Goldman Sachs Growth Equity has invested £50 million ($69 million) in UK digital bank, Starling. The investment is in addition to the bank’s oversubscribed £272 million Series D funding round announced in March 2021, which valued Starling at £1.1 billion. This takes the total raised in the Series D round to £322 million.
Starling now has more than two million current accounts, including 350,000 business accounts. Its deposit base has increased from approximately £1 billion just over a year ago, to now more than £6 billion.
“Securing the support of another global financial heavyweight demonstrates the strength of demand from investors and represents yet another vote of confidence in Starling. Goldman Sachs will bring valuable insight as we continue with the expansion of lending in the UK, as well as our European expansion and anticipated M&A,” said Starling CEO and founder Anne Boden.
Starling is one of the UK’s biggest neobanks, which is the term used to describe the fintech companies that have come up in the last decade, which allow for digital transactions without the need for brick-and-mortar bank branches.
It has more than £6 billion in deposits — up from £1 billion just over a year ago. Starling now has more than two million current accounts, including 350,000 business accounts. Its deposit base has increased from approximately £1 billion just over a year ago, to now more than £6 billion. The bank says it has 6 % of UK’s SME banking market.
Earlier, JP Morgan had shown an interest in taking over the bank. Anne Boden, the CEO, is insistent that she will be taking the bank public in the near future. And Goldman Sachs also has clarified that the investment is not strategic but just a financial investment through its asset management arm.
Unlike other neobanks, which are facing trouble in terms of bringing in revenue, Staling has turned in a profit this year. But it may need to raise capital before its IPO. Since the pandemic hit, the bank has lent more than £2bn to small businesses through government-backed rescue loan schemes.
“Starling is one of the leading and most innovative digital banks in the UK, with an ambitious technology-first leadership team and addressing a deep market opportunity,” said Goldman Sachs Managing Director James Hayward. “We are delighted to be supporting their growth with this investment and believe the company has sustainable long-term earnings potential.
Goldman launched its own competing digital bank called Marcus in the UK in 2018. It is firming up plans to bolster its consumer banking arm, Marcus, through acquisitions and concentrating on digital banking.
Last year, the bank planned to gather $125 billion in consumer deposits with a goal of $700 million in pretax income from the business. But, the Coronavirus’s arrival slowed all plans.
The management has set its M&A department on to the task of coming up with potential deals though Goldman has put an “extremely high” bar for any future deal, considering its recent troubles.
The Pandemic has forced many banks to look towards digital banking as the path for future growth and lessen their reliance on opening more branches for revenue growth.
