Starling raises £272m to land unicorn status with £1.1bn valuation
Starling Bank has raised £272 million in a Series D funding round led by new US investor Fidelity Investments. The capital injection secures Starling a pre-money valuation of £1.1 billion, which finally tips it into the fintech unicorn club.
The round also attracted Qatar Investment Authority (QIA), investment manager RPMI Railpen, and New York-based Millennium Management.
Despite reaching profitability in October, the UK challenger bank has gone on to secure its largest single swoop of capital investment yet.
Launched in 2017, Starling has since grown its customer base to two million, including more than 300,000 small business accounts. Gross lending now exceeds £2 billion, and deposits sit at around £5.4 billion.
“The capital will be deployed primarily to support a targeted expansion of Starling’s lending in the UK, as well as to launch Starling in Europe and for anticipated M&A [mergers and acquisitions],” the challenger bank says in a statement.
A healthy balance sheet
Starling has also revealed new figures, including its January 2021 revenue of £12 million, which it estimates puts it on track to achieve an annualised revenue run rate of around £145 million. That’s a 400% increase compared to January 2020.
Starling raised £100 million in two tranches last year, but according to Sky it failed to raise £200 million last autumn, having hired investment bank Rothschild.
The bank’s chairman Oliver Stocken did evaluate the JP Morgan and Lloyds interest in acquiring the challenger, according to Sky. But instead, he has opted for private financing.
Government-backed loans, as a result of the economically crippling global pandemic, made it possible for Starling to reach profitability last October. It beat Revolut – which claimed to break even a month later – and Monzo, whose valuation dipped 40% last year, to the post.
Lending is the key
The British Business Bank accredited Starling last April. This meant it could issue loans under both the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS).
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 earlier this year, 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.