NCFAs innovation and funding ecosystem

Koho secures $70 million Series C to scale adoption of its digital banking services

Betakit | | Mar 11, 2021

KOHO branding - Koho secures $70 million Series C to scale adoption of its digital banking servicesKoho has secured $70 million CAD in Series C financing, which sources estimate put its post-money valuation at $300 million. The Toronto FinTech startup raised the capital from TTV Capital, Drive Capital, and Portag3 Ventures as it aims to increase the utility and adoption of its alternative financial service offerings.

The round was led by new investor TTV Capital, a United States firm focused on FinTech and claiming an unparalleled network of major banks, processors, and other payment ecosystem participants. TTV invested in Koho through its $127 million USD early-stage FinTech fund, which closed last year.

Longtime Koho investor Portag3 Ventures followed-on for the Series C round, as did Drive Capital, which led Koho’s Series B extension in November 2019. The latter firm committed the largest portion of capital to this latest round.

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The $70 million is all primary capital, $50 million of which is equity and $20 million venture debt. Eberhard told BetaKit the round also included secondary financing on top of the $70 million but declined to disclose the amount. The CEO did confirm, however, the deal did not change Koho’s board of directors, which has five members: two Portag3 seats, one seat for Drive, one independent, and one founder seat held by Eberhard.

With Koho feeling it has found product-market fit, the $70 million will act as fuel to reach what founder and CEO Dan Eberhard called the macro adoption of its financial service offerings.

Koho has turned its focus to scaling as the COVID-19 pandemic “dramatically accelerated” the company’s timelines, given its focus on digital-first products for a digital-first generation. Koho has nearly doubled its customer base since the beginning of 2019, garnering more than 350,000 users. The startup handles $2 billion a year in transaction volume and Eberhard claimed Koho is set to triple its revenue again this year.

“Folks who offer a great online virtual-first experience make a lot of sense in an increasingly remote world and so we’ve continued to see acceleration,” said Eberhard. The CEO pointed to both the ongoing digital transformation and Koho’s direct deposits offer for the Canada Emergency Response Benefit (CERB) as reasons why the startup saw growth during the pandemic.

The Toronto-based FinTech startup, which first launched to market four years ago, has noticeably been building out its product offerings over the last couple of years. In addition to a spending account, Koho recently launched a savings account and a credit building product, giving it the core services consumers expect to see from a traditional financial institution and setting it up to be more competitive in the market.

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Awareness and adoption represent key areas of focus, as well as challenges, for Canadian neobank or challenger bank startups like Koho.

The COVID-19 pandemic has presented an opportunity for such digital-first offerings, having significantly changed the Canadian banking industry. Many Canadian banks have increased their focus on digital-first, with reports noting rapid acceleration and changes in consumer expectations. However, it is still too early to tell the exact effect the digital transformation of the past year will have on the sector and what it will mean for challenger banks.

“Consumers today have high expectations for the banking experience,” said Drive Capital partner Chris Olsen. “They’re looking to challenger banks to provide an elegant, mobile-first solution. Canadians are already turning to KOHO for their financial services and we expect this to accelerate going forward.”

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