The banking and payments app Revolut has become the most valuable British fintech firm on record after a fresh funding round pushed its valuation to $33bn (£24bn).
The company, founded by the former Lehman Brothers trader Nik Storonsky in 2015, announced on Thursday that it had raised $800m (£579m) from new investors Tiger Global Management and the major Japanese investment group SoftBank, which now hold a near 5% stake in the business.
It means the London-headquartered company has attained a valuation six times higher than last year, when it was valued at $5.5bn.
Wise (£8.75bn)
The Shoreditch-based fintech formerly known as TransferWise made its stock market debut in July 2021 with a valuation of £8.75bn, making it the largest-ever listing of a UK tech company. The business, which was founded in 2011 and has 10 million customers, is aiming to revolutionise cross-border payments by stripping out the markups that banks and foreign exchange dealers added to transactions.
Monzo (£1.2bn)
The high-profile digital challenger to high street banks lost its 35-year-old founder Tom Blomfield at the start of 2021, as he stepped down after suffering mental health issues during the pandemic. Valued at £2bn in 2019, criticism of issues – including widening losses, unexplained decisions to freeze customer accounts and job cuts – resulted in the need for top-up funding that cut its valuation to £1.2bn.
Starling (£1.1bn)
A funding round led by Fidelity in March 2021 catapulted the digital bank, which competes against high street banks as well as Monzo and Revolut, to unicorn status with a valuation of £1.1bn. Founded in 2017 by Anne Boden, Starling’s chief executive, the plan is to ultimately float the business.
Checkout.com (£3.9bn)
London-based Checkout.com, which operates as a middleman for merchants and other payment providers such as Grab, Revolut and Deliveroo, raised a new round of funding in 2020 that nearly tripled its valuation to $5.5bn (£3.9bn). The company, which has said that it would most likely seek a US-listing if it goes public, makes more than $100m in annual revenues and has been profitable since 2012.
OakNorth Bank (£1.4bn)
Launched in 2015, OakNorth provides loans of up to £50m to businesses and property developers in the UK, and licenses its AI-based credit software to other lenders. In 2019, a SoftBank-led investment valued the business at $2.8bn. Sale of part of its stake by early backer IndiaBulls last year implied a valuation of $2bn (£1.4bn).
The bumper valuation also means the six-year-old firm is worth more than three-quarters of the members of the FTSE 100 stock market index, even surpassing the 294-year-old bank NatWest, which has a market capitalisation of about £23.6bn.
The funding round has made its 36-year-old founder, who holds an undisclosed stake, a paper billionaire several times over. According to Companies House, Storonsky held a stake of more than 25% before the most recent funding round. It also significantly increased the value of shares held by its 2,200 employees through its equity participation plan.
It signals growing investor appetite for UK fintech firms, with Revolut’s funding round coming days after Wise, the British forex transfer business, listed on the London stock exchange with an £8.75bn valuation.
“This is a staggering valuation for a loss-making business but Revolut is an international beast,” said John Cronin, a financial analyst at the stockbroker Goodbody.
Revolut’s losses almost doubled last year to £207m. However, the company has amassed 15 million customers and expanded to 35 countries in only six years.
The company launched as a pre-paid card focused on offering free currency exchange to customers in 2015. It has since added business accounts, investments and wage advance to its range of financial service, and Storonsky, who has set his ambitions on running the “Amazon of banking”, has also tapped into the growing popularity of cryptocurrencies such as bitcoin and ether by offering crypto trading services on its app.
Revolut now holds an EU banking licence but is still awaiting similar approval in the UK. However, the company already has cheerleaders among high-ranking officials, including the chancellor, Rishi Sunak, who is pushing for changes that would make the UK more attractive to startups and growing businesses.
“It’s great news that Revolut has raised a further $800m and plans to expand even further – creating more jobs here in the UK,” Sunak said, adding that he wanted to see “even more great British fintech success stories”.
Revolut, which is chaired by the former Standard Life Aberdeen boss Martin Gilbert, said the new funding would help fuel its marketing spending and the development of new products.
“This funding round makes Revolut the UK’s most valuable fintech, demonstrating investors’ confidence that we can deliver products that raise the bar for customers’ expectations across the whole financial services industry,” said Storonsky, who is also the chief executive.
The finance chief, Mikko Salovaara, denied that the funding round was a precursor to a stock market debut. “Eventually we’ll become a public company but [we have] no immediate plans to list. The new capital we’ve taken on does give us some cushion, so we can be quite flexible about the timing.”
However, when asked whether he could rule out an initial public offering by the end of the year, Salovaara said: “Never say never.”
The company could end up listing before it reports an annual profit. While it managed to report a profit in the final two months of 2020, coinciding with some of the strongest demand for cryptocurrencies last year, the fintech firm remains loss-making. The £207m loss last year came despite a 34% jump in revenues to £222m, which was aided by strong demand for crypto trading services that make up about 15-20% of its total income.
“It will be interesting to track its progress and to see if this valuation can be sustained (or built on) if the business decides to embark on an IPO in due course,” said Cronin. “The ability to meet financial targets on an ongoing basis will be essential to the extent it does become a publicly listed company.”
