Starling set to raise £200m led by US investor Fidelity at $1.5bn valuation
Starling Bank is raising a £200 million round led by new US investor Fidelity Management & Research (FMR), according to Sky News.
Despite reaching profitability in October, the UK challenger bank is still looking to close its largest single swoop of capital investment yet. Its new valuation will likely reach $1.5 billion, according to Business Insider.
After raising £100 million in two tranches last year, Fidelity is now in “advanced negotiation” to lead the bank’s next round.
“A number of other blue-chip external investors” are also in discussions with Starling. But Fidelity’s involvement is the most notable. It will see the US backer take a £100 million stake in the challenger, according to Sky sources.
Starling’s chairman Oliver Stocken did evaluate JP Morgan and Lloyd’s interest in acquiring the challenger, according to Sky. But instead, he has opted for private financing.
Hence 2021’s round, which prequels the challenger’s eventual aim to go public in the coming years. It follows Starling’s failed efforts to raise £200 million last autumn, having hired investment bank Rothschild.
Government loans won’t last forever
Government-backed loans, as a result of the economically crippling global pandemic, made it possible for Starling to reach profitability last October.
The challenger beat Revolut – which claimed to break even a month later – and Monzo, whose valuation dipped 40% last year, to the post.
Starling was accredited by the British Business Bank in April. This means that it can issue loans under both the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS).
This saw the start-up’s gross lending shoot up from £37 million to £1.5 billion between October 2019 and October 2020. It now boasts more than two million accounts, 300,000 or which are small business customers.
As it stands, Starling has around £4.7 billion in deposits and a lending book coming out at just under £2 billion.
With a stronger balance sheet than most of its peers, Starling is seeing the benefits of fully utilising its UK banking licence – which it bagged back in 2016.
But as Boden pointed out to Sifted last month, these government-back loans won’t last forever. Which means the start-up needs to further diversify to keep its profitability up.
This has seen the bank scope out non-bank lenders in Europe as potential acquisition targets.