German digital bank N26 has raised an additional $100 million in funding, as it braces for economic uncertainty from the coronavirus pandemic.
The investment, backed by existing investors such as Chinese tech giant Tencent and Peter Thiel's Valar Ventures, is an extension to the company's Series D investment round announced early last year. It brings the total raised in that round to $570 million, while the company has now raised $770 million to date.
N26 already topped up its Series D round with another $170 million in July. The startup's valuation remains unchanged at $3.5 billion despite the injection of new capital, but co-founder and CEO Valentin Stalf still believes it was a "successful round" given recent volatility in financial markets that has, in turn, hit venture capital investors.
"It makes us still one of the most highly-valued companies around Europe," Stalf told CNBC in an interview. "It's not only about where we are today at $3.5 billion, but where are we going to be in five to 10 years."
Though N26 is adding more funds to its balance sheet, Stalf insisted the company wasn't running low on cash and said the round instead highlighted a trend of more people opting to "bank from home" instead of at a physical branch. N26's ATM withdrawals have halved in all its major markets, while e-commerce payments have grown dramatically among customers aged 65 and above.
Stalf added that the bank — which has over 5 million users in total — had already been in talks to raise more capital prior to the Covid-19 crisis.
"We've always been a well-financed company. For us it's an opportunity to raise more capital," he said. "Every company at this time is very much focusing on the next two to three years and how we get through the crisis. We just want to be very well-prepared and that's why we decided to raise more capital now."
"With the economic crisis that is resulting out of Covid-19, I think we as a company at least are planning for an impact that will still be ongoing later this year."
N26 is one of several online-only banks that have flourished in Europe, attracting millions of users despite a lack of any physical branches. Investors have followed the trend, pouring hundreds of millions of dollars into N26 and its competitors, which include Revolut, Monzo and Starling.
Revolut recently became the most valuable of Europe's challenger banks, banking $500 million of fresh funding at a $5.5 billion valuation in February. Trailing behind N26 is Monzo, which was last valued at $2.5 billion.
Still, the coronavirus outbreak has taken a toll on the growth of industries of all stripes, and financial technology upstarts haven't been immune. N26 saw a dip in user growth in March as countries across Europe went into lockdown, though it says signups rebounded in countries that were a few weeks into their respective shutdowns.
The firm is now cutting spending on things such as marketing, while Stalf says it's "reviewing every cost line." It has also placed 150 employees in Germany and Austria on a local wage subsidy scheme called "Kurzarbeit," while founders Stalf and Maximilian Tayenthal have taken a 25% pay cut.
The company withdrew from the U.K. last month — just 18 months after first launching there — claiming it wouldn't be able to continue operating after Brexit without a local banking license. Asked whether it would return to the U.K. again, Stalf said there was "definitely" a chance for it to reenter further down the line.
Higher up on N26's list of expansion priorities is Brazil, which Stalf said was a much "bigger" opportunity than the U.K. The company said there's no timeline for launching in Brazil, but that it's in the process of applying for a local fintech license in the country. It's also focused on the U.S., where it launched last year and now has over 250,000 users.