Monzo bounces back from pandemic jitters as digital bank raises £200 million

After announcing losses that had doubled to £114 million last summer in the midst of significant uncertainty around the Covid-19 pandemic and a Bank of England hike in capital requirements, digital bank Monzo warned of “significant doubt” about its ability to continue “as a going concern”. Seven months later and the fintech seems to be back on track, having announced the successful closure of a £75 million fundraising round.

The money, which will help fund a new push by the bank into premium and business accounts, came from some high-profile investors including Yahoo co-founder Jerry Yang through his venture fund and Nikesh Arora, the former SoftBank president, who invested in a personal capacity. Other reported participants in the round were AME Cloud Ventures and San Francisco-based investment firms Octahedron and Vetamer Capital.

Together with £65 million raised last June and another £60 million in November, Monzo has now brought in a total of £200 million in new funds over just eight months. As the fintech bank itself said in its statement to announce the new funding, the backing it has received in recent months “demonstrates strong confidence in Monzo and our future plans.”

All three rounds valued Monzo at £1.2 billion. That does represent a loss for earlier investors and a down round that values the bank at 40% less than during its most recent previous raise. However, against the backdrop of recent worries around the bank’s ongoing viability as a stand-alone concern, it probably counts as a success.

The notably presence of major investors from the USA might also be taken as an indication Silicon Valley recognises the early progress made by UK-based digital banks. Monzo expanded into the USA in the summer of 2019 and Revolut is also present in the world’s largest economy.

If UK fintechs are able to show strong progress growing market share in North America, it could open the doors to much higher valuations and sizeable funding rounds in future. Early Monzo investors like Eileen Burbridge’s Passion Capital, the digital bank’s first major venture capital backer, will be hoping that proves to be the case.

Gaining a serious foothold in the USA would be expected to see Monzo’s valuation rocket. But any early progress would have to be quickly consolidated with the raise of a considerable war chest to fund marketing and capital requirements.

Monzo currently has five million account holders, 130,000 of which pay for its £5-a-month Plus and £15-a-month Premium accounts. 70,000 business accounts have been opened since they were launched a year ago. The bank is known for its noticeable “hot coral” bank card design.

Monzo’s founder Tom Blomfield stepped down as chief executive last May. He attributed the decision to stress and the realisation he loved building digital businesses like Monzo rather than the day-to-day responsibilities of a chief executive at an established company. His replacement was TS Anile, a former Visa executive who had only joined in February to run Monzo’s American business. His choice could be considered a strong indicator of how important the USA is to the digital bank’s future plans.