Monzo’s valuation plummets 40% to £1.25bn in latest fundraising

via FinTech Futures

Monzo is close to landing another round of funding. However, the challenger faces a 40% decrease in valuation from the £2 billion valuation it received after its last fundraising in June, the Financial Times reports.

With a new and reduced £1.25 billion valuation, the UK challenger bank is clearly feeling the economic pressure of the coronavirus crisis.

The new round of cash, which Sifted confirms is attracting new as well as existing investors, comes at a time when non-profitable fintechs like Monzo are being treated with more caution by venture capitalist concerned over their slowing growth during the worldwide lockdowns.

The challenger bank plans to raise a – yet to be confirmed – £70 million to £80 million round, securing its cash position into the second half of 2021 when it plans to be a lot closer to profitability.

The round is expected to close in the next two-to-four weeks according to Sifted, with at least half of the funds already committed.

The FT says the majority of new funding will be provided by existing investors, despite the fintech’s hopes pre-lockdown to attract more new investors – one speculated to be Japanese conglomerate SoftBank.

Monzo’s key existing backers include US venture capital groups Accel, Y Combinator Continuity, and Goodwater Capital, as well as UK-based Passion Capital.

Unlike Monzo, challenger bank N26 managed to maintain its $3.5 billion valuation in its latest $100 million Series D funding round this month.

“I’d say it’s a very good valuation,” N26’s co-founder and CEO Valentin Stalf told TechCrunch, highlighting its achievement in maintaining its original valuation, despite the economic downturn.

As European challenger banks raise more funds to stay afloat during the crisis, many have also slashed staff. Monzo fired 165 customer support staff when it shut its Las Vegas office in April, N26 fired 10% of its workforce in New York, and Revolut cut 60 employees worldwide.

The travel bans have meant these challengers are losing money on interchange fees. The tightening of margins has pushed Monzo’s CEO Tom Blomfield and Revolut’s CEO Nicholas Storonsky to forgo their pay for the year.

But despite the market conditions, these fintechs have pushed on with their growth strategies. Monzo went ahead with its US banking licence announcement this year, and Revolut is still vying for profitability before year end.