Zopa Achieves Unicorn Status As SoftBank Leads $ 300 Million Funding Round

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UK digital bank Zopa is now a billion dollar company, earning the coveted unicorn title after raising $ 300 million from leading Japanese tech investor SoftBank.

The world’s oldest peer-to-peer lender said it has secured equity in Vision 2 Fund from SoftBank, with participation from Chimera Capital and existing investors IAG Silverstripe, Davidson Kempner, NorthZone and Augmentum Fintech.

The October 19 investment places Zopa in the upper echelons of UK fintechs as it prepares to list its operations in London, with a target to debut in the fourth quarter of 2022.

It comes as the UK government leads a charm offensive to ensure its local fintech firms choose London’s public markets over Wall Street, holding meetings with entrepreneurs and executives to convince them to consider the city instead. than New York and other destinations such as Amsterdam in the aftermath of Brexit.

READ Brexit skills shortage crisis risks London handing over financial crown to rivals

Zopa’s funding is expected to be announced on October 19 at an investor event hosted by Prime Minister Boris Johnson and reportedly attended by members of the royal family, aimed at attracting billions of foreign investment to Britain.

The latest injection of funding took Zopa to a valuation of $ 1 billion, with the company expected to report monthly profit within the next 10 weeks, a person familiar with the matter said. Financial news.

Zopa chief executive Jaidev Janardana said the round would likely be the company’s last before it was made public, with capital to be invested to meet demands to increase its balance sheet rather than costs. commercial.

“I want to show a consistent track record of profitability before I go public,” Janardana said. FN in an interview last week. “What this capital does is it allows us to speed up our trajectory – but it also means that we can choose our time to enter, because that gives us a lot more lead.”

Zopa started life in 2005 as a peer-to-peer lender, inviting consumers to invest their money in the form of business loans. The company has loaned £ 6bn to date and was granted a banking license last year, expanding into credit cards and fixed-term savings accounts.

The UK’s leading digital banks are chasing profits as they mature, after years of operating losses funded by free-flowing venture capital cash. Some, like Starling Bank, have targeted profitability as a priority, while others, like Revolut, have said profitability is about choice over growth.

READ FinTech Pays “Heavy Price” for Failed Profit, Says UK Startup Boss

Zopa reported an annual loss of £ 41million in the year through December, up from £ 15million in 2019, as rising costs associated with becoming a bank forced her to seek additional liquidity from investors.

“A lot of fintechs say ‘yes I can be profitable’ and then you look at the economics of the unit. It’s very hard to see how you would make any money, ”Janardana said. “These are the things that I think are more questionable.”

Zopa said its plan to achieve profitability within 10 weeks would make it one of the fastest digital banks in the UK, 18 months after acquiring its banking license.

Like his fintech counterparts Monzo and Revolut, he said Zopa is considering an expansion to buy now, pay funding for larger items later in the next six to eight months.

Meanwhile, the finance landscape for fintech companies is expected to change in the coming months, an Oct. 18 report warned, as venture and private equity firms focus on getting to market. mature societies.

A war on talent, rising interest rates and delayed public quotations are forcing large companies to depend longer on private liquidity, said report author Finch Capital, causing a funding shortage for young innovators in 2022.

READ Fintech frenzy ends as war for talent and slow IPOs in Europe hurt startups

Janardana said the cycle of easily-flowing fintech companies “is probably coming to an end.”

“We’re at a point where this funding will be more available to companies that can show they can actually make a profit – compared to companies historically, where I think the funding has been made available when [their models] are like “we’ll attract all of our customers and figure out how we monetize them down the road,” he said.

To contact the author of this story with comments or news, send an email Emilie Nicolle


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