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Monzo sees 40% valuation drop in latest funding round

The UK neobank Monzo has reportedly been forced to sell shares at an almost 40 per cent discount as the Covid-19 crisis puts pressure on tech valuations.

The FT reported that Monzo, which is raising a new round of cash, is close to agreeing a deal that will value the digital bank at around £1.25 billion – significantly lower than the £2 billion valuation from June when the company secured a £113 million Series F round.

The drop has revealed the challenges the coronavirus pandemic is bringing to unlisted tech valuations, with venture capital funds becoming more cautious about backing lossmaking companies.

The past few weeks have not been kind to challenger banks. Earlier this month, RBS decided to close down its online brand Bó, and US bank Moven moved all its customers’ accounts to FinTech Varo.

Tom Blomfield, CEO of Monzo

The 40 per cent drop in Monzo’s valuation is in line with the FTSE 350 Banks index since the start of the year. Moreover, data gathered by Aksjebloggen has revealed that the value of companies trading on the London Stock Exchange has dropped by £842 billion since the outbreak.

Monzo had hoped to raise between £50-100 million by early 2020, and in February this year, CEO Tom Blomfield said the bank planned on relaunching premium accounts and hiring 500 people as it was forecasted to have 5.5 million users by the end of 2020.

So far in the pandemic, the neobank has reportedly furloughed around 300 staff members and closed a Las Vegas support office, costing the company 165 employees. Blomfield has also announced that he will forgo his salary for the coming year.

However, Monzo is continuing its plans to apply for a US banking license and launching business services.

The majority of its new funding is now going to come from existing investors, which include US venture capital groups Accel, Y Combinator Continuity and Goodwater Capital, and UK-based Passion Capital.

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