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Telegram is a cloud-based mobile and desktop messaging app with a focus on privacy, security, and speed. In a recent development, the company has announced that it has raised $1B (approx €849M) in debt financing by selling bonds “from some of the largest and most knowledgeable investors from all over the world,” says Founder, Pavel Durov.
The Russia connection
The round includes a combined $150M funding from Mubadala Investment Company and Abu Dhabi Catalyst Partners (part-owned by Abu Dhabi state fund), by selling 5-year pre-IPO convertible bonds, with Abu Dhabi Catalyst Partners investing a further US$75 million.
“We are honoured by the US$150 million investment into Telegram from Mubadala and Abu Dubai Catalyst Partners. We look forward to developing this strategic partnership to continue our growth in the MENA region and globally,” says Pavel Durov, Founder and CEO of Telegram.
Additionally, state-controlled Russian Direct Investment Fund (RDIF) has also been reported to have invested in Telegram.
Meanwhile, Mike Ravdonikas, Telegram spokesperson, mentioned that RDIF hadn’t participated in the original sale, and the state-controlled fund “appears to have bought a small quantity of Telegram bonds on the secondary market” in a separate deal over which the company had no control.
“Given that the rights of the bondholders are limited and bonds do not give the power to influence the values or the strategy of the company, we generally do not consider transactions in Telegram bonds on the secondary market an issue,” he said.
“RDIF is not in the list of investors we sold bonds to. We wouldn’t be open to any transaction with this fund. The funds that did invest, including Mubadala, confirmed to us that RDIF was not among their LPs,” Ravdonikas told Bloomberg in an email.
Back in 2018, the Russian regulators attempted to block the service provided by Telegraph when it refused to give up encryption keys to read messages. For the past two years, the company prevented the efforts to enforce the ban, including by changing IP-addresses to evade blocking, however, Russia ultimately gave up last June.
Use of the capital
Durov mentioned on his official Telegram account that the company has reached 500 million active users, and needs further support for such growth. “After all, more users mean more expenses for traffic and servers. A project of our size needs at least a few hundred million dollars per year to keep going,” says Durov.
Hence, the raised capital will be used to help roll out expansion plans as well as drive the company’s monetisation strategy, which includes premium plans for business users.
A brief about Telegram and its founders
Telegram is a cloud-based instant messaging (IM) software and application service. The service also provides end-to-end encrypted voice and video calls and optional end-to-end encrypted “secret” chats.
According to Telegram’s privacy policy, “all data is stored heavily encrypted and the encryption keys in each case are stored in several other data centers in different jurisdictions. This way local engineers or physical intruders cannot get access to users’ data.”
In January 2021, Telegram surpassed 500 million monthly active users – it was the most downloaded app worldwide that month.
“The end goal for Telegram is to become a financially sustainable project that can serve humanity for decades (or centuries) to come. Today’s news is another step towards that goal,” Pavel Durov said in a statement on his Telegram channel.
The company was founded in 2013 by brothers Nikolai and Pavel Durov. The pair previously founded the Russian social network Vkontakte – which they left in 2014 after it was taken over by Russia’s Mail.Ru Group Limited in 2014.
Headquartered in Berlin, Germany, between 2014 and early 2015, Telegram had to move to different jurisdictions after failing to obtain residence permits for everyone on their team. After Russia, Pavel Durov is said to be moving from country to country with a small group of computer programmers consisting of 15 core members. The company is currently based in Dubai.
According to the Moscow Times, the round follows after Pavel Durov rejected a $1.7B Telegram blockchain project last year. The US Securities and Exchange Commission (SEC) said that the company had raised funds via an illegal initial coin offering (ICO). However, Telegram reached a settlement with SEC and agreed to return $1.22B as “termination amounts” in Gram purchase agreements, and pay another $18.5M as a penalty to SEC.
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