fintech all-star nubank raises a $750m mega round

Nubank's Continued Growth and Expansion

David Velez, a Colombian entrepreneur, embarked on a mission in 2013 to fundamentally change the Brazilian financial landscape. Despite lacking fluency in Portuguese, a background in engineering, or traditional banking experience, he firmly believed the existing system was flawed and capable of improvement. Furthermore, his prior experience as a Venture Capitalist at Sequoia provided him with necessary funding.

Significant Funding Round

Velez’s initial assessment proved accurate. Nubank recently announced a $750 million extension to its Series G funding round – which initially raised $400 million in January – bringing the total for this round to $1.15 billion. This latest investment elevates the company’s valuation to $30 billion, a $5 billion increase since January’s coverage.

Berkshire Hathaway spearheaded the extension funding with a $500 million investment, alongside contributions from various other investors.

Strategic Timing for Capital Raise

According to Velez, the decision to seek additional funding was driven by a favorable opportunity for growth. He explained to TechCrunch, “We observed a substantial opportunity in terms of growth rate and recognize that we remain relatively small compared to established industry players.”

Global Leader in Digital Banking

Nubank currently stands as the world’s largest digital bank, boasting a customer base of 40 million individuals. The company originated in Brazil as a technology firm, initially offering a no-fee credit card with a credit limit of R$50 (approximately USD$10).

Expanding Financial Product Suite

The company’s offerings have since diversified to encompass a comprehensive range of financial products. These now include digital bank accounts, debit cards, insurance options, peer-to-peer payments through Pix (Brazil’s equivalent of Zelle), loan services, rewards programs, life insurance, and dedicated accounts and credit cards for small business owners.

Serving the Underserved Population

Nubank specifically targets Brazil’s unbanked and underbanked population – representing roughly 30% of the country – a strategy that can yield significant profitability due to the large potential customer base.

Addressing Inefficiencies in the Brazilian Banking Sector

While the Brazilian banking system is known for its bureaucratic efficiency, customer service often falls short, and banks frequently impose substantial fees for even minor transactions.

Challenging Traditional Banking Dominance

Historically, Brazil’s banking sector has been dominated by five major institutions: Itaú Unibanco, Banco do Brasil, Bradesco, Santander, and Caixa Economica Federal.

International Expansion

Although Brazil remains Nubank’s primary market, the company has extended its services to Colombia and Mexico, with its Mexican launch occurring in 2018. Currently, the credit card is the sole product available in these two countries.

Strong Performance in Mexico

Velez highlighted the positive momentum in Mexico, stating, “Our Mexican credit card net promoter score (NPS) is 93, representing the highest NPS achieved in Nubank’s history. For comparison, our highest NPS in Brazil reached 88.”

Strengthening the Leadership Team

In recent months, Nubank has actively recruited key personnel, including two prominent executives. Matt Swann succeeded Ed Wible as Chief Technology Officer (CTO), with Wible transitioning to a more focused role in software development. Swann brings extensive experience from leadership positions at Bookings.com, StubHub, and Citi.

Arturo Nunez joined the company as Chief Marketing Officer (CMO), having previously served as Head of Marketing for Apple Latin America, as well as holding roles with Nike and the NBA.

Unique Marketing Strategy

The absence of a dedicated head of marketing until recently is noteworthy, as Nubank prides itself on a $0 customer acquisition cost (CAC). Instead of investing heavily in traditional marketing campaigns, the company prioritizes exceptional customer service and relies on positive word-of-mouth referrals.

Rapid Customer Growth

Since January, when the $400 million Series G funding was announced, Nubank has expanded its customer base from 34 million to 40 million in approximately six months. The new funds will be allocated to further business growth and personnel recruitment.

Accelerated Digital Adoption

Velez observed a significant shift towards digital banking, particularly among individuals who previously hadn’t considered it. He noted, “We are witnessing an influx of users from all demographics embracing digital banking solutions.”