Investors are shrugging off Brexit and pouring money into UK fintech startups
News | 14.02.2019
How Britain’s departure from the EU will play out next month is anyone’s guess. Surprisingly, investors appear unfazed by the uncertainty when it comes to financial startups.
London-based Starling Bank said yesterday that it raised £75 million ($96 million) from asset managers including Merian Global Investors. Britain led Europe in fintech investments last year, with startups raising a record $1.7 billion invested across 261 deals, according to Innovate Finance.
Of course, it’s impossible to know how much these firms would have raised if Brexit uncertainty wasn’t a factor. The details of Britain’s exit are yet to be pinned down—it’s still unknown whether the UK will crash out on March 29 without a transitional arrangement or find a compromise to smooth the process of separation from the EU—and investors may well have regrets in the near future. But for now, so-called neobanks have been especially buoyant in the UK, raising a record £446 million in 2018, according to PitchBook data.
The chief executives of the payment app Revolut, which recently received an EU banking license, and Clausematch, a compliance company, said in an interview last week that they get five to six calls from investors each week. OakNorth, a business and property lender, recently closed a $440 million fundraising round led by Japan’s SoftBank Group.
Why so much enthusiasm? Starling CEO Anne Boden said there still aren’t many new, licensed-banks like hers, built from the ground up, and that the prospects for the digital firm had “caught the imagination of investors.” The company plans to use the money it recently raised to invest in its products for consumers and small- and medium-size businesses, and to expand in the rest of Europe.
Some competitors have received bigger investments than Starling—investors poured £178 million into Revolut in April, and the company may seek more than twice that amount this year. Boden says her company has a different funding profile because it’s a licensed bank that never relied on a cash-burning, pre-paid card model. She said the bank, which has a customer base of 460,000 personal accounts and 30,000 business accounts, expects to have 1 million customers by the end of 2019 and to break even by the second half of next year.