British Neobank Zopa Raises $300M and Reaches $1B Valuation
Zopa, a UK neobank that offers savings accounts and peer-to-peer lending, raised $300 million (£220 million) in a pre-IPO round of funding. This funding round also reportedly gives Zopa a valuation of $1 billion (£750 million).
Japan’s Softbank Vision Fund 2 led the funding, joined by Chimera Capital, IAG Silverstripe, Davidson Kempner Capital Management LP, NorthZone, and others. Zopa described this as a pre-IPO round of funding, with the public offering expected to go through in Q4 2022.
Commenting on Softbank’s investment, Zopa’s CEO Jaidev Janardana said that “Softbank Vision Fund 2’s investment into our future is a clear validation of Zopa’s responsible, sustainable, and profitable approach to lending, our strong unit economics, and our vision to build the UK’s strongest-performing bank with the most happy customers.”
It seems that Zopa has timed the announcement to coincide with the Global Investment Summit 2021 led by the UK government. In reality, Zopa has been working on this round of investment since the summer of this year, when they initially raised $100 million, but tripled the amount over the last few months.
According to Zopa, the funds will go towards meeting capital requirements for the bank’s balance sheet. Unlike other neobanks and e-money institutions, Zopa is treated as a “real bank,” falling under the jurisdiction of the Prudential Regulation Authority (PRA) and the Financial Conduct Authority.
They managed to obtain their bank license in 2020, which came with regulatory requirements concerning customer protection. One of those safeguards is the insurance of customer deposits with up to £85,000, as determined by the Financial Services Compensation Scheme (FSCS).
The UK fintech company does not focus on checking accounts, as banks traditionally do. Instead, savings accounts are their focal point, in addition to various lending and credit offers. Zopa’s CEO Jaidev Janardana said that, while this drives fewer customers to the bank, it does translate to better margins.
Zopa’s run rate - a metric used to measure a business’ financial performance - is currently at $116 million. The fintech company expects to become profitable by the end of the year and double its run rate by 2022.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.
