Zopa Secures $300M at $1B Valuation - UK Neobank Expansion

Zopa Secures $300 Million in Funding, Eyes Potential IPO

A substantial capital injection has been received by a U.K.-based fintech company, following a period of significant expansion. Zopa, a neobank serving approximately 500,000 users within the U.K. with peer-to-peer lending, savings accounts, credit cards, and related financial services, has successfully raised $300 million.

This funding round values the company at $1 billion (£750 million) post-money, a figure that has been independently verified. Zopa has characterized this investment as a “pre-IPO” round, suggesting a potential public offering in the fourth quarter of 2022, contingent upon continued growth.

Current Performance and Future Projections

Currently, Zopa operates with a run rate of £85 million ($116 million), with expectations for this figure to reach £170 million ($233 million) by 2022. The company is also projected to achieve profitability before the year’s end.

Zopa differentiates itself from other neobanks by prioritizing savings accounts alongside its loan and credit offerings, rather than focusing on traditional checking accounts. CEO Jaidev Janardana notes this approach yields improved margins and customer engagement.

Investment Details and Key Participants

Softbank Vision Fund 2 spearheaded the investment round, with additional participation from Chimera Capital. Existing investors, including IAG Silverstripe, Davidson Kempner Capital Management LP, NorthZone, and Augmentum Fintech, also contributed to the funding.

The announcement was strategically timed to coincide with the U.K. government’s Global Investment Summit (GIS) 2021. However, discussions regarding this funding round reportedly began earlier this summer, initially targeting a $100 million investment, which ultimately nearly tripled in size.

Broader Trends in European Fintech

This investor enthusiasm reflects a wider trend within the European neobank sector. These digital banks are attracting substantial funding due to strong customer acquisition and a growing demand for modern banking solutions, particularly those accessible via mobile applications.

Recent examples include N26 in Berlin, which secured $900 million at a $9 billion valuation, and Revolut in London, which raised $800 million at a $33 billion valuation. Starling also received $376 million at a $1.9 billion valuation in March. Even companies assisting traditional banks with modernization efforts, such as 10x, are benefiting from this investment surge.

Zopa’s Evolution and Core Business Model

Founded in 2005, Zopa claims to have pioneered the concept of peer-to-peer (P2P) lending. This model connects borrowers with a network of individual and institutional investors, leveraging algorithms to assess credit risk and facilitate lending.

The company began expanding its services in 2018, ultimately launching a fully-fledged bank in the previous year. While lending remains a significant component of Zopa’s business, the banking division is currently experiencing the most rapid growth.

Future Plans and Strategic Focus

The newly acquired funding will be allocated to expanding Zopa’s product offerings, with a particular emphasis on tools designed to help customers improve their savings habits. Janardana highlighted the importance of fostering a savings culture among borrowers.

Zopa also intends to explore solutions for assisting consumers with credit card debt management, moving beyond traditional balance transfer options. While expansion into the business market is not currently planned, the company will consider strategic partnerships within the neobank and fintech ecosystems.

A key differentiator for Zopa is its in-house development of its core products, rather than relying heavily on third-party APIs. This approach provides greater flexibility and control over future innovation, a factor that resonated with investors.

Investor Perspective

Sourav Sen, an investor at SoftBank Investor Advisers, stated, “We believe Zopa’s fast-growing market penetration reflects high customer demand for adaptable financial services within a usable platform that can be customized to their specific needs.” He further added, “Zopa is fast emerging as a leading player in the U.K.’s nascent neobanking sector and we are proud to partner with Jaidev and the team on this journey.”