Monzo and Alphabet Discuss Final Funding Round Before IPO

Monzo, the British fintech bank founded in 2015, is reportedly in discussions with Alphabet's private investment arm, Capital G, for what could be its last funding round before going public. The neobank is looking to raise between $376 million and $625 million at an increased valuation of approximately $5 billion, sources familiar with the matter revealed. Monzo last secured funding in December 2021 at a valuation of $4.5 billion.

While the potential investment from Capital G is not yet confirmed or finalized, it signifies a strategic move for Monzo to bolster its financial position before a projected public listing in late 2024 or 2025. The London-based bank has attracted attention for its distinctive bright coral pink bank cards and currently serves around 8.5 million customers in the UK.

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This funding round is anticipated to be Monzo's final private raise, and existing investors, including Abu Dhabi Growth Fund, Coatue, and General Catalyst, may express interest in participating. The figures provided are subject to change as the discussions progress.

The fintech sector has faced challenges in 2023, witnessing a notable decline in funding. Fintech funding in Europe dropped by 70% to $5 billion in the first half of 2023 compared to the same period in 2022. Despite this trend, Monzo's potential upturn and increased valuation present a positive outlook for the neobank.

Monzo's CEO, TS Anil, remains optimistic about the bank's future profitability, even as it reported $146.86 million in losses last year, despite doubling its revenue. The bank's strategy includes international expansion, with a renewed effort to enter the US market. Monzo had faced setbacks in securing a US banking license in 2021 but has since hired Conor Walsh, former global product chief of Cash App, to lead the renewed expansion.

The neobank's journey to profitability aligns with industry trends, where established fintech startups have sometimes accepted valuation adjustments to sustain growth. Monzo's competition in the UK includes neobanking peers like Revolut, valued at $33 billion, and Starling Bank, which is currently in the process of appointing a new permanent CEO.

Early investors have reportedly sold parts of their stakes in Monzo at a valuation of around $4.3 billion. The potential funding from Capital G, along with the growing interest in secondary shares, positions Monzo on a trajectory that could reshape its financial landscape as it navigates toward a public listing.