Kuda Raises $55M at $500M Valuation

Kuda Bank Secures $55 Million Series B Funding to Expand Across Africa

Kuda Bank, a London-headquartered startup with operations in Nigeria, is disrupting traditional banking with its mobile-first, personalized, and cost-effective services. Leveraging modern, API-based infrastructure, the company has experienced substantial growth in recent months.

Funding Details and Expansion Plans

The startup has successfully closed a $55 million Series B funding round, conducted through its London entity. These funds will be strategically allocated to bolster expansion efforts, not only within Nigeria but also to extend Kuda’s reach to additional countries on the African continent.

Co-founder and CEO Babs Ogundeyi articulated the company’s ambitious vision: to develop a novel approach to banking services accessible to “every African on the planet.”

Valuation and Growth Trajectory

This funding round establishes Kuda’s valuation at $500 million. This achievement follows a period of impressive growth for the fintech company.

Ogundeyi emphasized the company’s commitment to resource deployment in Nigeria while simultaneously prioritizing expansion. He stated, “We still see Nigeria as an important market and don’t want to be distracted.”

User Base Expansion

Currently, Kuda Bank boasts a registered user base of 1.4 million. This represents a significant increase compared to the 650,000 users reported in March, when the company announced its $25 million Series A funding led by Valar Ventures.

Investment Details

This latest Series B round was completed as a relatively swift inside round, meaning it primarily involved participation from existing investors. Valar Ventures and Target Global co-led the investment, with contributions from SBI and other previous angel investors.

Kuda was not actively seeking funding when the Series B was initiated and finalized.

Investor Confidence

Ricardo Schäfer, a partner at Target Global who spearheaded the round, highlighted the founders’ vision. He noted that Babs Ogundeyi and Musty Mustapha, the co-founder and CTO, are focused on building a pan-African bank, rather than simply dominating the Nigerian market.

Schäfer expressed excitement about the potential to serve over a billion people through Kuda’s banking platform.

Rapid Funding Rounds Reflect Market Dynamics

The quick succession of funding rounds, occurring just four months after the previous announcement, is indicative of current market trends. A surge of venture capital investment, coupled with favorable growth metrics and a high level of industry interest, is driving this phenomenon.

Companies like GoPuff exemplify this trend, securing substantial funding shortly after previous rounds.

The Rise of Neobanks

Neobanks – fintech companies revolutionizing banking through modern interfaces and API-driven embedded finance – are experiencing rapid growth. Revenues are increasing at nearly 50% annually, with projections estimating a collective market value of $723 billion by 2028.

Kuda’s Position in the African Market

Notable neobanks globally include Nubank (Brazil), Revolut and N26 (Europe), WeBank (China), Varo and Chime (U.S.). Africa represents a largely untapped market for banking services, contributing to Kuda’s strong adoption rates.

A 2018 McKinsey report identified a growing demand for digital financial services in Africa, fueled by a rapidly expanding middle class and a significant unbanked population of approximately 300 million people. Kuda’s service is built upon these fundamental factors.

Competition in the Fintech Landscape

While Kuda is not alone in this space, with companies like Chipper Cash, Airtel Africa, and FairMoney also securing funding for fintech initiatives, Kuda distinguishes itself by operating with its own banking license.

Advantages of a Banking License

Possessing a banking license allows Kuda greater flexibility and agility in developing and modifying products. It also enhances the company’s credibility, particularly among customers accustomed to traditional banking institutions.

Initially, Kuda’s business model involved customers utilizing Kuda accounts for spending and transfers after receiving salaries in traditional bank accounts. However, Ogundeyi noted a shift towards customers managing both deposits and withdrawals through Kuda.

Future Expansion and Product Development

Ogundeyi refrained from disclosing specific target countries for future expansion. However, he highlighted the recent launch of Kuda’s overdraft allowance – the company’s first foray into credit – as an indication of future product development.

In Q2, over 200,000 users qualified for the overdraft, resulting in $20 million in credit disbursement. The company reports minimal default rates due to its data-driven approach to credit allocation.

“We use all the data we have for a customer and allocate the overdraft proportion based on the customer’s activities, aiming for it not to be a burden to repay,” Ogundeyi explained.

Continued Investor Support

Andrew McCormack, a general partner at Valar Ventures, emphasized the untapped potential of the African market and Kuda’s strategic approach. He stated that Kuda’s rapid growth over the past four months has validated their initial investment.

“With a youthful population eager to adopt digital financial services in the region, we believe that Kuda’s transformative effect on banking will scale across Africa and we’re proud to continue supporting them.”