Unicorn challenger bank Monzo has closed a $76 million funding round at a 40% valuation drop

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  • UK startup bank Monzo has raised £60 million ($76 million) in fresh funding as the high-profile fintech tries to rally against the economic impact of the coronavirus.
  • Monzo’s additional capital injection follows the firm announcing that it would lay off up to 80 staff.
  • The company has experienced a reshuffle in its executive ranks during 2020 with CEO Tom Blomfield stepping back, a change in CTO, and a new chief product officer.
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UK challenger banking unicorn Monzo has raised £60 million ($76 million) in fresh funding as it tries to rally against the economic impact of the pandemic, Business Insider can reveal.

The fresh capital comes from new backers such as Swiss fund Reference Capital and Vanderbilt University, plus existing investors including Y Combinator, General Catalyst, Accel, Stripe, Goodwater Capital, and Passion Capital. The round has been in the works for a number of months but was delayed by the pandemic.

Monzo confirmed that the round has closed in emailed comment to Business Insider. 

The new funding brings the company’s valuation down by 40%, potentially signalling an end to ballooning valuations for Europe’s privately-held tech companies.

Monzo’s most recent prior valuation was an estimated $2.5 billion, making it the second most valuable startup in the UK. Its new valuation is closer to 2018 levels at £1.25 billion ($1.6 billion). Investors indicated that the deal’s timing was behind the drop in valuation.

Business Insider understands that the funding round has two components, with the first tranche now closed. The second part of the round, which could be as much as £40 million, is expected to close in the coming months.

The new round follows layoffs at the company at the beginning of June.

The startup had onboarded some 850 staff through 2019 to fuel its growth, raising $144 million that year. By the end of 2019, the company acknowledged that some areas of the business needed to slim down to cut costs and its burn rate.

In an all hands call June 4, Monzo initially announced it would be cutting up to 120 jobs. As reported by Business Insider, the number was later revised down to 80 staff.

Monzo had its eye on US expansion

Monzo

Monzo has won plaudits for creating a new banking brand from scratch, winning over a zealous community of customers in an industry characterized by consumer inertia. More than 4 million customers bank with Monzo, and its “hot coral” payment cards are a common sight around the UK. Cofounder Tom Blomfield was awarded an OBE in the 2019 New Year Honours.

However, the startup remains unprofitable and like many other fast-growing tech companies faces a challenging 2020. It kicked off the year by publicizing a prospective US launch, but those plans may change thanks to the pandemic. Blomfield is stepping away from his current role as CEO to become president. And amid financial pressure during the pandemic, he has deferred his salary for a year.

Blomfield’s old job will be taken up by TS Anil, the Visa veteran who joined Monzo as US CEO in February. 

Other executive changes include the departure of CTO Meri Williams, while former Deliveroo CTO and Blossom Capital VC Mike Hudack joined as chief product officer. Sujata Bhatia, a former American Express executive in Europe was brought in as new COO. The start of the year also saw Monzo cofounder Paul Rippon leave the company to spend his time farming alpacas.

The challenger bank plans to be cash flow positive by Q3 2021 with investors close to the deal claiming that the company is back on a surer footing following its internal changes and a pick up in activity.

SEE ALSO: Leaked messages show that UK challenger banking unicorn Monzo is cutting up to 80 staff amid the coronavirus pandemic as it looks to reshape its business

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