Starling Bank lands £40m from existing backers

Written by Ruby Hinchliffe
29th May 2020

Starling Bank has raised an additional £40 million in funding from existing backers, adding to its £60 million raise in February, TechCrunch reports.

The round was led by JTC, a family office controlled by Bahamas-based billionaire Harald McPike, and Merian Chrysalis Investment Company Limited, a London-based firm which focuses on later stage private companies.

To date, the UK challenger bank has raised £363 million since its launch in 2014. The fresh capital will go towards its company-wide growth strategy, and its “much-needed support to small business customers who have been hit by the coronavirus emergency,” a bank spokesperson told TechCrunch.

Starling Bank’s CEO Anne Boden

“This additional funding from our existing investors demonstrates their commitment both to Starling and to our small business and personal customers who need our support now more than ever,” said CEO Anne Boden in a statement confirming the raise.

During the crisis, Starling Bank has landed approvals from the British Business Bank to issue both Coronavirus Business Interruption Loan Scheme (CBILS) grants, and Bounce Back Loan Scheme (BBLS) grants.

By mid-May, the bank had issued £263 million under the two schemes according to Boden at AltFi’s Digital Summit. It then teamed up with alternative lender Funding Circle to issue a further £300 million in CBILS grants.

But the fintech has faced some backlash from business customers, especially since it stopped accepting new sole trader business accounts on 14 May due to “record demand”.

Boden said on Twitter in response to the backlash that 16% cent of applications have been rejected, totalling roughly 2,900 applications. “I am really sorry to disappoint customers at this very difficult time,” she said.

The neobank claims to hold a 2.6% share of the UK’s small and medium-sized enterprise (SME) banking market, and currently holds roughly £500 million in SME lending on its balance sheet.

It says it has 1.4 million accounts, though only 155,000 of these are business accounts. According to TechCrunch, its deposit base has doubled in the last six months, holding more than £2.4 billion.

But as the coronavirus continues to disrupt fintechs’ long-term growth plans, Starling Bank is no different. Boden told Wired this week that though it was planning to reach profitability in 2020, this timeline has been pushed back to 2021, with a consequent delay to any initial public offering (IPO) which was planned for 2022.

“Is a listing in our sights? It’s probably not going to happen this year or maybe next year, but I do think it’s going to happen in the longer term,” Boden said at AltFi’s Digital Summit. The CEO also said the fintech had decided to postpone its European licence plans “for three to four months”.