fintech darling nubank raises blockbuster $400m series g at $25b valuation
Despite the financial challenges the pandemic presented to some startups, Nubank, a Brazilian neobank, has experienced significant financial growth. The company recently announced a $400 million Series G funding round, bringing its total funding to $1.2 billion. Notably, Nubank’s valuation has risen to $25 billion, a substantial increase from its $10 billion valuation in 2019, and its customer base has grown to 34 million users since its 2013 launch.
David Velez, the company’s co-founder and CEO, stated that their customer growth has been driven entirely by positive recommendations. “We’ve expanded from 12 million customers in 2019 to 34 million through word of mouth alone,” he explained. By September of the previous year, Nubank was adding 41,000 new customers on a daily basis. The company distinguishes itself by maintaining a $0 customer acquisition cost, allocating resources typically used for marketing to competitive salaries and exceptional customer support, fostering a loyal customer base that actively promotes the brand.
This new valuation positions Nubank as the fourth most valuable financial institution in Latin America and the world’s largest digital bank, measured by both customer numbers and application downloads.
The funding round included contributions from both private and public investors, such as GIC of Singapore, Whale Rock, and Invesco, as well as existing investors like Tencent, Dragoneer, Ribbit Capital, and Sequoia. Velez, a former partner at Sequoia, hails from Colombia but received his education at Stanford University and spent several years working in the United States.
Headquartered in São Paulo, the financial hub of Latin America with a population of 12.8 million, Nubank has extended its services to Colombia and Mexico. The new funding will be used to strengthen operations in these markets and to further develop its product range within Brazil.
Originally focused on credit cards, Nubank has evolved into a comprehensive banking platform, eliminating the need for traditional bank branches, which allows the company to direct its funding towards expansion.
Velez highlighted the dissatisfaction with existing banking practices in Brazil, characterized by bureaucratic processes and high fees. “People were tired of being poorly treated and charged excessive fees,” he said, comparing the experience to the difficulties of navigating a Department of Motor Vehicles office. Historically, paying bills in Brazil required in-person visits to bank branches and lengthy waits, often outdoors.
“It felt as though they were doing you a favor by allowing you to open an account, only to then impose an annual interest rate of 450%,” Velez noted. “Our core belief was that people would appreciate being treated with respect,” he added.
The Brazilian real was initially valued at 1:1 against the U.S. dollar in 1994. However, the country’s economy has faced significant challenges in recent years, including a major corruption scandal that led to the imprisonment, impeachment, and indictment of three consecutive presidents. The COVID-19 pandemic has further exacerbated these economic difficulties. Currently, the exchange rate stands at 1 USD to 5.40 BRL. Given the favorable exchange rates in Brazil, Colombia, and Mexico, the $400 million USD investment provides Nubank with substantial financial flexibility, particularly as its Brazilian operations have been generating positive cash flow since 2018.
Nubank is particularly recognized for its commitment to serving the unbanked population in Brazil, including individuals who lacked the financial standing to qualify for traditional credit cards. While conventional banks have a presence in approximately 80% of Brazilian municipalities, Nubank’s app-based service is accessible nationwide, reaching 100% of municipalities. Furthermore, the company assists Brazilians in establishing credit history. Its signature purple credit card begins with a monthly limit of $50 reals (approximately $10 USD), which increases with timely payments.
In addition to its credit card offerings, Nubank provides debit cards and savings accounts. While the company does not maintain physical branches, customers can access cash through ATM networks, similar to the arrangements in the United States.
“Nubank was founded on the principle that individuals deserve financial services that are more transparent, equitable, and focused on their needs, empowering them to manage their finances and shape their future. We began seven years ago in Brazil, a country with a highly concentrated banking sector, and successfully liberated millions from bureaucratic hurdles and frustrations. Through technology and dedicated customer service, we have made a positive impact on their daily lives,” Velez stated.