Digital Bank Varo Raises $510 Million At $2.5 Billion Valuation
Varo, a six-year-old digital bank, is the latest fintech firm to benefit from the influx of venture funding. It has raised $510 million, driven by Lone Pine Capital, a hedge fund founded by billionaire Stephen Mandel, Jr. in Greenwich, Connecticut, bringing its total capital to $992 million. Declaration Partners, Eldridge, Marshall Wace, and Berkshire Partners are among the latest investors in Varo. The fundraising round included previous backers Warburg Pincus, Rise Fund, Gallatin Point Capital, and Harbour Vest Partners.
Varo’s bank charter hasn’t helped the company achieve a more extensive valuation than main competitors Chime and Current, who don’t have alliances. Varo has four million “opened accounts” (one person with a checking and savings account equals two accounts), so each performance is worth about $625 at its $2.5 billion valuations. A digital bank based in New York was currently valued at $2.2 billion in April when it had “almost three million users” and a $730 per member value. According to eMarketer, Chime was recently valued at $25 billion and had an estimated 13 million customers. That works up to $1,900 per customer.
According to Walsh, Varo has the most straight road to the profitability of all the fintech because of its diverse income streams, reduced cost base, and ability to produce its capital. “We created Varo the proper way, from the ground up, with long-term viability and sustainability in mind.” Varo will generate more than $100 million in yearly sales this year, and he expects the company to break even by mid-2023. In the next couple of years, he’ll begin to “seriously contemplate” going public.