Fintech
startup N26 is raising a Series D round of $300 million. Following this new
funding round, the company is now valued at $2.7 billion. Insight Venture
Partners is leading the round with Singapore’s sovereign wealth fund GIC and a
few existing investors also participating.
N26 is
building a retail bank from scratch. The company lets you open a bank account
and get a card in just a few minutes. You can then control everything from your
phone or computer. And it’s a much better user experience compared to
traditional banks.
This round
comes as a surprise as the startup announced a $160 million funding round ten
months ago. I talked with N26 co-founder and CEO Valentin Stalf about this, and
there are several reasons why raising money made sense.
First, N26
is a very different company now compared to early 2018. The user base has
tripled and people are using their N26 accounts more and more. Around a third
of N26’s customers are paying every month for a premium account.
The
startup’s valuation has exploded as well. “The previous valuation was below $1
billion,” Stalf told me. In other words, N26 is in great shape and it made
sense to grab more money before expanding to new markets around the world.
N26 is
currently live in 24 European markets and has 2.3 million customers. The
company plans to expand to the U.S. in the coming months as well as other
markets around the world. Customers currently hold €1 billion in N26 accounts
overall. And the company has processed €20 billion in transaction volume since
its creation.
I
interviewed Valentin Stalf about today’s funding round. This interview has been
slightly edited for brevity and clarity.
TechCrunch:
Your list of investors is becoming more and more global. Does it mean that, in
addition to the U.S., we can expect other countries and other regions as well?
Valentin
Stalf: Absolutely. Our goal now for the next couple of years is to transform
N26 from being a European company to being a global company. We started in
Germany and Austria as you know. We’re now in 24 markets including the U.K.
where we’re offering our product in a different currency.
And now the
next step will be the U.S. in 2019. We would like to bring N26 to four to six
new markets outside of the U.S. and Europe in the next couple of years. But
this year is really about the U.S. and then by the end of the year one more
market or a couple of markets probably. But we see the opportunity to take the
business global. And that’s also what everybody who invested in this round
signed up for.
TC: It’s the
first time you’re sharing the valuation, which is quite high. Does it mean that
the financials of the company are looking good? Are you making money and from
what?
Stalf: Two
things led to the success of this funding round. One is tremendous growth.
We’ve more than tripled the number of customers in the last year. Globally, I
think we’re the fastest growing mobile bank on the market now. It’s one driver
of the valuation — the future potential that there are many more customers
searching for a banking alternative.
We’ve also
worked on the profitability of our company. We’re definitely today the most
advanced player on the market in terms of profitability per customer.
Obviously, we’ll be consuming cash in 2019 — that’s why we raised a round to
invest in new markets. But if you look at our company on a per-customer basis,
we’re profitable on a per-customer basis. And I think it’s very important.
Where is the
revenue coming from today? We’re very much focused on the daily usage of our
product. So one is really from card transactions and the interchange fee.
Second is our subscription model. Depending on the market, up to 32 to 35
percent are choosing one of the premium products that we’re offering — it’s a
really important revenue driver. And then you have the daily usage of financial
products, such as overdraft, savings and consumer credit and these things that
we have on the German market, the French market. We’re bringing that now to the
U.K. and other markets.
TC: On the
product front, are there other products that you’re going to roll out or are
you more focused on launching the entire lineup of products across all your
markets?
Stalf: I
think we want to internationalize existing products to new markets and bring
our financial products that we have to more of the markets that we’re in.
But I think
the strong focus that we have in order to internationalize is really to
innovate more on the product. We’ve launched Spaces before Christmas — I would
say version one. The big update that is coming out in the next two months is
really about sharing a space, creating a shared account either long term with
your partner or short term with friends.
We’ll add
much more functionality to Spaces. We’ll be adding virtual cards that you can
add per account. We’ll be adding different account numbers.
TC: Let’s go
back to the funding round. You’ve raised $160 million a year ago — it’s quite
quick. If I read that correctly, does it mean that you’re thinking that competition
is fierce or that you should get a war chest in case there’s an economic
downturn?
Stalf: I
wouldn’t call it an economic downturn, but if you look at the equity market,
obviously valuations have been challenged over the last couple of weeks. And I
think we were lucky in terms of when we raised funding. I think it was good
timing.
Independent
of that, we’ve never raised because of any timing thing or so. Our company
managed to do incredibly well in the last year in terms of profitability and
growth. And we’ve had a lot of people approaching us, we’re always in contact
with different investors. I always think the best time to raise is when you
don’t need to raise. GIC and Insight are the best investors we could have
thought of.
TC: Let’s
talk about the future. Now, that you’ve got a ton of funding in your bank
account. How do you see N26 in a couple of years as a product, as a company and
as a brand?
Stalf: I
think we have the opportunity to really build a business with a hundred million
customers globally. I truly believe in this. And that means that we’ll have to
build the brand that you need for such as business. It’s going to be a big
focus.
If you look
more at our company, we have now 700 employees in three locations around the
world — Berlin, Barcelona and New York. We will open a couple of offices
throughout the next year in Europe and maybe somewhere else in the world. So
it's really awesome to transform our company to be more global — we already
have 50 different nationalities.
Source: TC
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