Zopa Raises $ 300 Million at $ 1 Billion Valuation to Expand P2P Lending and Neobank Savings in UK – TechCrunch
Another big cash injection from a major investor is heading to a fintech outside the UK on the heels of strong growth. Today, Zopa – a neobank with some 500,000 users in the UK where it offers peer-to-peer loans, savings accounts, credit cards and other services – has raised $ 300 million, for a valuation we have confirmed at $ 1 billion (£ 750 million) post-currency.
Zopa describes this as a “pre-IPO” round, and from what we understand, this public offering – if things continue on the same trajectory as today – will come in the fourth quarter of 2022. The company is currently on a rate of £ 85. million ($ 116 million) and expects that to double to 170 million pounds ($ 233 million) by 2022. It is also on track to achieve profitability by the end of this year.
Unlike other neobanks, Zopa’s banking services do not focus on current accounts (checks) but on a savings account, which complements its loan and credit products. “This means that we are generating fewer customers in the ecosystem,” CEO Jaidev Janardana said in an interview today, but added that it is also a better business model in terms of margins and of returns. “They really use us and are willing to pay for the services.”
Softbank Vision Fund 2 led the round with participation from Chimera Capital as well, with existing investors IAG Silverstripe, Davidson Kempner Capital Management LP, NorthZone and Augmentum Fintech all participating. Zopa timed the news to coincide with a 2021 UK government-led World Investment Summit (GIS) this week, although it appears the company has been working on that cycle since this summer, first as a $ 100 million cycle; in the meantime, the size of the fundraiser has almost tripled.
This investor enthusiasm is part of a larger trend right now. Neobanks in Europe have been in the lead in the race for huge fintech fundraising this year, driven by strong customer growth and a collective consumer appetite for a new, easier-to-use banking approach (especially via mobile applications) and offering services that are more responsive to how younger generations of adult consumers manage and spend their money.
As of today, Berlin’s N26 raised $ 900 million on a valuation of $ 9 billion. Earlier this summer, Revolut of London raised $ 800 million on a valuation of $ 33 billion. Starling in March raised $ 376 million on a valuation of $ 1.9 billion. And even startups that are helping legacy banks modernize and upgrade are seeing part of the windfall: 10x in June raised $ 187 million to create new services for legacy banks.
Zopa is, relatively speaking, not a newcomer to the block, less neo than some of the other neobanks who are making waves right now.
It started in 2005 and claims to be the first company to develop the concept of P2P lending: when people ask to borrow money, the funds come not from Zopa’s deposits like they might be in a traditional bank, but a network of retail investors and institutional investors, who leverage Zopa using better algorithms and other technologies to ensure they lend to people who are more likely to repay what they borrow .
This was the bulk of the business until the company began, in 2018, to target new product horizons with the launch of a bank. It finally happened last year.
“I see this latest investment as validation of the successful launch of our banking service,” Janardana said. He added that while Zopa’s lending department is still the biggest part of the business, the banking industry is growing the most. (This loan company has processed some £ 6 billion in loans to date.)
The company plans to use the financing to continue to expand the products it offers to its customers, which will broaden the theme of providing tools to consumers to help them better build and manage their savings. “We have a lot of ambition when it comes to savings,” Janardana said. “We think it’s an important part of the ecosystem for borrowers to get into the habit of saving, so creating products that promote that” is important. It will also look for ways to help consumers pay off credit cards, rather than allowing the type of balance transfers between cards that are the norm today.
He said that while there will be more products aimed at “solopreneurs”, the enterprise market is not the one Zopa plans to support in the near future. But it will likely look for ways to partner with others in neobanks and fintechs where its lending, credit, and savings technology could be complementary.
The fact that most of the products Zopa offers today have been designed from scratch by the company – and not through APIs as some neobanks have done – means there is a higher degree flexibility in what Zopa can do next, either with partners or solo, and this is something that seems to have caught the attention of investors as well.
“We believe that Zopa’s rapidly growing market penetration reflects strong customer demand for adaptable financial services within a usable platform that can be customized to suit their specific needs,” said Sourav Sen, investor for SoftBank Investor Advisers, in a statement. “Zopa is emerging as a leading player in the UK’s nascent neo-banking industry and we are proud to partner with Jaidev and the team on this journey. “