Taxi app

European Investment Bank-backed Bolt taxi app to compete with Uber

Markus Villig, CEO of Bolt

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Bolt, the European challenger to giant Uber, has secured 50 million euros ($56 million) in debt financing from the EU’s lending arm.

The European Investment Bank, or EIB, invested in Bolt through a subprime loan, which is used as an alternative to taking an equity stake in a start-up to avoid diluting the ownership of existing shareholders.

Bolt, based in Tallinn, Estonia, is one of many companies looking to reduce Uber’s dominance in the ride-sharing space. Founded in 2013, the company was initially called Taxify, but has since rebranded to offer more services like scooter sharing and food delivery. It currently has 30 million users in 150 cities in Europe and Africa.

The EIB’s strategic funding will help Bolt increase its research and development spending to make its services safer and more sustainable while maintaining operational efficiency, Bolt and the EIB said in a joint statement Thursday.

It also means investing in Bolt’s core line of business, ridesharing, as well as food delivery, which it added to its platform last year. Both services are essential to the company’s bid to take on Uber, its Silicon Valley competitor.

The battle between the two heated up recently after Uber was barred from operating in London by local transport regulators. The company is still operating in the UK capital as it is appealing the decision.

The specific type of financing that the EIB provides to Bolt is what is known as a “quasi-equity” loan facility. Depending on the lender, the financial return on these loans is calculated as a percentage of a company’s future revenue streams, thus avoiding equity dilution.

EIB Vice-President Alexander Stubb called Bolt “a good example of European excellence in technology and innovation”, while Bolt CEO Markus Villig said the loan “allows us move faster to serve many more people in Europe”.

One of a growing class of “unicorn” companies – private tech companies with a valuation of $1 billion or more – Bolt is also in talks with investors for a new funding round that would cement its unicorn status. Although he is looking for more money, Bolt’s Villig insists the company is in good financial shape. The company says it is now profitable in two-thirds of its global markets.