A digital bank that raised $110 million from investors — including celebrities Leonardo DiCaprio and Orlando Bloom — is suddenly struggling to find additional funding, CNBC reported on Thursday (Nov. 21).
Los Angeles challenger bank Aspiration was launched with great fanfare in 2015 by Co-Founder Andrei Cherny, a former speechwriter for President Bill Clinton. The current funding dilemma could point to a growing climate of startup fear by investors following the WeWork fiasco and disappointing Uber initial public offering (IPO).
The neo bank hung its hat on social responsibility and fairness, garnering positive press coverage and rapid growth. It let its 1.5 million customers decide how much to pay for services and advertised “fossil-fuel-free deposits,” giving 10 percent of earnings to charities.
Cherny told Reuters in April he was looking for a Series C funding round “larger than anything we’ve done before.” An anonymous source reportedly told the news outlet that Aspiration wanted at least $200 million and a $1 billion-plus valuation.
Sources told CNBC that so far, the startup cannot get enough investors on board for a new round of funding. The company was forced to lay off 15 percent of its workforce and “has been withholding some payments to vendors since at least the summer,” the sources said.
“This is a company that would’ve gotten funded a year ago,” said a FinTech CEO told CNBC, requesting anonymity. “What you’re seeing is VCs becoming more discerning about the outcomes on latter-stage rounds. If you’re going to fund something at a $1 billion valuation, are you sure you can get a $3 billion valuation in an IPO?”
“More than 1.5 million Americans have signed up with Aspiration to start making the move to spending and saving with a conscience,” Cherny said in the statement to CNBC. “During the past year, Aspiration has seen phenomenal growth in customers and revenue. Anyone saying otherwise doesn’t know the facts.”
Last year, Cherny noted that while his firm serves all demographics, millennials tend to be its largest audience. The average Aspiration customer is 32, and by and large, the digital bank attracts people who have already migrated to digital banking — and almost never use tellers.