Monzo has raised £113m of fresh funds, doubling the British digital bank’s valuation since its last fundraising round eight months ago to just over £2bn and showing investors are still keen to back upstart financial technology companies.
The investment has been led by Y Combinator Continuity, part of the eponymous Silicon Valley start-up accelerator that helped to launch Dropbox and Airbnb, alongside Monzo’s existing backers including Accel, Orange and Stripe.
Monzo said it would use the cash to support its growth in the US, where it launched earlier this month, and to develop new products to move it closer to sustainability.
The app-based bank has proven adept at attracting users — it is on track to sign up 250,000 new customers this month. Head of marketing Tristan Thomas said the early response to its US opening had been “incredible” — thousands of people have signed up to its US waiting list.
Having launched in 2015 by offering a pre-paid debit card managed through a mobile app, Monzo secured a full banking licence and started to offer current accounts in 2017. Perks such as cheap foreign exchange have helped it to attract more than 2m customers, but also contributed to rising losses.
The company made a pre-tax loss of £33.1m in the 12 months to February 2018, the most recent year for which data are available.
It has tried to eschew traditional banks’ focus on lending at scale in favour of building a “marketplace” model, taking fees from partner companies that offer their own products such as savings accounts or energy switching through Monzo’s app.
Mr Thomas said the latest investment provided a “confidence boost and reaffirmation of that plan”, and said gaining the support of YC was “a huge win for us, both in terms of validation but also in terms of expertise”.
Anu Hariharan, YC Continuity partner, said Monzo “is the first of its kind to redefine the modern banking experience for customers”, and was well on its way to “scaling revenue rapidly and sustainably”.
The bumper valuation, a month after fellow British fintech start-up TransferWise set a new European record of $3.5bn for the most valuable financial technology start-up, highlights how investors still have an appetite for fast-growing fintechs.
However, the decision to raise fresh funds so soon — and while being “already well-capitalised as a result of previous funding rounds” — points to a growing concern in some quarters that the benign investment environment may not last.
“It’s always better to raise money when you don’t need it versus when you need something within a month,” Mr Thomas said. “It’s impossible to predict the future so where we’re at now it feels like a good time and it’s nicer to be a master of your own destiny than be at the whims of the economy or anything else that could change.”
Mr Thomas said Monzo had not had any problems with its expansion proving more expensive or the business burning through cash faster than expected since its last fundraising in October.
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