N26 raises another $100 million in Series D extension

Fintech startup N26 now has a proper funding war chest to face the economic downturn. The Berlin-based startup has extended its Series D round with another $100 million of funding at the same valuation of $3.5 billion. In total, N26 has raised $570 million as part of its Series D round.

N26’s Series D seems like a never-ending list of big numbers. In January 2019, the company announced a $300 million Series D at a $2.7 billion valuation. In July 2019, the company added $170 million at a $3.5 billion valuation. And now, here comes another $100 million.

Like the last extension, there’s no new investor on board. Major investors in the company participated in the extension funding.

You may have noticed that the valuation didn’t go up this time. “I’d say it’s a very good valuation,” co-founder and CEO Valentin Stalf told me. While N26 started the fundraising process before the economic downturn, the company thinks it’s already quite an achievement that the valuation didn’t go down.

When the crisis arrived, it made even more sense to go ahead and extend the Series D round. Stalf called it an “opportunity without a lot of effort.”

Like most challenger banks, N26 generates revenue from premium subscriptions, interchange fees, and third-party and in-house financial products that induce fees, such as overdraft and credit.

The startup noticed a huge shift away from cash as people use their debit card and contactless payment even more than before. Online payments have been on the rise. Overall, spending volume has been down “20 to 30% depending on the market,” Stalf said. Revenue from interchange fees has been down.

Conversely, account balances have been going up as people are postponing payments. N26 says that subscriptions are “quite stable” and churn isn’t higher than usual.

With today’s new funding, the company wants to double down on its most promising markets — Europe, the U.S. and Brazil. Earlier this year, N26 shut down its operations in the U.K.

“Unfortunately, we were all surprised by the clearness of the election that happened around the new year with a fast Brexit,” Stalf said. He then said that it would have required a big investment to apply to a new banking license in the U.K. and adapt the product to work with the new system.

“For me, it was a super clear decision. I would have loved to stay in the UK,” Stalf said. “But there are more attractive markets out there like the U.S. and Brazil,” he added.

In the U.S., N26 is iterating to adapt its product to the market. You can now leverage ACH transfers to top up your N26 account using another bank account. N26 said it had 250,000 customers in the U.S. back in January.

In Brazil, the company applied to a fintech license. “We hope to obtain a license within six months, maybe earlier,” Stalf said. But the company will assess the situation when it has secured its license as N26 could postpone its launch in Brazil due to the economic crisis.

I asked the company about potential layoffs and hiring freeze. “We're much more selective on hiring. We're still hiring but we're a little bit more picky,” Stalf said. Some employees, such as office managers and event staff, are now covered by short-time working in Germany. “They still get the majority of their pay but they don't need to work full time for you,” Stalf said.

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