UK challenger bank Monzo is reportedly raising a fresh round of cash from investors at a 40 per cent discount to its previous fundraising.
The fintech is close to sealing a deal that will value it at around £1.25bn, compared to a valuation of more than £2bn at its previous funding round in June, according to the Financial Times.
The drop in its valuation comes in the context of the coronavirus pandemic and the ensuing economic chaos as growth slows and venture capital firms become increasingly cautious about investing in loss-making businesses.
The report said Monzo was planning to raise between £70m and £80m in the current round.
It is understood that the money raised is being sourced from both new and existing investors.
The FT reported that the deal is expected to close within the next month. Monzo declined to comment.
Monzo was already seeking to raise cash before the coronavirus pandemic hit the UK.
Key backers of Monzo include US venture capital groups Y Combinator Continuity, Accel and Goodwater Capital, along with UK-based Passion Capital.
Monzo has furloughed some staff in the wake of the coronavirus lockdown and in March chief executive Tom Blomfield said he would forgo his salary for 12 months.
However, it still has its sights set on growth and last month applied for a US banking licence as it looks to expand across the Atlantic.
It could take Monzo between 18 months and two years to have its application approved. The process, run by the US Office of the Comptroller of the Currency, is more stringent than other countries’ such as the UK.
Becoming a fully licensed bank would let Monzo provide a wide range of lending products and fully insured deposit accounts.