange mark-ups on local or cross-border payments sent from Circle. However, it aims to make money from additional services, many of which have yet to be introduced.

“We have seen significant market traction over the past year as we have expanded. As such, large investments have been made in human resources and product development to increase the functionalities of Circle Pay and bring the product to different markets – for example, in 2016, Circle’s HQ in Ireland almost tripled its workforce,” the company said in a statement.

“These substantial investments result in expected operating losses in the financial statements but are in line with the company’s progression, upscaling and business strategy,” it added.

Circle, which last year raised an additional $60.5 million from investors to fund its expansion, set up its international headquarters in Ireland in July 2014.

The digital currency firm has secured $136 million in venture capital funding since it was established with backers that include Goldman Sachs, Accel Partners and Pantera Capital.

Earlier this year, the company, which employs 120 people in total, announced plans to increase staff in Ireland again. The move comes after it recorded more than 1,000 per cent-year-on-year growth in customer numbers.

Compensation expenses for Circle almost doubled in 2016, rising by $7.3 million to $14 million, primarily due to additional staff costs. Professional service fees jumped from $1.6 million to $3 million for the same period.

Circle had total assets of $109.9 million and $137.8 million of total liabilities. Total assets include liquidity of $80.3 million in cash at hand and investments.