London FinTech unicorn Monzo is closing in on a new funding round as it faces a near 40 percent drop in valuation due to coronavirus pandemic economic fallout, according to a report in the Financial Times on Friday (May 15), citing sources.
If Monzo takes the funding deal, the digital banking startup would be valued at roughly £1.25 billion, a steep drop from its £2 billion valuation in June 2019, several sources with knowledge of the proceedings told FT.
The decline shines a light on the effects the COVID-19 crisis has had on money-losing tech startups as investors become more prudent. Key investors for this new funding include U.S. venture capital groups Accel, Y Combinator Continuity, Goodwater Capital, and the U.K.’s Passion Capital.
Monzo is planning to close funding between £70 and £80 million to help it navigate the rough economic climate. The new funding is expected to help the neobank move through the second half of 2021 with a solid financial footing and at a time when it is also anticipated to turn a profit.
A source involved with the talks told FT that the deal could close in 30 days, but the final numbers for funding or valuation are not confirmed.
Founded in 2015, the challenger bank was looking for new funding at the start of 2020 — but plans were sidelined as the coronavirus started traveling around the globe in March.
The challenger bank was launched by founders Gary Dolman, Jason Bates, Jonas Huckestein, Paul Rippon and Tom Blomfield. The bank has raised £324.7 million across 14 funding rounds.
German FinTech N26 left the U.K. in February, unable to beat local rivals like Monzo. Its valuation stayed steady at $3.5 billion when it raised $100 million in a Series D round, but that wasn’t the case for many tech startups that saw valuations drop because of the global crisis.
To save money amid the pandemic, Monzo CEO and co-founder Bloomfield is forgoing his salary for a year, while senior staffers are taking a 25 percent pay cut.