After raising $300 million in a round led by SoftBank in 2021, UK neobank Zopa made a deal to put more money in the treasury. The company – which offers consumer credit services, credit cards and savings accounts and has some 850,000 customers – has raised £75 million (about $93 million), an equity investment that plans to use both to build new financial products, to bring in more customers and make acquisitions.
Interestingly, Zopa does not disclose a lead investor, but CEO Jaidev Janardana confirmed to us in an interview that it was an insider round of existing investors; that those involved included investment companies Uprising and Augmentum; and that was SoftBank not in this round, but that it remains an investor and board member. The company also said in a statement that the funding “cements and significantly improves” its unicorn status — the $300 million round in 2021 was made at a $1 billion valuation — but it does not provide an actual valuation at this latest round.
There are a few signs that this round took some time to close. There were rumors about the fundraising in September last yearand at the time Zopa was said to be looking to raise about $100 million.
Those reports also noted that this could be the last fundraiser for the company before going public, though Janardana declined to comment on timelines given the current state of the public markets and the fact that Zopa, in his words, , has no pressure to do. so at this point.
This latest injection of funding comes at a key moment in the UK economy.
The IMF released a report earlier this week outlining the predicted that the UK would be the only major economy to shrink in 2023. But despite that questionable distinction, and amid a lingering threat of recession, challenger banks seem to continue to gain traction with consumers and businesses seeking better rates and faster services than those offered by more traditional banks.
The company says it passed £3bn in deposits in its savings business this month, with £2bn in its lending business (with a total of £8bn in approved loans) and around 400,000 credit cards in circulation. It currently has some 850,000 customers across the different tranches of its business. Sales figures are not disclosed, but the company says they have doubled in the past year. It is also on track to be profitable for the full year in 2023, the first time since its inception 17 years ago.
Still, market growth for loans and financial services has certainly slowed, Janardana said, with 2022 decidedly back to “pre-pandemic levels” of activity.
“The demand for credit is down… and overall, when I look at the industry demand for loans, there has only been 5-10% growth over the last year,” he said, citing a large decline in discretionary spending as one of the main reasons for this. “But this hasn’t affected us as much as it has affected some others.” LendingClub, another major lending company in the country, cut about 14% of the workforce in January.
“Customers are switching to digital and looking for more options rather than going to a bank,” he continued. “That better-informed consumer behavior [means] our volumes continue to grow.”
Acquisitions and new products will aim to capitalize on that, he said, while helping the company diversify its business. Areas Zopa would like to explore include building products aimed at businesses, as well as expanding into payments in addition to its credit, loan and savings products.
The current market is certainly seeing a lot of pressure on valuations and the sea of fintech startups that have been funded over the years are also finding it harder to raise more money, giving Zopa (and others) a chance to raise those assets. peck. Janardana noted that the £75m should not be seen as the cap on those valuations as it is likely to scrap deals that will be combinations of cash and shares, and that it still has a lot of money in the bank from previous rounds. He added that investors are also willing to bet more on the most interesting deals and that Zopa has yet to explore whether debt can be incurred.
