There are now 100 rhinos in India. Bengaluru-headquartered Neobank Open on Monday entered the coveted club with a fresh funding round.
The five-year-old startup did not disclose the size of its Series D funding, but a source familiar with the matter said it stood at $50 million. Both said the new round, which had an open value of $1 billion, was led by Mumbai-headquartered investment firm IIFL. Existing backers Tiger Global, Temasek and 3one4 Capital also participated in the round, which comes just seven months after Open announced Series C funding at a $500 million valuation. Open has raised about $187 million so far.
Open operates a NeoBank that provides almost all the features of a bank with additional tools for small and medium sized businesses as well as enterprises to better meet customer needs. Millions of small and medium-sized businesses in India struggle to maintain multiple bank accounts, book their daily expenses and pay off employees.
The startup, which has partnerships with over a dozen top banks in India, is used by over 2.3 million businesses, it said. Open processes over $30 billion of transactions each year, it said.
In recent years, the startup has expanded its offerings in a white-label licensing arrangement to provide its neobanking technology stack to banks, who then sell it to their customers.
The startup said it intends to launch three new products — revenue-based financing Flow, early settlement card offering Settle and working capital borrowing capital — to further broaden its offerings in the coming months. It is targeting to lend $1 billion through its new products within the next 12 months.
“We are excited to partner with IIFL and existing investors Tiger Global, Temasek and 3one4 Capital for our Series D round. We see a lot of synergies with IIFL especially to leverage the lending book, as we launch innovative products such as revenue-based financing, early settlement, working capital loans and business credit cards to SMEs on our platform Getting ready,” said Anish Achuthan. Open’s co-founder and CEO said in a statement.
The growth of Open in recent years, which has led to the expansion and innovation of many other startups in this category, has dramatically changed the relationship between banks and fintechs. A few years back, most banks in India were skeptical of Neobank and it was very difficult to persuade any of them to partner, the fintech founders told TechCrunch.
“Neobank is gaining prominence as a platform for Millennials and SMEs to digitize banking or bank-like services. Top-4 global neobanks are worth $100 billion and Indian fintech debuts through OpenGL, RazorpayX, Phi and Jupiter,” analysts at Jefferies wrote in a report last year.
“In fact, many Indian fintechs are planning to expand from 1-2 platforms to Neobank now in 3-5 years. Existing banks/NBFCs partnering with them. Monetization is some time away,” he said.
Today’s announcement is a major milestone for the Indian ecosystem, which is home to the world’s tenth unicorn. It was more than a decade before India found its first unicorn, a startup with a $1 billion or more valuation, in edtech startup InMobi in 2012, when startups were scarce and funding was hard to come by. Things have changed dramatically over the past decade, with a rapid increase in the number of entrepreneurs finding the conviction to create something of their own. Over 60 Indian startups have entered the unicorn club since last year.