The London-based digital bank Monzo is in advanced talks to raise up to £350 million in a new funding round that could value the company at around £4 billion. According to sources familiar with the matter cited by Financial Times, Monzo is nearing a deal and could finalize the fundraising in the next two weeks.

Monzo Nears £4 Billion Valuation in New Funding Round

The new round is expected to be led by CapitalG, Alphabet's growth equity investment fund, with participation from existing Monzo backers like China's Tencent and the US fintech specialist Ribbit Capital, among others. This new infusion of capital would further build on Monzo's last fundraising in 2021, which valued the company at £3.5 billion.

A step up in valuation reflects improving investor sentiment towards financial technology companies after a period of market turbulence. In recent years, rising interest rates and tighter regulations have made investors wary of fast-scaling, cash-burning startups. But, Monzo seems to have convinced backers of its long-term potential.

Since its founding in 2015, Monzo has expanded well beyond its iconic coral pink debit cards into areas like business banking, lending, investments and buy-now-pay-later. It now counts over 9 million UK customers, including over 380,000 business clients. An international push is also underway, with Monzo active in the US market.

Last year, the digital bank doubled its revenues to £355.6 million and tripled its lending book to £759.7 million. Though it still posted a £116 million loss, the company said it turned a profit in March 2023 and is on track to achieve full-year profitability soon.

With fresh funds and continued growth, 2024 could be a landmark year for Monzo to demonstrate it can transition from a buzzy startup into a sustainable digital bank able to withstand economic turbulence. The £4 billion valuation affirms investors' confidence in Monzo's future prospects.

Fintech and VC Funding Plummet off a Cliff

As observed in the financial landscapes of fintech funding in Europe and the UK in recent quarters, the funding round Monzo aims to finalize stands out as one of the larger endeavors, defying the adverse trends seen in the industry.

The latest KPMG Pulse of Fintech report underscores the challenges within the fintech sector, noting a significant downturn in investment across the globe in 2023. Fintech investment plummeted to $113.7 billion from the previous year's $196.3 billion, with the number of deals dropping to the lowest since 2017, totaling 4,547.

Despite the overall decline, a marginal recovery was observed from the first to the second half of 2023, with investments slightly increasing from $55.5 billion to $58.2 billion. This recovery was spurred by six major deals, each surpassing the $1 billion mark, suggesting pockets of resilience within the fintech ecosystem.

Moreover, a separate analysis by Innovate Finance has revealed a contrasting trend in the United Arab Emirates, where fintech funding witnessed an impressive surge, growing 92%. This indicates that while the broader fintech funding environment has faced headwinds, specific regions and deals, such as Monzo's forthcoming round, highlight the sector's potential for significant transactions and growth, even in a generally declining market.