Monzo, the UK challenger bank with 9 million customers, raises $430 million

Image Credits: Monzo

London-based fintech company Monzo raised a late-stage funding round of $430 million (£340 million), confirming a report from the Financial Times from a few weeks ago. Following this round, the company has reached a post-money valuation of $5 billion (£4 billion). Founded in 2015, Monzo provides U.K. current accounts, debit cards and several financial products with a digital-first approach.

Today’s investment is an important tidbit of information as massive funding rounds have become a rarity over the past year or so — unless you’re working on an AI foundation model.

As a reminder, according to Atomico’s latest report on the state of European tech, startup funding has fallen to $45 billion in 2023 compared to $82 billion in 2022 and $100 billion in 2021. American VC firms have pulled back on European investments, and crossover investors like Tiger Global or Coatue have drastically slowed down their investment pace in tech startups.

That’s why Monzo is sort of defying the odds with this new funding round, with Google playing a big part in this investment. CapitalG, the growth fund of Google’s parent company Alphabet, is leading the round. GV, Google’s venture fund, is also participating, as well as HongShan Capital (the VC firm formerly known as Sequoia Capital China) and existing backers, such as Passion Capital and Tencent.

And yet, Monzo’s trajectory hasn’t always been going up and to the right. After growing nicely in its home market, the company tried to expand to other markets, including the U.S. But Monzo ended up shuttering its U.S. team and refocusing on the U.K.

In 2020, it even had to raise a down round, meaning that its total valuation went down between two funding rounds. A few months later, its iconic founder and CEO Tom Blomfield left the challenger bank. He is now a partner at Y Combinator.

The company’s performance improved rapidly, in part due to rising interest rates. The startup now generates revenue from cash and balances at central banks. Monzo reached a post-money $4.5 billion valuation in 2022.

Monzo has nine million retail customers in the U.K. In 2023 alone, the company added two million customers. There are also 400,000 companies using Monzo for their business banking needs.

In addition to checking accounts and debit cards, Monzo diversified its product portfolio with savings accounts, access to three investment funds (ETFs) and some credit products. Essentially, Monzo still believes it can build a one-stop shop for all your financial needs. The company says that it became profitable in March 2023.