Varo Bank, Who made last year The first US Neobank to be granted a national bank charter, this morning announced that it has raised a staggering $510 million in a Series E funding round at a valuation of $2.5 billion.
The massive “oversubscribed” financing comes nearly seven months after the fintech startup raised $63 million A round led by NBA star Russell Westbrook, who joined the startup as a consultant, focused on the direction of Vero Bank’s programs aimed at underserved communities, including communities of color.
Varo declined to reveal any hard revenue figures, but noted that in the 13 months since it received the bank charter, the company has doubled the number of accounts it opened to 40 million and tripled its revenue. Have given. The latest funding raises the San Francisco-based startup’s total to $992.4 million since its 2015 founding, meaning that this round alone is effectively about $30 million more than the company has raised in its lifetime. . Varo has never disclosed valuations before, but has noted that the $2.5 billion valuation figure has increased “5x” since May of 2020.
At the time of its last increase in February, Varo spoke of 3 million accounts opened. From the math we can conclude that the startup has added one million new accounts in the last seven months. its time $241 million Series D Last June (which included the participation of U2’s Bono), Varo counted About 2 million banking and savings accounts.
New investor Lone Pine Capital led the latest round, along with “dozens” of additional new backers, including funds and accounts managed by Declaration Partners, Aldridge, Marshall Weiss, Berkshire Partners/Stockbridge and BlackRock. They join existing investors Warburg Pincus, The Rise Fund, Gallatin Point Capital and HarborWest Partners.
Last year, Varo announced that it had been granted a national bank charter from the Office of the Comptroller of the Currency (OCC) and received regulatory approval from the FDIC and Federal Reserve to open Varo Bank, NA – effectively a “de facto” bank. But without physical branches.
CEO and founder Colin Walsh told that the move has had a significant impact on the growth of his company. First, it effectively eliminated an arbiter.
“The regulated system being in the loop has given us an opportunity to significantly expand our margins. “Now that we have direct access to the payment network, our ability to generate substantial value for both our consumers as well as our shareholders is becoming more and more evident.”
Walsh also said that Varo isn’t profitable yet, but is on its way to getting there. He predicts that Varo will achieve profitability in about two years or three years after becoming a bank.
“One of the cool things that Charter gives us is that we can really pursue growth and profitability at the same time,” Walsh said. “That’s within the three-year window we were in when we became a bank.”
In addition, over the past 13 months, Varo has nearly doubled its workforce today to nearly 800 and expanded to a third center in Charlotte, North Carolina.
Walsh acknowledged that the increase was not necessary in the company’s plans.
“We didn’t set out to raise that much money. It was coming fast and furious and we were like $510 [million] And I finally said, ‘Okay, that’s enough,'” he said. “But the fact that we were able to raise this money without even really trying is proof that something like this is happening. Which is very culturally relevant in this moment and for me our success is about having that kind of impact on a large scale. “
The executive said the major investor’s choice was tied to its eventual plans to go public.
“They are a highly reputable sophisticated crossover investor who invests in high-growth, high-potential private market companies and worked with them to eventually go public,” Walsh told . “It’s definitely on the roadmap for us because I think we can create a ton of value as a public company when the time is right.”
He said the existing investors are not pressurizing Varo to do so. And so, Walsh predicts that any move in that direction will only happen “over the next few years.”
He also said that down the line, it is possible that Varo explores a global expansion.
Varo was launched in 2017 with a mission to become “a fully digital, mission-driven, FDIC insured bank designed for the modern American consumer,” Walsh said. Today, the company’s core product offerings include “premium” bank accounts with no minimum balance or monthly account fees and high-interest savings accounts combined with a suite of “tech-first features” that allow people to save their money. and are designed to help manage
It recently launched Varo Advance, a short-term credit line that gives eligible customers a way to secure cash advances of up to $100 within its app “in seconds” and Varo Perk cashback rewards. The company also plans to launch Varo Believe, a credit building credit card program designed to help Varo customers “securely build or repair their credit,” with a flexible security Deposit and no fee.
According to Walsh, the new capital will go toward continued investments in its products, risk platform and design. Varo aims to reach “tens of millions” of consumers and “L .” have to beThe oved brand is recognized for its social impact mission,” he said.
Since its inception, the startup has been vocal about its intention to help promote financial inclusion with its offerings that aim to serve marginalized and underserved communities, which it says are historically different from traditional financial institutions. explicitly excluded. For Walsh, this is important.
“We believe we are on the verge of creating an iconic brand that is doing well in the world,” he said. “I want to be like the ‘Patagonia of banking,’ where people feel really good about the company and what we’re doing and the impact we’re making on people’s lives.”
Varo Bank competes with a growing number of all-digital banks operating in the US, including Chime, Current, N26, Level, Step, Moven, Empower Finance, Dave, GoBank, Aspiration, Stash, Zero and more. other.
Like many other fintechs, Varo saw pandemic-related growth in business.
“This is a time when many people reevaluated their banking relationships and decided to switch to a digital bank that offers far better value and more convenience than a traditional bank,” Walsh said.
David Craver of Lone Pine Capital said of their new investment: “What the Varo team has achieved in such a short time to market is truly remarkable. This is a group of trailblazers who are leading the way in America’s next generation of iconic companies. On the way to make one.
Todd Schell of Warburg Pincus and Varo investor said that from day one, his firm stuck to Walsh’s view that the bank charter was fundamental to a long-term sustainable business model.
“At Varo we see an opportunity to radically redefine a cost structure, introduce new products across a variety of categories, and uniquely solve use cases that have historically been out of scope,” said Shell. wrote via email. “Varo today has all the pieces of this puzzle, including the next-generation banking technology stack, the license to operate and fully reap its benefits, and massive amounts of capital. vARO already serves millions of Americans, but we believe it has the potential to reshape financial services for millions of people around the world.”