In 2021, U.K. neobank Zopa, which has been around since 2004, leapt to a $1 billion valuation on the back of a big investment from SoftBank and a plan to go public by 2022. Now it’s 2023, and Zopa is today announcing another fundraise of a different kind as it continues to wait for the IPO markets to reopen.
The startup has picked up £75 million ($93 million), a debt fundraise that it plans to use to shore up its finances, eye up some acquisitions and continue building more products alongside its loans, savings and deposits, BNPL and other services used by its 1 million customers.
The funding is being led by IAG SilverStripe, with participation from other investors, and it comes about seven months after the startup raised an equity tranche, also totaling £75 million, led by the same backer. It’s raised £530 million to date.
Many startups looking for new equity investors may still be feeling the chill of the funding winter, but things continue to heat up in the world of debt. One report from earlier this year noted that debt, in May, had just tipped (50.5%) into becoming the biggest source of funding to startups and more generally was on a stronger growth curve than equity-based funding.
Some might opt for debt as a faster way of securing financing, or as a way of securing money without giving up equity.
Zopa leans on one of the other common reasons: It is already generating cash and it is growing, so it has a strong case for repaying whatever it chooses to draw down from the debt line. It is already EBITDA positive and says that it’s on track to be profitable for the full year for the first time this year.
Specifically, company says that it is currently on track to make £250 million ($312 million) this year on an annualized run rate.
There are no plans ahead for launching services outside the U.K.
“There is so much opportunity in the U.K. today that we don’t need to go international in the near term,” said Jaidev Janardana, the CEO, in an interview. The company launched two new products this year — a BNPL service and a long-term savings account popular in the U.K. called an ISA — and Janardana said the plan is to launch two more next year as it continues to wait for the IPO waters to warm up.