Monzo hit by valuation drop

Monzo is reportedly raising a fresh round of cash from investors at a 40 per cent discount to its previous fundraising.

The fintech is close to sealing a deal that will value it at around £1.25bn, compared to a valuation of more than £2bn at its previous funding round in June, according to the Financial Times.

The drop in its valuation comes in the context of the coronavirus pandemic and the ensuing economic chaos as growth slows and venture capital firms become increasingly cautious about investing in loss-making businesses. [City Am]

Monzo will have had its hand forced in part by regulatory pressure, prompting them to secure a raise to ensure the company continues to fulfil its capital requirements as a licensed bank.

Several investors told Sifted earlier this year that Monzo and its peers had been struggling with “challenger bank fatigue” among wary investors, delaying the raise even before the UK lockdown took hold. [Sifted]

Monzo plans to raise between £70m and £80m to see it through the coronavirus disruption. This would secure its cash position into the second half of 2021 when it will have moved closer to profitability.

The deal is expected to close within the next month. One person involved in the discussions cautioned that the final value and amount raised had not been confirmed. Monzo declined to comment.

German digital bank N26, which pulled out of the UK after struggling to compete with local start-ups such as Monzo, managed to maintain its $3.5bn valuation when it raised money from existing investors earlier this month. However a growing number of technology start-ups have been forced to accept reduced valuations in recent weeks or been unable to complete deals altogether. [FT]

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