British digital financial institution Zopa has raised £220m in a funding spherical forward of plans to record in London subsequent yr.
The deal, led by SoftBank’s Imaginative and prescient Fund 2, displays Zopa’s altering fortunes because it has transitioned away from purely providing peer-to-peer lending to more and more offering banking providers.
“For us, the capital we’re seeking to increase is to fund the expansion of the stability sheet,” chief govt Jaidev Janardana stated in an interview with the Monetary Occasions.
The capital raised, he stated, “additionally means we could be extra versatile in our timing” of an preliminary public providing.
Sources near the deal stated it could worth Zopa at £750m, becoming a member of London’s fintech ‘unicorns’ reminiscent of digital banking start-ups Revolut and Unicorn with valuations of not less than $1bn. That compares to an estimated valuation of £188m in December 2019, when it confronted political and market uncertainty round Brexit.
Janardana stated the funding spherical, which included participation from Chimera Capital and current traders together with US funding agency IAG Capital, had raised greater than anticipated.
“We expect we’re prepared [to list], however one factor I want to have is a observe report of profitability earlier than going public,” he stated, with the earliest date for an IPO being the fourth quarter of 2022.
He stated the choice to record in London, the place traders search for “a mix of profitability, sturdy unit economics and development”, would play to Zopa’s strengths, though he acknowledged the “combined bag” of IPOs listed within the metropolis this yr.
Shares in high-profile listings reminiscent of meals supply app Deliveroo and semiconductor IP firm Alphawave have fallen steeply, though greeting card group Moonpig and Virgin Wines had extra beneficial IPOs.
Zopa was a pioneer of the peer-to-peer lending trade when it launched in 2005, however started its pivot into banking in 2016 with the intention to entry extra secure methods to fund its loans.
In 2019, it was compelled to urgently increase £140m from IAG with the intention to keep its provisional banking licence. In June 2020, it was granted a full banking licence, with a give attention to bank card, auto finance and private mortgage merchandise.
“With retail financing you’ll be able to create a enterprise mannequin that’s extra sustainable,” stated Janardana. He argued that the corporate’s mixture of peer-to-peer lending and banking, coupled with its digital choices made it a competitor for incumbent banks.
The broader peer-to-peer lending sector has confronted plenty of challenges in recent times. In 2019, after a collection of high-profile issues, the Monetary Conduct Authority launched harder new guidelines.
The coronavirus pandemic additionally made the scenario harder, with capital markets drying up and retail traders in search of to withdraw their funds. Peer-to-peer lender Funding Circle, which listed at a valuation of £1.5bn in 2018, had its market worth fall to lower than the amount of money on its stability sheet in 2020.
SoftBank has backed plenty of European fintechs. This yr, it led a $639m funding spherical in Swedish purchase now, pay later firm Klarna and an $800m funding spherical in Revolut, alongside Tiger World Administration.
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