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HSBC-backed London fintech Monese warns on its future after losses widen

January 2nd, 2024

Monese is backed by PayPal and British Airways owner IAG (Monese)

The scale of the cash crunch facing London’s tech sector has been laid bare after City-based unicorn Monese warned that its future was under threat unless it could raise additional funds.

The fintech company, which offers current account and money transfer services and counts PayPal, HSBC and British Airways owner IAG among its major shareholders, said there was “material uncertainty on the success of raising future fundraising” which undermined the “going concern” status of the business.

In accounts filed with Companies House, Monese posted a loss of £30.5 million in 2022, an increase of almost 70% on the previous year and outstripping revenues of £27.7 million over the same period.

The WorldRemit and Wise rival said it was “moving to improve the unit economics of the Monese offering, reducing customer acquisition costs and enhancing profitability.”

Blackfriars-headquartered Monese, which has more than two million customers worldwide and targets migrants who struggle to access high street banks due to a lack of credit history, last raised cash from investors in September 2022, when it secured $35 million from HSBC. But in an apparent strategy pivot, HSBC today said it was launching its own money transfer app, Zing, in a bid to build its own market share and ‘attack’ dominant international payments fintechs.

Since the start of last year, scores of British tech firms, from food delivery business Gousto to semiconductor business Graphcore to fintech giant Revolut, have seen their valuations cut by investors amid demands for tighter cost control and clearer pathways to profitability.

A recent report by PitchBook found that the proportion of “down rounds”, in which a firm accepts investment on worse terms than in previous funding rounds, increased to 21.3% from 14.8% in 2023.

The UK’s share of all European capital investment between 2021 and 2023 declined by almost three percentage points compared with 2018-20, according to venture capital firm Atomico, the steepest decline in Europe. The UK also saw the greatest number of “dehorned unicorns” — tech firms that have ceased to be worth $1 billion or more.

Last year, Monese rival Zepz laid off more than a quarter of its employees to cut costs, and in its accounts warned that in the event of a significant slowdown in growth, it would breach the covenants on a loan from BlackRock and would be forced to seek extra cash to keep its finances in check.

Priya Oberoi, founding general partner at Goddess Gaia Ventures, told the Standard: “I think it’s got tougher for everyone — you really have to prove that you are top of your class. Meetings are getting longer, decisions are taking longer and there’s more due diligence.

“The idea of hyper growth at all costs is something that we won’t return to. The silly money won’t exist going forward — founders and portfolio companies must demonstrate that their unit costs are down so that they can actually create a profitable company.”

Administrators and restructuring specialists warn that high-growth companies such as tech firms are likely to be among those facing the toughest financial strain amid an expected rise in corporate insolvencies in 2024.

Rob Hornby, partner and managing director of AlixPartners, said: “I personally think we are definitely seeing an element of the dotcom bubble repeating itself. Since before the pandemic, there was plenty of investment money around, with VCs worried about missing out… Now some of that funding is running dry, you will start to see consequences.”

This content was originally sourced and posted at Yahoo Canada Sports – Sports News, Scores, Rumours, Fantasy Games, and more »
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